Naira Could Have Hit N3,500/$ Without Subsidy Removal – Adedeji

The naira could have plunged to about N3,500 to the dollar if the Federal Government had retained the petrol subsidy, Chairman of the Nigeria Revenue Service (NRS), Zacch Adedeji, has said, warning that the cost of sustaining the policy could have risen to N53 trillion.

Adedeji said the scale of the potential subsidy burden, particularly amid the global energy crisis, would have placed an unsustainable strain on the country’s finances and consumed a significant portion of government resources.

Speaking on Channels Television’s Sunday Politics yesterday, he said the estimated N53 trillion subsidy bill would have amounted to about 76 per cent of Nigeria’s total budget, leaving little room for other government priorities.

He argued that the removal of the subsidy should therefore be viewed against what Nigeria could have faced had the policy continued, rather than only through the immediate increase in the cost of petrol and its effect on households.

“The subsidy today will have been N53 trillion,” Adedeji said, adding that the figure had to be considered in the context of Nigeria’s total budget.

According to him, the subsidy system created the illusion that government had money available to keep petrol prices artificially low when, in reality, the government was effectively financing the difference between the actual cost of the product and the price paid by consumers.

He likened the arrangement to buying a product worth N10 for N3 while borrowing the remaining N7, arguing that such a system could not constitute sustainable income or wealth.

Adedeji said retaining the subsidy would also have made it difficult for domestic refineries to operate commercially because producers would not be able to sell their products at market-driven prices.

He linked the removal of the subsidy to the emergence of increased domestic refining capacity, saying Nigeria had moved from refining about 30,000 barrels of crude per day before the reforms to about 700,000 barrels per day.

He further said the country was expected to become a net exporter of Premium Motor Spirit (PMS) in March, describing the development as a major shift from Nigeria’s longstanding dependence on imported petrol.

According to him, the ability to refine locally also provides a buffer against external shocks, particularly disruptions in the international oil market.

He cited the recent global energy crisis linked to the Iran conflict as an example of the kind of external shock that could have exposed Nigeria to greater vulnerability had the country remained heavily dependent on imported petrol.

The NRS chairman also said the removal of subsidy had contributed to a substantial increase in funds available for distribution to the three tiers of government.

He said monthly allocations had risen from about N700 billion in 2023 to approximately N4.5 trillion currently, giving state governments greater capacity to meet their financial obligations.

Adedeji said the improvement was evident in the reduced frequency of state governments seeking federal assistance to pay workers’ salaries.

He maintained that the question Nigerians should ask was not simply how much petrol cost after subsidy removal, but what the country would have looked like if the policy had continued under worsening global conditions.

“If Mr. President has not stopped it, only God knows where this country would have been,” he said.