Finance Minister Taiwo Oyedele has warned that a return to petrol subsidy could trigger capital flight and place severe pressure on the naira, potentially pushing the exchange rate to between ₦3,000 and ₦4,000 per dollar.
Oyedele gave the warning on Monday during a press briefing at the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand, arguing that even a signal that the Federal Government was considering restoring the subsidy could unsettle investors and weaken confidence in Nigeria’s economic reforms.
The minister said investors were watching closely to determine whether the administration would maintain its current policies or reverse them as the 2027 election approaches. He argued that uncertainty over the direction of economic policy could prompt investors to move their funds elsewhere, increasing demand for foreign exchange and putting further pressure on the naira.
According to Oyedele, the consequences could extend beyond foreign investors. Wealthy Nigerians, business owners and middle-class investors might also seek protection against uncertainty by moving their money into dollars, potentially intensifying pressure on the foreign exchange market.
He warned that a weaker naira could make imported goods more expensive and worsen the cost-of-living burden on households. In his assessment, a return to subsidy could therefore undermine the intended relief by weakening the currency and making petrol and other imported products more expensive in local currency.
The minister’s comments have added a new dimension to the debate over petrol subsidy, which has become a prominent issue in discussions about economic hardship and political alternatives ahead of the next general election.
The Federal Government removed the petrol subsidy in May 2023, shortly after President Bola Tinubu took office, arguing that the policy had placed an unsustainable burden on public finances. The decision was followed by sharp increases in petrol prices and higher transport and living costs, prompting calls from labour unions and opposition figures for measures to ease the hardship.
Oyedele maintained that the government would not reverse its economic reforms, insisting that restoring the subsidy could undermine the progress the administration says it is making. He also rejected the suggestion that the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins amounted to a return to subsidy.
He explained that a company reducing its profit margin as a commercial decision was different from the government using public funds to cover the difference between the cost of supplying petrol and the price paid by consumers.
However, the minister’s projection has drawn criticism from the African Democratic Congress Presidential Campaign Council, which challenged him to publish the economic model supporting the forecast.
The council’s Director of Media and Publicity, Kola Ologbondiyan, accused the government of using alarming projections to discourage debate over subsidy policy. He argued that Nigerians deserved to know the assumptions and calculations behind the claim that the naira could weaken to ₦4,000 per dollar if subsidy returned.
Ologbondiyan questioned how the minister arrived at the projected exchange rate and insisted that the government should provide evidence rather than rely on warnings about possible market reactions. He also argued that subsidy proposals should be assessed on their economic merits.
The disagreement reflects a wider policy debate over how Nigeria can protect consumers from high energy costs without creating fresh pressure on government finances or the foreign exchange market.
While the government sees subsidy restoration as a risk to fiscal stability and investor confidence, critics argue that the immediate hardship faced by households also requires serious consideration. The central question is whether targeted support, a different subsidy framework or other relief measures could reduce the burden on consumers without worsening the country’s economic challenges.
Oyedele’s ₦4,000-per-dollar warning remains a projection of a possible outcome rather than an established exchange-rate forecast. Its accuracy would depend on several factors, including the scale and financing of any subsidy, investor reactions, foreign-exchange supply and broader economic conditions.
As the debate continues, the demand for transparent evidence is likely to remain central to discussions over subsidy policy. The government is defending the continuation of its reforms, while opposition voices are calling for its projections to be explained and tested against alternative approaches to easing the cost of living.