Nigeria's Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, has warned that returning to fuel subsidies could weaken the naira sharply, potentially pushing it to N3,000, N3,500 or even N4,000 per dollar. Speaking at a press briefing during the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand on Monday, Oyedele said any signal that President Bola Tinubu's administration was considering or reinstating subsidies would immediately affect financial markets, raise borrowing costs and worsen economic hardship for households.
Oyedele said investors had repeatedly questioned whether the government would abandon its economic reforms ahead of the next election cycle. He stressed that markets, both domestic and international, would react immediately to any hint of subsidy reversal. The minister noted that such a move would trigger capital flight extending beyond foreign investors to include wealthy Nigerians, business owners and middle-class investors seeking refuge in dollars, further increasing pressure on foreign exchange demand.
According to Oyedele, ordinary Nigerians would bear the ultimate consequences through higher import costs, rising prices and increased economic hardship. He rejected characterisations of the Nigerian National Petroleum Company Limited's temporary reduction in petrol retail margins as a return to subsidy, describing it instead as a commercial decision rather than public resource spending. A company reducing its profit margin to make a product more affordable should not be regarded as receiving or providing a subsidy, he argued.
President Tinubu announced on 29 May 2023 that his administration would remove the subsidy on petroleum products. In his inaugural address at Eagle Square in Abuja, Tinubu stated that the national budget had no provision for subsidy from June 2023 onwards. Since then, the naira has moved to approximately N1,300 per dollar from between N500 and N700 in 2023, while transportation prices have risen sharply.
The Central Bank of Nigeria has directed Deposit Money Banks to remove the rate cap on the naira at the Investors and Exporters Window of the foreign exchange market, allowing the national currency to float freely against the dollar and other global currencies. Oyedele ruled out reversing the government's economic reforms, maintaining that doing so would immediately affect financial markets and worsen conditions for Nigerians.
For borrowers and businesses, a return to fuel subsidies would increase borrowing costs and raise prices for imported goods, while for savers and investors, capital flight triggered by such a move could further weaken the naira and reduce the purchasing power of naira-denominated savings.