The petrol subsidy could have drained as much as N53 trillion from government coffers under present market conditions and driven the naira to roughly N3,500 against the dollar, Nigeria Revenue Service Chairman Zacch Adedeji has said.
Speaking in an interview on Channels Television, Adedeji argued that keeping the subsidy would have placed heavy fiscal and foreign-exchange pressure on the economy.
Projected Fiscal Burden
He explained that the N53 trillion estimate captured what the country might have faced if President Bola Tinubu had not abolished the petrol subsidy in May 2023, especially against the backdrop of global economic shifts.
“The subsidy today would have been N53 trillion if Mr President had not removed it, given what is happening in Iran, given what is happening globally,” Adedeji said.
A continued subsidy regime, he added, could have intensified pressure on the foreign exchange market and pushed the exchange rate toward N3,500 per dollar. Such a liability, he maintained, would have imposed a major burden on federal finances and created an unsustainable obligation.
Justification for the 2023 Decision
Tinubu announced the removal of the petrol subsidy shortly after taking office in May 2023. The step ended a long-running arrangement in which the government covered the gap between the market cost of petrol and the regulated price paid at the pump.
The change produced a sharp rise in petrol prices and shifted a greater share of fuel costs onto consumers. Adedeji dismissed the view that the government should first have built a fiscal buffer. He insisted the subsidy was being funded largely through borrowing.
“Subsidy is not an income. It is like you are borrowing money to buy a product and that product is N10, and you are selling it at N3,” he said.
Maintaining the policy, he argued, would have further weakened public finances and increased the demand for dollars needed to pay for petroleum imports.
Connection to Currency and Refining Reforms
Adedeji also connected the subsidy reform to the government’s foreign exchange measures. He said the earlier exchange-rate system failed to reflect the naira’s true market value and had discouraged investment. In his assessment, the reforms improved foreign exchange conditions and strengthened incentives for investment in domestic refining.
Nigeria is still adapting to the broader effects of subsidy removal, including higher pump prices, exchange-rate adjustments and efforts to expand local refining capacity.
Hypothetical Estimates
Both the N53 trillion figure and the projected N3,500 exchange rate are scenarios of what might have happened under a different policy path, not costs the government has actually incurred. Adedeji did not disclose the assumptions or methodology behind either projection.
The real cost of retaining a subsidy would hinge on factors such as international crude prices, domestic petrol consumption, exchange-rate movements, refining output and the size of the subsidy per litre. The figures nevertheless illustrate the fiscal and foreign-exchange risks that policymakers associated with keeping the petrol subsidy, as the administration continues to present the reforms as essential for long-term fiscal health.
