Nigeria's Minister Says Fuel Subsidy Could Cost Over N20 Trillion Annually

The Federal Government has turned down calls to bring back the petrol subsidy. They warned that reintroducing the subsidy could cost Nigeria over N20 trillion every year and make petrol even more expensive.

Taiwo Oyedele, the Minister of Finance and Coordinating Minister of the Economy, shared this information on Thursday during a press briefing in Abuja. He spoke about the rising petrol prices and the ongoing subsidy debate.

Mr Oyedele mentioned that Nigeria uses about 50 million litres of petrol daily. He said that going back to the petrol prices before the 2023 reforms would mean spending more than N20 trillion each year.

He added that if petrol were sold at N500 per litre, it would cost the government over N16 trillion every year. This figure does not include the effects of increased consumption and smuggling.

"Amounts of that size are nearly everything the Federation Account shared among all three tiers of government in 2025," Mr Oyedele said.

He warned that funding such a subsidy would hurt other government responsibilities. This includes paying salaries, pensions, and funding hospitals and schools.

The minister's remarks come as calls to bring back the fuel subsidy grow louder, especially with the political debates heating up ahead of the 2027 general elections.

According to Mr Oyedele, bringing back the subsidy could hurt government revenues. It might lead to a downgrade in Nigeria's credit rating, increase borrowing costs, and put pressure on the naira and foreign reserves.

The government thinks that the exchange rate might hit N3,000 to the dollar in a few months if the subsidy returns.

Mr Oyedele pointed out that this could push the price of subsidised petrol to at least N2,000 per litre, which is much higher than the current average of about N1,400.

"A subsidy does not lower the cost of fuel. It only changes how it is paid, and when," he said.

He explained that crude oil, shipping, and refining costs are mainly quoted in dollars. He stated that reducing the naira price of petrol would mean the government has to subsidise foreign exchange.

The minister also disagreed with calling a proposed subsidy for petrol refined in Nigeria a "production subsidy." He argued that a real production subsidy would help producers who cannot compete at market prices.

Instead, he said the proposal on the table would mean offering discounted crude that would eventually lead to higher prices for consumers at the pump.

"This is different, it is a discount on crude, passed through to the pump. That is a consumption subsidy by another route, with the same bill attached," he said.

Mr Oyedele noted that subsidised fuel would widen the price gap between Nigeria and its neighboring countries. This could lead to more smuggling and make Nigerian taxpayers pay for motorists in other countries.

He defended the removal of the petrol subsidy in 2023. He said it released N15.8 trillion to the Federation Account between June 2023 and December 2025. Out of this amount, N10.4 trillion went to states and local governments.

In May 2023, he mentioned that 27 states struggled to pay salaries, but none were in that situation at the time of the briefing.

At the federal level, he said about two-thirds of the savings from the subsidy, along with additional revenue and borrowing, had been used for spending that directly benefited Nigerians. This includes higher wages, infrastructure, electricity subsidies, and social transfers.

The remaining funds were used to stabilize the economy, especially as the cost of servicing debt rose due to higher interest rates aimed at controlling inflation.

Mr Oyedele explained that the government has been using tax and duty waivers, local refining, naira-for-crude deals, exchange-rate stabilization, and deploying CNG to help lower fuel costs.

He said the government has granted a full waiver of taxes and duties on petrol worth over N3.3 trillion for the year ending 30 September 2026.

He added that the government would keep looking at targeted relief options instead of a blanket subsidy.

Some of the new measures include a 30-day discount on petrol sold at NNPC stations, a proposed N1,350 ceiling on the landing cost of petrol, more cash transfers, subsidised credit, and quicker CNG deployment.

The government is also considering a tax on excess profits made by energy firms, with the money going to help vulnerable consumers.

Mr Oyedele made it clear that the government would not go back on the subsidy reform. He argued that reversing it would take Nigeria back to the problems of fuel shortages, smuggling, currency weakness, and financial pressure.

"Our task is not to reverse a necessary reform designed to set our country on the path towards sustained prosperity," he said. "It is to make sure its gains reach more Nigerians, more quickly and in more tangible ways."