“The Naira Could Crash to ₦4,000 Per Dollar If Subsidy Returns” — Oyedele Warns

Nigeria’s efforts to maintain investor confidence could face a fresh test if the Federal Government signals a return to petrol subsidy, with Finance Minister Taiwo Oyedele warning that the move could trigger capital flight and send the naira plunging to between ₦3,000 and ₦4,000 against the dollar.

Oyedele issued the warning on Monday during a press briefing at the International Monetary Fund and World Bank Annual Meetings in Bangkok, Thailand, as he addressed concerns over the government’s commitment to sustaining its economic reforms ahead of the next election cycle.

According to the minister, investors have continued to question whether President Bola Tinubu’s administration would maintain its current economic direction as political activities gather momentum. He insisted that reversing the reforms could undermine confidence in Nigeria’s economy, with consequences extending well beyond the cost of petrol.

Oyedele said even a suggestion that the government was considering restoring the subsidy could unsettle financial markets, drive investors towards safer assets and increase borrowing costs. He warned that the resulting pressure on the naira could make fuel and other imported products significantly more expensive, potentially defeating the very purpose of reintroducing the subsidy.

“If, for any reason, the President were to say we are merely considering the return of fuel subsidy, capital would react immediately,” the minister said.

He added that the naira could come under severe pressure, potentially moving towards ₦3,000, ₦3,500 or even ₦4,000 to the dollar, while air travel and other economic activities could become more expensive.

The minister also warned that the consequences would not be restricted to foreign investors. Wealthy Nigerians, business owners and middle-class investors could seek refuge in the dollar to protect their savings against uncertainty, increasing demand for foreign exchange and adding further pressure to the local currency.

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Such a development, he argued, would eventually affect ordinary Nigerians through higher import costs, rising prices and additional financial hardship. In effect, a policy intended to make petrol cheaper could become counterproductive if it triggered a currency crisis severe enough to raise the naira cost of fuel.

Oyedele also pushed back against suggestions that the Nigerian National Petroleum Company Limited’s temporary reduction in petrol retail margins represented a return to subsidy. He explained that the decision was a commercial measure rather than a government-funded intervention, maintaining that a company sacrificing part of its profit to lower prices should not automatically be described as receiving or providing a subsidy.

President Tinubu announced the removal of petrol subsidy on May 29, 2023, shortly after being sworn in as Nigeria’s 16th president. His declaration, “Subsidy is gone,” marked a major shift in the country’s fuel pricing policy, with the government subsequently ending budgetary provision for the subsidy from June 2023.

The decision has remained a central issue in Nigeria’s economic debate because of its impact on petrol prices, transportation costs and household spending. While the government has defended its reform programme as necessary for economic stability, many Nigerians continue to grapple with the increased cost of living.

Oyedele’s warning therefore highlights the delicate balance confronting the administration: maintaining confidence in its economic policies while responding to demands for relief from rising living costs. Although the minister presented a return to subsidy as a risk to the naira and investor confidence, his projected exchange rate remains a hypothetical warning rather than a confirmed forecast.

The wider question is whether the government can ease the pressure on households without reversing reforms that it considers essential to the economy’s long-term stability.