Fuel subsidy return could push Naira to N4,000/$, Oyedele warns

‎Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has warned Nigerians against returning to petrol subsidy.

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‎Oyedele said the return could trigger capital flight, undermining investor confidence and pushing the naira to N3,000, N3,500, or even N4,000 per dollar.

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‎He disclosed this at a press briefing of the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand, on Monday.

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‎The minister said investors had repeatedly questioned whether the government would abandon its reforms ahead of the next election cycle.

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‎Oyedele, who ruled out reversing the government’s economic reforms, maintained that any signal that President Bola Tinubu’s administration was contemplating or reinstating the subsidy would immediately affect financial markets, raise borrowing costs and worsen economic pressures on households.

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‎“In all the meetings I have had, I came to a conclusion that the markets, including the domestic market, which you can read from the capital market, and the international market, have largely written off the opposition in Nigeria as being unserious.

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‎“If, for any reason, the President were to say we are merely considering the return of fuel subsidy, capital would react immediately.

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‎“Airfares would struggle, the naira would come under severe pressure, potentially moving towards 3,000, 3,500 or even 4,000. The very fuel people want subsidised would become far more expensive in naira terms.” Oyedele warned that capital flight could extend beyond foreign investors, as wealthy Nigerians, business owners and middle-class investors might also seek refuge in dollars, further increasing demand for foreign exchange.

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‎He stressed ordinary Nigerians would ultimately bear the consequences through higher import costs, rising prices and increased economic hardship.

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‎The minister also rejected the description of the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins as a return to subsidy, explaining that it was a commercial decision rather than a payment funded by public resources.

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‎He argued that a company reducing its profit margin to make a product more affordable should not automatically be regarded as receiving or providing a subsidy.

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‎Recall that on May 29, 2023, in Abuja, Tinubu announced that his administration would remove the subsidy on Petroleum products.

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‎“Subsidy is gone,” Tinubu exclaimed during his inaugural address at Eagle Square, Abuja, shortly after he was sworn in as Nigeria’s 16th President.

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‎The president said the national budget had no provision for subsidy from June 2023 and, therefore, it stands removed.

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‎Also, the Central Bank of Nigeria has directed Deposit Money Banks to remove the rate cap on the naira at the Investors and Exporters (I&E) Window of the foreign exchange market.

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‎According to the CBN, this will allow the national currency to float freely against the dollar and other global currencies.

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‎These major policies have greatly affected Nigerians, with transportation prices soaring and the naira jumping to about N1,300 from between N500 and N700 in 2023.

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