Petrol Subsidy May Cost Nigeria Nearly N20tn Yearly, CPPE Warns

Petrol Subsidy May Cost Nigeria Nearly N20tn Yearly, CPPE Warns

The Chief Executive Officer of the Centre for the Promotion of Private Enterprise CPPE, Dr Muda Yusuf, has warned that restoring a universal petrol subsidy could cost Nigeria nearly N20 trillion annually, placing additional pressure on the country’s finances, debt obligations and foreign exchange market. Yusuf’s warning comes amid renewed concerns over rising petrol prices and the growing economic burden on households and businesses. He acknowledged that the latest increase in petrol prices has pushed up transportation, logistics and production costs while weakening consumers’ purchasing power and the competitiveness of businesses, particularly micro, small and medium enterprises MSMEs In a recent CPPE policy brief titled “Petrol Subsidy: Preserving Reform Gains While Protecting Citizens,” Yusuf argued that Nigeria should resist calls to return to the former subsidy system. Instead, he urged the government to preserve the gains of deregulation while using resources saved from subsidy removal to provide targeted assistance to vulnerable Nigerians. According to him, the government should prioritise measures such as mass transit, improved electricity supply, food security initiatives and targeted social protection rather than restoring a universal petrol subsidy. Yusuf said a return to the old arrangement would recreate significant fiscal pressures because the government would have to commit enormous resources to keeping petrol prices artificially low. He warned that such expenditure could worsen Nigeria’s debt burden and reduce the fiscal space available for critical sectors. The CPPE chief also linked the former subsidy regime to foreign-exchange pressures, noting that Nigeria previously spent an estimated $10 billion to $15 billion annually on petroleum-product imports. He argued that subsidy and under-recovery obligations consumed public resources while limiting the funds available to the Federation. According to Yusuf, artificially low domestic petrol prices also created incentives for arbitrage and cross-border fuel diversion. He said Nigerian public resources were effectively being used to subsidise consumption outside the country when cheaper petrol was moved across borders.He therefore described the old subsidy arrangement as not simply a petrol-pricing issue, but a broader fiscal, foreign-exchange and resource-allocation problem. Yusuf also highlighted the importance of Nigeria’s growing domestic refining capacity. He said market-based petrol pricing had improved the commercial viability of domestic refining after decades in which regulated prices and uncertainty weakened incentives for investment in the sector. According to him, a competitive domestic refining industry could provide benefits beyond petrol, including increased production of diesel, aviation fuel, petrochemicals and fertiliser. He added that greater domestic refining would reduce dependence on imported petroleum products and help conserve foreign exchange. The warning comes against the backdrop of government claims that the removal of petrol subsidy has created significant fiscal savings.Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele said Nigeria saved N15.8 trillion between June 2023 and December 2025 following the removal of the petrol subsidy. According to Oyedele, about N5.4 trillion accrued to the Federal Government, while N10.4 trillion was shared among state and local governments through the Federation Account. The government has repeatedly argued that restoring the subsidy would reverse some of the fiscal gains achieved since President Bola Tinubu announced its removal in May 2023. While opposing a return to universal subsidies, Yusuf acknowledged the severe economic hardship caused by higher petrol prices. He said the latest price increases have raised transportation, logistics and production costs, weakened household purchasing power and placed additional pressure on businesses. The impact is particularly significant for MSMEs, many of which depend heavily on petrol-powered generators and transportation to operate. Yusuf said the answer to rising fuel costs should be targeted interventions rather than a return to the old subsidy regime. He urged the government to channel the fiscal resources created by the reforms into programmes that directly reduce the cost burden on households and businesses. Such measures, he argued, should include efficient mass transportation, improved power supply, food-security interventions and targeted social protection. The debate over petrol subsidy is therefore likely to remain contentious as Nigerians contend with higher fuel prices, while policymakers weigh the need to protect households against the risks of placing another massive financial burden on government.