Finance Minister Taiwo Oyedele has warned that restoring petrol subsidies could trigger capital flight, weaken the naira and undermine investor confidence.
Nigeria’s Finance Minister, Taiwo Oyedele, has warned that restoring petrol subsidies could push the naira towards N4,000 per dollar.
He said the move could trigger capital flight, weaken investor confidence and increase borrowing costs. Oyedele delivered the warning on Monday during a press briefing at the IMF and World Bank Annual Meetings in Bangkok, Thailand.
According to the minister, investors have repeatedly questioned whether the Federal Government would maintain its economic reforms ahead of the next election cycle.
However, Oyedele ruled out reversing the reforms. He warned that even considering a subsidy reinstatement could unsettle financial markets and intensify economic pressures on households.
Subsidy Reversal Could Increase Pressure on the Naira
Oyedele said investors would likely react immediately to any indication that the government was considering restoring petrol subsidies.
He warned that the naira could weaken to N3,000, N3,500 or even N4,000 against the dollar.
Such a depreciation could increase the naira cost of imported goods and services. It could also raise business costs and add pressure to household budgets.
Furthermore, Oyedele said capital flight could extend beyond foreign investors. Wealthy Nigerians, business owners and middle-class investors might also shift funds into dollars to protect their assets.
That response could increase foreign exchange demand and place additional pressure on the naira.
Government Rules Out Reversing Economic Reforms
The minister said investors were closely monitoring Nigeria’s policy direction, particularly as the country approaches another election cycle.
He maintained that the government would not reverse its economic reforms. He also argued that the possibility of reinstating subsidies could undermine confidence in the government’s commitment to those policies.
Meanwhile, the debate over petrol prices continues as households and businesses face higher energy and transportation costs.
NNPC Margin Reduction Is Not a Subsidy, Minister Says
Oyedele also rejected suggestions that the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins amounted to a subsidy.
He explained that the company had reduced its commercial margins rather than received government funding to lower petrol prices.
According to the minister, a company’s decision to accept lower profits does not automatically constitute a government subsidy.
The distinction comes amid continued debate over petrol affordability following the removal of Nigeria’s fuel subsidy.
Oyedele maintained that restoring the previous arrangement could create additional economic pressures if it weakened investor confidence and increased demand for foreign exchange.
He explained that the reduction was a commercial decision rather than a payment funded by public resources, arguing that a company’s decision to lower its profit margin to make a product more affordable should not automatically be classified as a subsidy.