Petrol Subsidy Return Could Cost Nigeria Over N20tn Yearly—Oyedele

Petrol Subsidy Return Could Cost Nigeria Over N20tn Yearly—Oyedele

The Federal Government has warned that returning to a blanket petrol subsidy regime could cost Nigeria more than N20 trillion annually, as the administration seeks alternative ways to cushion the impact of rising fuel and transportation costs.

Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has maintained that reversing the petrol subsidy removal would place a huge burden on government finances and potentially undermine the fiscal gains of the 2023 reform.

The warning comes amid renewed calls for government intervention as petrol prices, transportation costs and inflation continue to put pressure on households and businesses.

An earlier estimate by the Centre for the Promotion of Private Enterprise (CPPE) put the potential annual cost of restoring a universal petrol subsidy at about N19.16 trillion, based on an assumed daily petrol consumption of 50 million litres and an indicative subsidy of N1,050 per litre. The organisation rounded the figure to nearly N20 trillion and warned that the actual cost could vary depending on crude oil prices, exchange rates, consumption, refining or landing costs and the regulated pump price.

The estimated burden translates to about N52.5 billion daily and N1.575 trillion monthly, according to the CPPE calculation.

The group warned that such spending could compete with funding for infrastructure, healthcare, education, security, agriculture and social protection, while potentially widening the fiscal deficit and increasing borrowing and debt-servicing pressures.

Oyedele has also said the removal of the subsidy generated significant fiscal resources. The Federal Government has put the savings mobilised between June 2023 and December 2025 at N15.8 trillion, with about N5.4 trillion accruing to the Federal Government and N10.4 trillion shared among states and local governments.

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However, the subsidy debate has intensified as Nigerians contend with renewed increases in the cost of petrol and the knock-on effects on transportation, logistics and household purchasing power.

The Federal Government has therefore introduced a series of measures designed to provide relief without returning to a blanket fuel subsidy.

Among the measures is a 30-day discount on petrol sold through NNPC stations, with public transport operators expected to receive priority. The government has stressed that the arrangement is not a subsidy but a temporary discount intended to ease the immediate pressure on consumers.

The government has also proposed a N1,350-per-litre ceiling on petrol landing or ex-gantry costs, with the mechanism expected to be reviewed monthly. Under the proposal, refiners and importers would absorb temporary cost increases above the ceiling and recover the difference when market conditions improve.

Another major component is the planned use of forward crude sales to domestic refineries, aimed at providing refiners with greater certainty over crude supply and helping to moderate the impact of international crude prices and foreign-exchange fluctuations.

The government is also accelerating the deployment of compressed natural gas (CNG) as a cheaper alternative for transportation. Officials say more than 120,000 CNG-powered vehicles, over 400 conversion centres and dozens of refuelling facilities are already part of the programme.

The administration has further announced plans to remove selected levies and regulatory costs that add to transportation and logistics expenses, while expanding targeted support for vulnerable households and small businesses.

The government is also considering an excess profit tax on businesses deemed to be taking undue advantage of current market conditions. Proceeds would be directed towards measures such as transport support and vouchers for vulnerable households.

Oyedele has repeatedly argued that these measures are intended to address the consequences of high fuel prices without recreating the fiscal and market distortions associated with the former subsidy system.

The CPPE has similarly urged the government to retain the downstream petroleum reforms while providing targeted relief through affordable mass transportation, improved electricity supply, food-production support, stronger social protection and measures to reduce energy and logistics costs for businesses.

The debate is expected to remain contentious as political parties and other stakeholders differ over whether Nigeria should maintain the current market-based petrol pricing system or introduce targeted intervention to shield consumers from further price shocks.

For the Federal Government, the challenge is to balance economic reforms and fiscal sustainability with immediate relief for Nigerians facing higher living and transportation costs.

The administration insists that its latest interventions are aimed at achieving that balance without returning the country to a blanket petrol subsidy regime.

Petrol Subsidy Return Could Cost Nigeria Over N20tn Yearly—Oyedele