The Chairman of the Nigeria Revenue Service (NRS), Zach Adedeji, has said Nigeria could have faced a petrol subsidy bill of about N53 trillion if President Bola Tinubu had not removed the subsidy in 2023.

Mr Adedeji made the claim while appearing on Channels Television on Sunday, where he defended the administration’s decision to end the subsidy and rejected arguments that the government should have first created fiscal buffers before taking the step.

According to him, retaining the subsidy would have placed an unsustainable burden on government finances, particularly amid developments in the global oil market and geopolitical tensions.

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

He added that the continued payment of subsidy could also have had implications for the naira.

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

Mr Adedeji argued that the subsidy was not a sustainable government expenditure because the government was effectively borrowing money to purchase petrol and sell it to consumers at a lower 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.

Why subsidy removal was necessary

The NRS chairman said creating a fiscal buffer before removing the subsidy would not have addressed the underlying problem because the government was already committing borrowed resources to maintain the policy.

He described the subsidy as a major fiscal obligation that would have continued to consume government resources at the expense of other areas of the economy.

Mr Adedeji therefore rejected the suggestion that the decision to remove the subsidy was a mistake.

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

He also defended the timing of the decision, arguing that President Tinubu prioritised the long-term sustainability of the economy over short-term political considerations.

“We should commend Mr President for not being a politician or being preoccupied and forgetting whether I want to have an election or not, but focusing on having a solid foundation for this economy,” he said.

What happened after subsidy removal?

President Tinubu announced the end of the petrol subsidy shortly after his inauguration on 29 May 2023.

The decision immediately triggered a sharp increase in petrol prices, with knock-on effects on transportation and the cost of living.

The Federal Government, however, has consistently argued that removing the subsidy was necessary to reduce pressure on public finances and free resources for infrastructure, social programmes and other government priorities.

Earlier this year, Mr Tinubu said the decision had saved Nigeria from imminent bankruptcy and helped lay the foundation for economic recovery.