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The Federal Government has ruled out a return to fuel subsidy system, warning that bringing back any form of petrol subsidy would cost Nigeria over N20 trillion annually, trigger a sovereign downgrade, and push the exchange rate to N3,000 per dollar.
The Minister of Finance and Coordinating Minister of the Economy, Professor Taiwo Oyedele, stated this on Thursday in Abuja at a press briefing on "Fuel Prices and the Subsidy Question."
Oyedele said the current elevated prices were driven by a global shock from the 8-month-old Gulf conflict, not domestic policy failure, and that a subsidy would make matters worse.
According to the Minister, shipping through the Strait of Hormuz was running at roughly 13 percent of pre-war level by mid-September, with Brent crude trading above $100 per barrel, almost 50 percent higher than before the war.
"Diesel exports from the Middle East and Russia are down 75 percent. Crude tanker rates from West Africa reached record highs in September. The International Energy Agency expects pressure on refined products to last for months," he said.
He cited global comparisons: diesel in the US at a record $6.50 a gallon (73% above pre-war), diesel nearly doubling in Philippines, Bangladesh paying three times for gas, and Zambia's 24 percent pump price jump in one day after unsustainable duty waivers expired.
"Before the conflict, with crude near $70, petrol sold for about N830 a litre. Today it averages about N1,400. That increase was caused by a global conflict in which we had no say. Ironically, without subsidy removal, the impact would have been far greater," he said.
He noted that fuel has remained available in every state throughout the crisis, saying "availability is the first form of affordability."
Oyedele gave four reasons why proposals described as "production subsidy" for local refining are actually consumption subsidy by another name:
1. Exchange rate trap: Crude, freight and refining inputs are priced in dollars. Forcing naira price down means subsidising FX — a return to multiple exchange rate system that nearly collapsed the economy before 2023 reform.
2. Hiding volatility: Fixing pump price while crude and FX move shifts risk to public balance sheet. Nigeria consumes ∼50 million litres daily. Returning to pre-reform price would cost over N20 trillion a year, and even N500/litre promise would cost over N16 trillion — nearly everything Federation Account shared in 2025.
3. Leakages and smuggling: Nigerian petrol is already 20-30% cheaper than Benin, Togo, Cameroon and 30-40% cheaper than Ghana, Kenya, South Africa. Widening gap would mean Nigerian taxpayers subsidising motorists across borders and raising consumption amid tight global supply.
4. Fiscal collapse: Subsidy removal released N15.8 trillion to Federation Account between June 2023 and December 2025, of which N10.4 trillion went to states and LGs. In May 2023, 27 states could not pay salaries; today none is in that position.
"Return subsidy and the sequence is familiar. Weaker revenue invites downgrade, as rating agencies have signalled, risking our first S&P upgrade in 14 years. Borrowing costlier, capital leaves, reserves fall, naira weakens. Our estimate is exchange rate could approach N3,000/$ within months, and so-called subsidised petrol would cost at least N2,000/litre — well above what Nigerians pay today," Oyedele said.
He added: "A subsidy does not lower cost of fuel. It only changes how it is paid, and when."
He challenged proponents to answer three questions: What will it cost? How will it be funded sustainably? And what pump price will it deliver?
Oyedele listed sustainable measures already taken:
Local refining: Deregulation made domestic refining viable, keeping supply steady.
Tax and duty waivers: Saving consumers N400-N600/litre, equivalent to over N5 trillion potential revenue. Petrol is among 25 cheapest globally, 35% below world average.
Naira-for-crude: Local refiners buy crude in naira, easing dollar demand.
Stable currency: Gap between official and parallel rates narrowed from over 60% to under 5%; reserves at $55 billion, highest in 18 years.
"Naira was not devalued, rather Naira depreciated because we ran out of reserve to defend artificial rate," he clarified.
Stronger oversight: NMDPRA guarding against hoarding and under-dispensing.
Cheaper alternatives: 120,000 vehicles on CNG, 400 conversion centres, 96 refuelling stations, 18 L-CNG stations, 550 CNG buses deployed with 30-50% fare drop; tax removal on EVs, solar, and duty cut on vehicles with over N100bn waivers.
Electricity, gas and fertilizer subsidies retained for vulnerable and producers.
He noted Nigeria's full waiver of taxes on petrol worth N3.3 trillion up to September 30, 2026 exceeds IEA-recorded relief in over 50 countries.
Oyedele announced further steps:
Margin discount at NNPC stations for 30 days, priority for public transporters.
Forward sales of crude to domestic refineries as production rises.
Price modulation: Negotiating ceiling of N1,350/litre on ex-gantry/landing cost to smooth volatility. Shortfall carried by operators and recovered later when prices fall. Monthly review and publication.
Removing illegal levies with states under 2025 tax reforms.
Increased cash transfers and subsidised credit for vulnerable and small businesses.
Faster CNG rollout with states.
Excess profit tax on operators exploiting consumers; proceeds for transport support/vouchers for minimum wage earners, plus tax relief for low-income earners in 2027 Finance Bill.
Less red tape to cut business costs.
National Strategic Fuel Reserve to release products under published rules during disruptions — not subsidy, but supply security.
Better traffic and logistics management and NIPOST address codes to cut fuel consumption.
"None of these measures restores blanket subsidy. That would be creating longer term harm for short-term cure," he said.
He also disclosed work on a comprehensive fiscal package to bring inflation to single digits sustainably.
Oyedele closed: "The cost of fuel is real, and we do not dismiss it. But Nigeria has already lived through that cycle: scarcity, smuggling, collapsing currency and fiscal crisis. Our task is not to reverse a necessary reform but to make its gains reach more Nigerians, more quickly under President Bola Ahmed Tinubu."
The Minister of State for Finance, Heineken Lokpobiri, said subsidy removal saved Nigeria from Venezuela's fate where petrol sells for N46 equivalent but poverty is high despite 300 billion barrels reserves.
"Nigeria would have been like Venezuela. If subsidy continued, Dangote refining would not be possible because government as exclusive importer would crowd out private investment. Today Dangote is expanding to 1.4 million barrels," he said.
He said removal is legal under Section 205 of the PIA, which mandates free market pricing.
"Anybody saying bring back subsidy wants to do something illegal. We are already on our way to Israel, nobody can take us back to Egypt," he said.
Earlier, Permanent Secretary, Ministry of Finance, Raymond Omachi, said the theme "From Gatekeeper to Enablers" captures the Ministry's transformation agenda to make agency interactions more productive, predictable and responsive for businesses.