Tinubu’s 30-Day fuel “Discount” cannot repair the damage of subsidy removal

By Daniel Nduka Okonkwo

The Federal Government has issued a stark warning: restoring petrol subsidies could push the exchange rate towards N3,000 to the dollar and petrol prices to at least N2,000 per litre. On October 8, 2026, Finance Minister and Coordinating Minister of the Economy Taiwo Oyedele presented these projections, as reported by Channels Television, arguing that subsidy restoration could weaken government revenue, increase borrowing costs, trigger capital flight, and undermine progress on inflation. The warning deserves serious consideration. But so does a fundamental question: what assumptions and calculations underpin these projections, and how can Nigerians independently assess them?

The economic risks of an expensive subsidy programme are real. If the government absorbs a substantial portion of petrol costs without a sustainable funding plan, it could face mounting fiscal pressure. Depending on how the programme is financed, the consequences could include increased borrowing, reduced spending on essential services, delayed payments, or higher taxes. A poorly designed subsidy could also distort prices and create opportunities for smuggling and diversion. However, acknowledging these risks is not the same as accepting that a particular exchange rate or petrol price will inevitably follow a policy reversal. Equally, a temporary fuel discount cannot automatically undo the economic consequences Nigerians have endured since subsidy removal.

The N3,000-to-the-dollar projection should be examined as a conditional scenario, not an established outcome. The government has described a possible chain of events involving lower revenue, a potential sovereign credit downgrade, costlier borrowing, capital outflows, declining foreign-exchange reserves, and further naira depreciation. But what is the model’s starting point? How much subsidy spending is assumed? What financing method is envisaged? What happens if crude oil prices, domestic refining output, foreign exchange inflows, or investor behaviour differ from the assumptions? Without these details, the public cannot distinguish a carefully modelled forecast from a warning based on a worst-case scenario.

The same scrutiny should apply to the claim that petrol would cost at least N2,000 per litre if the subsidy returned. The relevant factors include crude oil prices, the exchange rate, refining and distribution costs, taxes, profit margins, and the scope of the proposed subsidy. Would the estimate apply to imported petrol, domestically refined petrol, or both? Would it reflect prevailing market conditions or assume that restoring subsidies had already weakened the naira? The government should publish the assumptions behind its estimate so independent economists can test the calculations and explain the range of plausible outcomes.

Oyedele has argued that subsidies must ultimately be financed through measures such as higher taxes, unpaid salaries and pensions, or money creation. These are genuine risks, but they are not the only conceivable financing arrangements. The fiscal consequences would depend on the programme’s design, duration, eligibility rules, funding source, and budgetary controls. A targeted, time-limited intervention financed transparently through an approved budget is not economically identical to an open-ended subsidy funded by uncontrolled borrowing or monetary expansion. Those proposing to restore support must demonstrate how it would be funded; equally, the government must explain why its projected outcomes should be regarded as the most likely.

The minister’s reference to more than N30 trillion being printed under the previous administration also requires context. Nigeria’s history of monetary financing raises legitimate concerns about inflation and fiscal discipline. Yet that history does not, by itself, establish that any future subsidy would necessarily be financed through money creation. The relevant questions are whether a proposed programme would increase the deficit, how that deficit would be funded, and what safeguards would prevent costs from becoming unsustainable. The debate should focus on the actual financing mechanism rather than treating the worst possible option as inevitable.

Another unresolved issue is what Nigerians have received in return for the removal of the petrol subsidy. The Federal Ministry of Finance’s economic reform scorecard estimates subsidy savings of N15.8 trillion across the federation. It puts the Federal Government’s share at N5.43 trillion, the states’ share at N6.52 trillion, and local governments’ share at N3.88 trillion. These figures matter because the entire N15.8 trillion was not retained by the Federal Government as a single pool of cash. The ministry also reports N20.4 trillion in incremental federal resources from subsidy savings, other additional revenue, and incremental borrowing, against approximately N30.64 trillion in additional expenditure pressures. These are the government’s own figures, not an independent audit, and they should be examined alongside evidence of actual spending and outcomes.

This distinction changes the accountability question. It would be inaccurate to suggest that the Federal Government alone received all the reported savings. But it is entirely reasonable to ask what additional resources each tier of government received, how those resources were used, and whether citizens can see measurable improvements in public services. What additional funding reached hospitals, schools, roads, public transport, and social protection? What proportion went to debt servicing, wages, infrastructure, and other obligations? Where are the independently verifiable results? A fiscal scorecard is useful, but expenditure records, project-level disclosures, and measurable outcomes are necessary to establish whether the public has benefited.

Domestic refining presents another important test of the government’s argument. Greater local refining capacity can reduce dependence on imported finished petrol and may lower some supply-chain costs. Yet domestic production does not automatically guarantee cheaper fuel. Refineries still face crude oil costs, financing expenses, operational costs, distribution charges, and exposure to international market conditions. Where crude is priced at export-parity levels or refiners must purchase foreign exchange to meet their obligations, domestic production may not insulate consumers from global prices. The government should disclose how its projections account for local refining and what proportion of petrol supply it expects domestic refineries to provide.

The question is not simply whether Nigeria refines petrol locally, but whether domestic crude-supply arrangements and pricing rules allow Nigerians to capture the benefits of that capacity. If crude is supplied to local refineries at prices reflecting international market conditions, consumers may continue to face substantial price pressures even as imports fall. Conversely, any proposal to supply crude at preferential prices must identify who bears the cost and how the arrangement affects public revenue. Forward sales of crude to domestic refiners should therefore come with transparent terms, clear delivery obligations, and an explanation of their expected impact on petrol supply and prices.

Another significant development in the debate is the government’s proposed N1,350-per-litre ceiling on petrol’s ex-gantry or landing cost. According to the government’s briefing, the proposal is intended to moderate price volatility. Where costs exceed the ceiling, refiners and importers would initially absorb the shortfall and recover it later when market conditions allow. The government has said this arrangement is not a subsidy or price control. Crucially, however, the proposed ceiling does not mean petrol will sell for N1,350 per litre at filling stations.

Daniel Nduka Okonkwo is an investigative journalist, human rights advocate, and can be reached at dan.okonkwo.73@gmail.com.