The Federal Government has warned that a return to petrol subsidy could push the pump price of Premium Motor Spirit to at least N2,000 per litre and weaken the naira to about N3,000 to the dollar within months.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, gave the warning on Thursday during a press briefing on petrol prices and the subsidy debate in Abuja.
Oyedele said reinstating subsidy would reduce government revenue, increase borrowing costs, potentially trigger a sovereign credit downgrade and lead to capital flight and a decline in foreign exchange reserves.
He warned that the resulting economic pressures could weaken the naira and reverse recent progress on inflation and interest-rate reductions.
The minister said subsidy did not reduce the actual cost of petrol but merely shifted the burden to government finances.
According to him, the return of subsidy could provide temporary relief for consumers but create wider economic difficulties in the longer term.
Oyedele said government financing of subsidy could also affect the payment of salaries and pensions, increase taxes or lead to increased money supply, with consequences for inflation.
He said the Federal Government remained open to alternative proposals on petrol pricing but insisted that proponents must demonstrate the cost, funding mechanism and expected pump price.
“We remain open to ideas, but any credible proposal should answer three questions. Number one, what will it cost? Number two, how will it be funded sustainably? Number three, what pump price will it deliver?” he said.
Oyedele said the government was instead pursuing measures to cushion the impact of higher petrol prices, including a 30-day discount on petrol sold by the Nigerian National Petroleum Company Limited, with priority given to public transport operators.
He also announced that the government was negotiating a ceiling of N1,350 per litre on the ex-gantry or landing cost of petrol.
Other measures under consideration, according to the minister, include increased cash transfers, subsidised credit, faster deployment of compressed natural gas vehicles and the establishment of a national strategic fuel reserve.
The Federal Government has faced renewed calls for a return to petrol subsidy more than three years after President Bola Tinubu announced its removal.
Oyedele, however, maintained that any intervention must be financially sustainable, warning that short-term relief funded through unsustainable measures could create deeper economic challenges.
His comments came amid growing public and labour concerns over petrol prices and the rising cost of living.
The Nigeria Labour Congress has separately given the Federal Government a two-week ultimatum to reduce petrol prices, commence renegotiation of the national minimum wage and implement outstanding agreements with workers.
