Subsidy could have cost N53trn, pushed naira to N3,500/$-NRS

Nigeria’s fuel subsidy could have ballooned to about N53 trillion, and the naira weakened to as much as N3,500 to the dollar if President Bola Ahmed Tinubu had not removed the subsidy in 2023, Chairman of the Nigeria Revenue Service (NRS), Zacch Adedeji, has said.

Adedeji said the projected subsidy burden, which would have represented a massive drain on government finances, would have worsened alongside global oil market disruptions and geopolitical tensions, leaving the Federal Government with significantly less fiscal space to fund other parts of the economy.

He also argued that the naira could have come under substantially greater pressure, potentially reaching N3,500/$, as the government continued to finance the subsidy while grappling with foreign exchange shortages, weak oil-sector performance and a narrow revenue base.

The NRS Chairman made the remarks during an appearance on Channels Television’s Sunday Politics, where he defended the economic reforms undertaken by the Tinubu administration and outlined the fiscal and structural challenges inherited by the government in 2023.

According to Adedeji, the administration inherited four major and mutually reinforcing economic distortions: an unsustainable fuel subsidy regime, an opaque foreign exchange market, an underperforming oil sector and a tax base that was too small relative to the size of the economy.

He said the distortions had combined to weaken government finances, discourage investment and put pressure on the naira, while the Federal Government was also dealing with a large Ways and Means balance at the Central Bank of Nigeria (CBN).

“Mr President inherited an economy that is riddled with four mutually reinforcing distortions. One is unsustainable subsidy. Second one is an opaque foreign exchange market that we have, that discouraged investment into the country,” Adedeji said.

“The third one is an underperforming oil sector, which should be our backbone. And the last one is that we have a tax base that is very small compared to the size of our economy.”

He said the consequences were reflected in trade deficits, negative Federal Account Allocation Committee (FAAC) inflows and a Ways and Means balance of about N23 trillion.

“You go to CBN, you have a backlog of several billion. You have ways and means of roughly 23 trillion,” he said.

The subsidy, in particular, was described by Adedeji as a fiscal distortion because the government was effectively borrowing money to purchase petrol at a higher cost and sell it to consumers below its market-related price.

“Subsidy is not an income. It is like you are using your borrowing money to buy a product and that product is 10 naira, and you are selling it at 3 naira,” he said.

Adedeji said maintaining the subsidy would have become increasingly expensive as international crude oil and refined petroleum product markets were affected by geopolitical developments, particularly tensions involving Iran and disruptions around key global energy routes.

“The subsidy today would have been N53 trillion if Mr President had not removed it, given what is happening in Iran, given what is happening globally,” he said.

“With the ripple effects of that, the exchange rate today would have been around N3,500 if that had not been done,” he added.

The N53 trillion estimate highlights the scale of the fiscal exposure that, according to the NRS Chairman, Nigeria avoided by ending the subsidy regime. The figure would amount to a substantial portion of the Federal Government’s current spending envelope and would have significantly constrained funds available for infrastructure, social programmes and other public investment.

Adedeji had in April 2026 estimated that Nigeria could have spent about N52 trillion on fuel subsidies in 2026 alone if the policy had remained in place, equivalent to about 76 per cent of the N68 trillion 2026 budget.

The latest estimate therefore reinforces the administration’s argument that subsidy removal was primarily a fiscal sustainability measure rather than simply a policy choice aimed at raising petrol prices.

President Tinubu removed the petrol subsidy on May 29, 2023, shortly after assuming office, triggering a sharp increase in petrol prices and contributing to higher transportation and living costs.

The government has since argued that the policy was necessary to end a costly system that absorbed public resources while distorting prices and creating incentives for smuggling and other leakages.

However, the fiscal benefits of the reform have been contested.

Advisory firm CFG Advisory has argued that the savings generated from subsidy removal have been largely absorbed by debt servicing, limiting the Federal Government’s ability to convert the fiscal relief into substantial development spending and social interventions.

The debate therefore centres not only on how much Nigeria would have spent if subsidy had remained but also on how effectively the savings from its removal are being converted into stronger public finances, investment and improved living standards.

Adedeji nevertheless said the administration’s overall balance sheet was improving, arguing that the reforms had begun to address the structural weaknesses inherited in 2023.

He said the foreign exchange reforms were designed to replace an opaque market structure that had discouraged investment with a more transparent system, while efforts to increase oil production were aimed at restoring the sector’s capacity to generate foreign exchange and government revenue.

The NRS Chairman also pointed to the expansion of the tax base as a critical component of the reforms, saying Nigeria could not sustainably finance its development needs with a revenue base that remained disproportionately small relative to the size of its economy.

The combination of subsidy removal, foreign exchange reforms, oil-sector reforms and tax reforms, he argued, was intended to correct the underlying distortions rather than simply provide temporary relief.

Adedeji said the administration should therefore be judged against the economic conditions it inherited and the longer-term objective of establishing a more sustainable fiscal and monetary foundation.

He rejected the argument that the government should have first built a fiscal buffer before removing the subsidy, maintaining that such an approach would have meant continuing to finance an unsustainable expenditure from borrowed resources.

He also defended President Tinubu’s decision to remove the subsidy despite the immediate political and economic consequences, saying the administration had prioritised long-term economic stability over short-term political considerations.

“It is not a mistake. It is the best thing that has happened to the economy,” Adedeji said.

The NRS Chairman’s assessment comes as the government continues to defend its reform programme amid persistent concerns over inflation, household purchasing power, debt servicing, exchange rate stability and the pace at which economic growth is translating into improved living standards.

The central economic question is therefore shifting from whether subsidy removal was necessary to whether the fiscal space created by the reform, alongside higher oil-sector output and broader tax revenues, can ultimately be converted into stronger public investment and lower economic pressures on households and businesses.

For the Tinubu administration, the N53 trillion counterfactual subsidy estimate and the N3,500/$ exchange-rate projection form part of its argument that the cost of preserving the old economic structure would have been significantly higher than the short-term disruption created by reforming it.