By Benson Daniel
Reintroducing a universal petrol subsidy could cost Nigeria nearly ₦20 trillion every year and place additional pressure on the country’s finances, according to a new economic assessment.
The Centre for the Promotion of Private Enterprise estimated that restoring the subsidy would expose the Federal Government to an annual fiscal burden of about ₦19.16 trillion, based on projected petrol consumption of 50 million litres per day and an estimated subsidy of ₦1,050 per litre.
The organisation said the actual cost could vary depending on crude oil prices, exchange rates, refining or landing costs, petrol consumption and the regulated pump price.
It warned that bringing back the subsidy could deepen Nigeria’s fiscal deficit and increase pressure on government borrowing and debt servicing.
The estimated annual cost would represent more than 40 per cent of Nigeria’s ₦47 trillion 2025 budget, highlighting the scale of resources that could be redirected towards subsidising petrol consumption.
According to the assessment, such expenditure could compete with funding for critical sectors including infrastructure, education, healthcare, security, agriculture and social protection.
The report also warned that increased government borrowing to finance a subsidy regime could crowd out private-sector credit, keep interest rates elevated and weaken investment, productivity and job creation.
Beyond the fiscal burden, the organisation said a renewed subsidy system could recreate some of the distortions associated with the previous regime, including incentives for smuggling, arbitrage, foreign-exchange pressure and uncertainty for investors.
It argued that subsidy removal, despite the hardship it has created for households and businesses, remains an important structural reform for the Nigerian economy.
The organisation also pointed to the growing role of domestic refining capacity, arguing that increased local production of petroleum products could reduce Nigeria’s dependence on imports, conserve foreign exchange and create opportunities across refining, engineering, logistics and related industries.
The renewed debate over petrol subsidies comes amid another sharp increase in fuel prices. Petrol prices have risen above ₦1,300 per litre in some locations following a surge in international energy prices linked to the conflict in the Middle East.
The assessment cautioned against attributing the entire increase in petrol prices to subsidy removal, noting that global crude prices, exchange rates and other supply costs also influence pump prices.
Rather than restoring a universal subsidy, the organisation called for targeted measures to cushion vulnerable households and businesses from rising living costs without placing an unsustainable burden on public finances.
The debate over petrol pricing is therefore increasingly centred on how Nigeria can protect consumers from energy-price shocks while maintaining fiscal stability and encouraging investment in domestic refining.
For policymakers, the challenge remains finding a balance between affordable energy, sustainable public spending and the long-term reforms required to reduce Nigeria’s dependence on imported petroleum products.
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