A return to petrol subsidy could weaken the naira to between 3,000 and 4,000 to the dollar, Nigeria's Minister of Finance and Coordinating Minister for the Economy Taiwo Oyedele has warned. Speaking at the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand on Monday, Oyedele cautioned that any signal the Federal Government was considering reinstating petrol subsidy could unsettle financial markets, increase borrowing costs and worsen economic pressures on households. He said investors had repeatedly questioned whether President Bola Tinubu's administration would abandon its economic reforms ahead of the next election cycle.
Oyedele ruled out reversing the reforms and emphasized that even a hint of reconsidering subsidy policy could trigger an immediate market reaction. He stated that if the President were to say the government was merely considering a return to fuel subsidy, capital would react immediately. According to the minister, the consequence would be severe: airfares would struggle, the naira would come under severe pressure, and the very fuel people wanted subsidised would become far more expensive in naira terms. He noted that markets, both domestic and international, had largely dismissed the political opposition in Nigeria as lacking credibility on economic matters.
The minister warned that capital flight could extend beyond foreign investors to include wealthy Nigerians, business owners and middle-class investors, who might turn to the dollar as a hedge against uncertainty, further increasing demand for foreign exchange. He added that in all meetings he had held, he had concluded that markets had assessed the opposition as unserious. Oyedele rejected suggestions that the Nigerian National Petroleum Company Limited's temporary reduction in petrol retail margins amounted to a return to subsidy. He explained that the reduction was a commercial decision by the company rather than a payment funded by public resources, and that a company's decision to lower its profit margin to make a product more affordable should not automatically be classified as a subsidy.