The presidential adviser on fiscal policy has warned that the naira may fall to N4000 per dollar if the federal government returns petrol subsidy.
The adviser Taiwo Oyedele gave the warning during a media interaction on Monday. He said maintaining subsidy arrangements would put heavy pressure on government finances and foreign exchange.
According to him, the cost of subsidising petrol would reduce the amount of dollars available in the market. This would lead to further depreciation of the naira against the dollar. He said ordinary Nigerians would bear the brunt through higher costs of goods and services.
Nigeria removed petrol subsidy in May 2023. The decision was aimed at reducing government spending and allowing market forces to determine petrol price. Since then, the naira has experienced depreciation but government says it is working to stabilise the currency.
The warning comes at a time when Nigerians are already facing high cost of living. The price of petrol is currently above N1000 per litre in many parts of the country. The exchange rate is around N1650 to one dollar at the official market.
The adviser explained that if government returns to paying subsidy, it would need to source dollars to import petrol. This would increase demand for dollars and cause scarcity. He advised government to focus on local refining and improving revenue collection instead of returning subsidy.
The Nigeria Labour Congress has been calling for reduction in petrol price. The organised labour says high petrol price is affecting workers. The federal government has said it is working on measures to reduce the impact of fuel price on citizens.
Economic analysts have also reacted to the warning. They said government should continue with reforms that improve local production. They said Dangote Refinery and other local refineries should be supported to produce enough fuel for local consumption.
The Central Bank of Nigeria has said it is implementing policies to strengthen the naira. The bank said it has cleared foreign exchange backlogs and is working to improve transparency in the forex market.
The federal government has not announced any plan to return petrol subsidy. The presidency has said the subsidy removal is permanent and necessary for economic growth.
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