Taiwo Oyedele warns that reinstating fuel subsidy could erode government revenue, trigger capital flight, weaken foreign reserves and reverse Nigeria’s recent economic gains.

Nigeria’s Finance Minister and Coordinating Minister of the Economy, Taiwo Oyedele, has warned that bringing back fuel subsidy could trigger fresh economic pressures, potentially pushing petrol prices to ₦2,000 per litre and the naira to ₦3,000 against the US dollar within months.

Oyedele gave the warning while briefing journalists in Abuja on Thursday amid an ongoing debate over whether the Federal Government should reconsider its decision to remove the petrol subsidy.

According to the minister, restoring the subsidy would place additional pressure on government finances, reduce available revenue and potentially undermine recent improvements in Nigeria’s economic outlook.

He argued that the consequences could extend beyond the cost of petrol, affecting the country’s credit rating, borrowing costs, foreign exchange reserves and the value of the naira.

Oyedele said a decline in government revenue could prompt international credit rating agencies to downgrade Nigeria’s sovereign rating, putting recent improvements in the country’s creditworthiness at risk.

He noted that such a development could make it more expensive for the government to borrow money, discourage investors and trigger capital flight.

As investors withdraw funds and demand for foreign exchange rises, the minister warned, Nigeria’s reserves could come under pressure, further weakening the naira.

“Return subsidy and the sequence is familiar. Weaker revenue invites a sovereign credit downgrade, as the rating agencies have already signalled,” Oyedele said.

“That would put at risk the upgrades we have recently earned, including our first from S&P in fourteen years. Borrowing becomes costlier. Capital leaves. Reserves fall. The naira weakens.”

The minister also cautioned that a return to subsidy payments could threaten the progress made in reducing inflation, which he said had created room for the Central Bank of Nigeria to begin lowering interest rates.

According to him, renewed fiscal pressure and currency depreciation could reverse some of those gains, creating fresh difficulties for households and businesses already grappling with high living costs.

Petrol Could Cost More Despite Subsidy

In one of his strongest warnings, Oyedele argued that reinstating the subsidy might not deliver cheaper petrol in the long run.

He estimated that the naira could weaken to around ₦3,000 to the dollar within months, while petrol prices could climb to at least ₦2,000 per litre under the scenario he outlined.

“Our estimate is that the exchange rate could approach ₦3,000 to the dollar within months, and so-called subsidised petrol would cost at least ₦2,000 a litre. That is well above what Nigerians pay today,” he said.

His argument is that the financial burden of subsidising petrol could weaken the broader economy, potentially putting additional pressure on the exchange rate and ultimately raising the cost of imported goods and fuel-related supplies.

However, the figures represent the minister’s projection of a possible outcome if the subsidy is restored, not a confirmed forecast or a certainty that petrol prices and the exchange rate will reach those levels.

Government Rules Out Return to Subsidy

Oyedele maintained that returning to the fuel subsidy regime was not an option, insisting that the government should focus on strengthening public revenue, stabilising the economy and safeguarding the gains recorded so far.

The subsidy debate remains a sensitive issue in Nigeria, where the removal of petrol subsidies has significantly affected household budgets and business operating costs.

While proponents of a return to subsidies may see the policy as a way to ease the financial burden on citizens, the government has repeatedly faced the challenge of balancing relief for consumers against the cost of supporting fuel prices with public funds.

Oyedele’s latest comments underline the administration’s position that bringing back the subsidy could create wider economic risks, even as Nigerians continue to contend with the high cost of living.

The central question remains whether the government can sustain economic stability and improve living conditions without restoring a policy that, according to the minister, could place additional pressure on public finances and the naira.