Fuel Subsidy Reversal Could Weaken Naira To ₦4,000 Per Dollar — Oyedele

Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has warned that reinstating petrol subsidy could trigger capital flight, undermine investor confidence and cause the naira to depreciate to between ₦3,000 and ₦4,000 against the dollar.

Oyedele gave the warning on Monday during a press briefing at the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand.

He said investors had repeatedly raised concerns about whether the Federal Government would abandon its economic reforms ahead of the next election cycle.

The minister ruled out reversing the reforms, warning that even an indication that President Bola Tinubu’s administration was considering restoring petrol subsidy could unsettle financial markets, increase borrowing costs and worsen economic pressures on households.

According to Oyedele, both domestic and international investors are monitoring the government’s commitment to maintaining its current economic policies.

He cautioned that any suggestion of a possible subsidy reinstatement could prompt an immediate market reaction, with investors moving their funds into foreign currencies and other assets to protect their wealth.

Oyedele said such a development could place severe pressure on the naira, potentially pushing the exchange rate towards ₦3,000, ₦3,500 or even ₦4,000 to the dollar. He added that petrol could become more expensive in naira terms despite efforts to make it more affordable through subsidies.

The minister explained that capital flight might extend beyond foreign investors, as wealthy Nigerians, business owners and middle-class investors could also seek to hold dollars amid uncertainty. This, he said, could increase demand for foreign exchange and further weaken the local currency.

He warned that ordinary Nigerians would ultimately bear the consequences through higher import costs, rising prices and increased financial hardship.

Oyedele also dismissed suggestions that the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins amounted to a return to subsidy.

He explained that the move was a commercial decision rather than a payment financed with public funds, arguing that a company reducing its profit margin to make a product more affordable should not automatically be classified as a subsidy.

President Tinubu announced the removal of petrol subsidy on May 29, 2023, during his inauguration at Eagle Square in Abuja.

The president declared that the subsidy had ended and said the national budget would no longer provide for it from June 2023, marking a major change in Nigeria’s fuel pricing policy.