The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has warned that restoring petrol subsidy could trigger capital flight and weaken the naira to between N3,000 and N4,000 per dollar.
Oyedele said a move to reverse the policy could undermine investor confidence, increase borrowing costs and intensify economic hardship for Nigerians.
He gave the warning on Monday during a press briefing at the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand.
The minister said investors remained concerned about the possibility of the Federal Government reversing its economic reforms ahead of the next election cycle.
He argued that even a signal that the government was considering reinstating the subsidy could unsettle financial markets and prompt investors to move their funds into safer assets.
Oyedele also warned that capital flight could involve wealthy Nigerians, business owners and middle-class investors seeking to protect their savings by buying dollars, putting additional pressure on the foreign exchange market.
He said a weaker naira would make imports more expensive and worsen the cost of living, potentially undermining the intended benefits of cheaper petrol under a subsidy regime.
The minister also dismissed suggestions 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 choosing to reduce its profit margin to make a product more affordable was taking a commercial decision, rather than receiving or providing a subsidy funded by public resources.
President Bola Tinubu announced the removal of petrol subsidy during his inauguration on 29 May 2023, saying the 2023 budget made no provision for the payments from June that year.
The policy, alongside foreign exchange reforms, has contributed to significant changes in fuel costs and the exchange rate, with Nigerians facing higher transport and living expenses.
The Central Bank of Nigeria (CBN) has also removed the rate cap at the Investors and Exporters foreign exchange window, allowing the naira to trade more freely against the dollar and other currencies.
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