…warns fuel subsidy return would cost N20trn
a Year
.. to announce tax relief for low-income earners
…plans national strategic fuel reserve to cushion future price shocks
The federal government is turning to tax relief, transport support and targeted fuel-price measures to cushion households and businesses from rising petrol costs, as it seeks to contain the impact of a global oil-price shock without returning to a broad fuel subsidy.
Taiwo Oyedele, minister of finance and coordinating minister of the economy said Thursday that the government will prioritise public transporters in the NNPC discount nationwide, while also negotiating an arrangement under which refiners and importers would absorb temporary increases in petrol costs and recover them when market conditions improve.
The proposed N1,350 figure applies to the ex-gantry or landing cost rather than the final pump price. The government intends to review the figure monthly and publish the calculations, with the aim of smoothing sharp price swings rather than fixing retail prices.
“This is neither a subsidy nor a price control: it is designed to smooth prices over time rather than suppressing them,” Oyedele said at a press briefing in Abuja.
The government will also increase funding for cash transfers to the most vulnerable households and provide subsidised credit to small businesses and consumers. It plans to accelerate the rollout of compressed natural gas vehicles, with the government urging transport operators to pass lower fuel costs on to passengers through reduced fares.
Other immediate interventions include the removal of illegal road levies that add to transport and logistics costs, while the government is considering an excess-profit tax on energy operators that take undue advantage of consumers.
Proceeds from the tax would be used exclusively to cushion the effect of fuel prices through transport support or vouchers for vulnerable urban minimum-wage earners.
The government will also work with the National Assembly on enhanced tax relief for low-income earners under the 2027 Finance Bill, Oyedele said.
The measures are being introduced as petrol prices rise following a global increase in crude and refined-product costs. Brent crude is trading above $100 a barrel, while disruptions to shipping through the Strait of Hormuz have reduced the flow of oil and refined products from the Middle East.
Nigeria’s petrol price has risen to an average of about N1,400 a litre from around N830 before the latest global shock, according to Oyedele. He said the government is seeking to limit the impact on consumers without returning to a broad fuel subsidy.
As part of that effort, the government plans forward sales of crude to domestic refineries as production increases. The arrangement is intended to give local refiners greater certainty over crude supplies and shield domestic petrol prices from some of the volatility in global markets.
The government is also investing in a National Strategic Fuel Reserve that will allow refined products to be released into the market when global disruptions or hoarding threaten supply and price stability. The reserve is intended to reduce artificial scarcity and price volatility rather than subsidise consumption.
Oyedele said the government has already provided significant relief through tax and duty waivers on petroleum products. Those measures are saving consumers between N400 and N600 per litre, equivalent to more than N5 trillion in potential tax revenue, he said.
Despite the new interventions, the government rejected calls to restore the fuel subsidy, warning that doing so would impose a much larger burden on public finances.
“To return petrol to its pre-reform price would cost more than N20 trillion a year, before any allowance for inflated consumption and smuggling,” Oyedele said.
A subsidy of N500 per litre would cost more than N16 trillion annually, he said, adding that such an amount is close to the total Federation Account allocation shared by Nigeria’s three tiers of government in 2025.
Oyedele said subsidy removal released N15.8 trillion to the Federation Account between June 2023 and December 2025, of which N10.4 trillion went to states and local governments. He said 27 states were unable to reliably pay salaries in May 2023, compared with none today.
The minister also warned that restoring subsidies could weaken the naira, increase borrowing costs and put recent economic gains at risk. The exchange rate could approach N3,000 to the dollar within months, he said, potentially pushing subsidised petrol to at least N2,000 a litre.
“A subsidy does not lower the cost of fuel. It only changes how it is paid, and when,” Oyedele said.
The government says its current strategy is to provide targeted and temporary relief while reducing Nigeria’s exposure to imported fuel and global energy shocks.
The measures include faster deployment of CNG buses and vehicles, continued support for vulnerable electricity consumers, feed gas and fertiliser support for producers, and stronger oversight of fuel markets to prevent hoarding, diversion and unjustified margins.
Oyedele said the government recognises that the measures will not eliminate the pressure households face, but argued that they provide a more sustainable response than returning to a blanket subsidy.
“Short-term relief bought with long-term fragility is the most expensive money a government can spend,” he said.
Onyinye Nwachukwu is the Abuja Bureau Chief of BusinessDay, overseeing coverage across Abuja and Northern Nigeria. With more than two decades of experience in economic and financial journalism, she reports on business, policy, and market trends, linking local developments to the global economy. A fellow of the International Monetary Fund (IMF) and recipient of the P. Vishwanathan Memorial Award for Excellence in Financial Journalism, she is known for her insightful storytelling and interviews with senior policymakers, diplomats, and business leaders. Well traveled and globally minded, Onyinye brings depth and international perspective to her reporting.
