FG Draws Red Line on Fuel Subsidy, Warns of Naira Crisis if Reforms Are Reversed

The Federal Government has ruled out a return to petrol subsidy and multiple foreign exchange rates, warning that reversing the economic reforms introduced under President Bola Ahmed Tinubu could worsen Nigeria’s fiscal position, weaken the naira and increase the cost of living.

The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, reiterated the government’s position on Saturday, October 17, 2026, amid renewed debate over fuel prices and economic policy ahead of the 2027 general elections.

Speaking on the sidelines of the World Bank and International Monetary Fund meetings in Bangkok, Thailand, Oyedele said the administration would not reverse its decisions to remove petrol subsidies and liberalise the foreign exchange market.

He maintained that the government’s priority was to preserve the reforms while pursuing measures to ease the pressure of high fuel prices on households and businesses.

The minister’s latest comments followed his October 8 briefing in Abuja, where he warned that restoring petrol subsidy could cost Nigeria more than ₦20 trillion annually if petrol prices were returned to their pre-reform levels.

According to Oyedele, even a proposal to sell petrol at ₦500 per litre could require more than ₦16 trillion annually, depending on consumption and other factors.

He argued that financing such expenditure would put significant pressure on public finances and potentially divert resources from essential responsibilities, including salaries, pensions, education, healthcare, infrastructure and security.

Oyedele also warned that reversing the reforms could undermine investor confidence, increase borrowing costs and put further pressure on the naira. He said the exchange rate could approach ₦3,000 to the dollar within months under the scenario he outlined, while subsidised petrol could still cost at least ₦2,000 per litre.

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These figures were presented as warnings about the possible consequences of restoring subsidy, rather than confirmed predictions of future exchange rates or petrol prices.

The minister argued that a subsidy does not eliminate the actual cost of petrol but transfers part of the bill from consumers to the government. Since crude oil, shipping and many refining inputs are priced in dollars, he said, keeping domestic petrol prices artificially low could expose public finances to additional foreign exchange costs.

He also warned that subsidised petrol could encourage cross-border smuggling if prices in Nigeria fell significantly below those in neighbouring countries, potentially leaving Nigerian taxpayers to finance fuel consumed elsewhere.

Oyedele further rejected calls to restore multiple foreign exchange rates, arguing that doing so would recreate distortions the government sought to eliminate through market liberalisation.

Under the previous system, different exchange rates operated across official and other market segments. The government argued that the arrangement encouraged arbitrage, reduced transparency and weakened confidence in the foreign exchange market.

The administration has maintained that a more unified, market-driven system would improve transparency and allow the naira’s value to respond more closely to market conditions, although exchange-rate volatility and the cost of living remain major concerns for Nigerians.

Despite ruling out a return to broad-based fuel subsidy, the government has announced temporary measures intended to moderate petrol prices.

One of the measures is a 30-day petrol discount at Nigerian National Petroleum Company Limited (NNPC) Retail stations, introduced in October. Under the arrangement, NNPC Retail agreed to forgo its retail profit margin and sell petrol at cost for the period, with priority intended for public transport operators.

Oyedele has insisted that the arrangement is not a return to fuel subsidy because the discount is borne by the company through reduced margins rather than payments from public funds. The distinction has nevertheless attracted debate, with critics questioning whether the intervention amounts to a form of subsidy in practice.

The government has also proposed a ₦1,350-per-litre ceiling on the ex-gantry or landing cost of petrol to moderate sudden price movements caused by changes in global crude oil prices and exchange rates.

The proposed ceiling is not a fixed pump price of ₦1,350 per litre. Under the mechanism outlined by the minister, refiners and importers would initially absorb costs above the ceiling and seek to recover the shortfall when market conditions improve. The arrangement is intended to smooth price fluctuations rather than permanently fix petrol prices.

Other measures highlighted by the government include support for local refining, the expansion of compressed natural gas (CNG) as an alternative transport fuel, tax and duty waivers on petroleum products, and targeted assistance for vulnerable households and businesses.

The government says such interventions can provide temporary relief without recreating the large and recurring liabilities associated with the former subsidy regime.

The fuel subsidy debate has intensified as Nigerians continue to face the effects of higher petrol prices on transport fares, food distribution, electricity generation and business operating costs.

The removal of petrol subsidy in May 2023 was one of Tinubu’s major economic policy decisions. The government has defended the reform as necessary to reduce fiscal pressure and redirect resources towards other priorities, while critics argue that the resulting rise in living costs has placed a heavy burden on households and businesses.

Calls for a return to subsidy have featured prominently in political discussions ahead of the 2027 elections, with proponents arguing that government intervention is needed to provide relief to consumers.

Oyedele said the government remained open to alternative proposals but insisted that anyone advocating a return to subsidy should explain its total cost, how it would be financed sustainably and the price consumers would ultimately pay at filling stations.

The administration’s challenge remains balancing its commitment to market-oriented reforms with demands for more immediate and meaningful relief for Nigerians struggling with the high cost of living.