…Says Fuel Subsidy Restoration Could Cost Nigeria N20Trn Yearly
The Federal Government on Thursday unveiled sundry fiscal measures aimed at cushioning the effect of the fuel subsidy removal on Nigerians, particularly vulnerable households, low-income earners, commuters and small businesses, from the impact of rising petrol prices.
The Minister of Finance and Coordinating Minister of the Economy, Taiwo Oyedele, who unveiled the measures during a press briefing in Abuja while outlining the government’s response to the increase in fuel prices, stressed that the interventions were designed to provide relief without returning the country to a blanket petrol subsidy regime.
While acknowledging the negative impact of the rising fuel prices on households and businesses nationwide, the minister 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.
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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 disclosed that the government was working on a mechanism that would allow domestic refineries to purchase crude oil through forward contracts at agreed prices for periods of up to six months.
According to him, the arrangement would give refiners greater certainty over their input costs and help moderate fluctuations in petrol prices caused by changes in the international oil market.
He also disclosed that the government was negotiating a ceiling of N1,350 per litre for the landing or ex-gun cost of petrol under a proposed price-modulation mechanism aimed at preventing extreme price increases, adding that the ceiling will be reviewed monthly in line with prevailing market conditions, with revised figures published to ensure transparency.
Similarly, the minister said the government would also prioritise the supply of fuel at cost to public transport operators across the country as part of efforts to prevent increases in petrol prices from translating into unaffordable transportation fares.
Oyedele, who also announced 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, explained that the government was also considering the introduction of an excess-profit tax on operators in the energy value chain who unduly increase costs to consumers.
He explained that the proceeds from such a measure could be channelled into transport support and vouchers for vulnerable urban minimum-wage earners.
The minister added 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.
Oyedele further disclosed that efforts were being made by the government to reduce regulatory bottlenecks and unnecessary business costs that eventually translate into higher prices for goods and services.
Speaking on alternative sources of transportation energy being looked into by the government, he said the government would accelerate the rollout of Compressed Natural Gas (CNG) in partnership with state governments, and expressed optimism that the initiative would provide cheaper alternatives to petrol, reduce transportation costs and lessen the impact of fuel price increases on commuters and businesses.
While also announcing government’s plans to establish a national strategic fuel reserve capable of releasing refined petroleum products during periods of global supply disruptions, hoarding or artificial scarcity, the minister said the reserve would provide a buffer against external shocks and help prevent sudden shortages from triggering sharp increases in pump prices.
Oyedele further clarified that improved traffic management in major urban centres, alongside the deployment of NIPOST address codes, would improve logistics efficiency, reduce unnecessary fuel consumption and lower the cost of transporting goods.
He maintained that the measures were designed to provide immediate relief to Nigerians while preserving the broader economic reforms of the administration.
The minister hinted that the government was developing a comprehensive package of fiscal measures aimed at sustainably reducing inflation to single digits, adding that future interventions will be targeted at Nigerians most affected by rising costs rather than a return to a broad-based fuel subsidy regime.
Oyedele said the government’s objective was to provide immediate relief while building a more stable domestic energy market through increased local refining, alternative fuels, targeted social support and measures to reduce the cost of doing business.
The relief measures came amid complaints by millions of Nigerians over the spiking fuel prices over the past few months, which the government has attributed to disruptions in the global energy market as well as higher crude oil and refined petroleum product costs locally and internationally.
