…Announces Measures To Cushion Subsidy Removal Burden
As the controversies on the retention or reversal of the fuel subsidy regime continue to gather momentum in the nation’s politico-economic space over the past few weeks, the Federal Government on Thursday cautioned that the discontinuation of the of the current no fuel subsidy regime would worsen economic pressures and possibly lead to even higher petrol prices in the country.
Expressing the government’s position on the raging controversies during a media briefing in Abuja, the Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, attributed the recent surge in fuel prices to global market disruptions caused by the ongoing conflicts in the Middle East region.
Noting that the crisis has raised crude oil prices above $100 per barrel and tightened supplies of refined petroleum products across international markets over the past few months, the minister said that petrol prices in Nigeria had increased from about N830 per litre before the crisis to an average of N1,400 per litre, reflecting external market pressures affecting countries worldwide.
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While acknowledging the negative impact of the rising fuel prices on households and businesses nationwide, Oyedele maintained that any attempt to restore fuel subsidies, including schemes presented as support for local refining, would effectively translate to a consumption subsidy and further strain the nation’s public finance system.
Specifically, he projected that reducing petrol prices to pre-reform levels would cost the government more than N20 trillion annually, as selling fuel at N500 per litre would require over N16 trillion in form of subsidy on a yearly basis
According to him, subsidy removal generated N15.8 trillion for the Federation Account between June 2023 and December 2025, with N10.4 trillion distributed to states and local governments.
Oyedele explained that restoring subsidies could reduce government revenues, increase borrowing costs, weaken foreign reserves, place additional pressure on the Naira, and reverse gains achieved through recent economic reforms, among other fiscal burdens on the government.
For instance, he estimated that the restoration of the subsidy regime could push the Naira exchange rate close to N3,000 per dollar, while subsidized petrol could eventually cost at least N2,000 per litre.
As a remedial steep towards alleviating the socioeconomic burdens of the Nigerians and businesses without returning to the subsidy regime, the minister disclosed that the government had initiated sundry measures.
He disclosed that the government was considering a fuel price modulation mechanism designed to maintain an ex-gantry or landing-cost ceiling of N1,350 per litre, with the aim of reducing sharp fluctuations in pump prices and cushioning the volatility in the market without suppressing prices or reintroducing subsidy payments.
The minister also hinted about the Federal Government’s plans to establish a National Strategic Fuel Reserve to safeguard supply during future market disruptions and minimise the impact of fuel shortages and price spikes.
He listed some of the palliative measures as including temporary petrol discounts at NNPC retail outlets, expanded cash transfer programmes for vulnerable households, subsidised credit facilities for small businesses, accelerated deployment of compressed natural gas (CNG) infrastructure, and initiatives aimed at reducing transportation and logistics costs.
Oyedele further spoke on the government’s plans to increase funding for cash transfers to vulnerable households and expand subsidised credit for small businesses and consumers facing higher operating and living costs, adding that the government is also considering the introduction of an excess-profit tax on operators in the energy value chain who unduly increase costs to consumers.
According to him, proceeds from such a measure could be channelled into transport support and vouchers for vulnerable urban minimum-wage earners.
The minister said that the Federal Government was working with the National Assembly on enhanced tax relief for low-income earners under the proposed 2027 Finance Bill as well as collaborating with state governments to eliminate illegal road taxes and levies that contribute to the rising cost of transporting food, fuel and other essential commodities.
He said efforts were also underway to reduce regulatory bottlenecks and unnecessary business costs that eventually translate into higher prices for goods and services.
