World Bank Urges FG to Cease Subsidy Payments, Proposes Petrol Price Increase to N750/Litre

The World Bank has asserted that the Nigerian federal government may still be shouldering petrol subsidies due to non-cost-reflective fuel prices. The institution suggests an increase in petrol prices to N750 per litre from the current rates, emphasizing the necessity for market-reflecting pricing.

As of now, petrol prices have surged to approximately N690 in Kano and Sokoto, reaching over N700 per litre in northeastern states like Yobe and Borno. The resultant impact has led to widespread vehicle parking and amplified costs of essential goods, exacerbating the economic challenges faced by citizens.

Despite President Bola Ahmed Tinubu’s prior assurances that the petrol subsidy regime had ended, recent data indicates a contradictory reality. The World Bank’s lead economist for Nigeria, Alex Sienaert, confirmed the ongoing subsidy payments during the presentation of the Nigeria Development Update (NDU), December 2023 Edition in Abuja.

Sienaert noted, “We think the price of petrol should be around N750 per litre, more than the N650 per litre currently paid by Nigerians.” The NDU report emphasizes the importance of sustaining savings from the petrol subsidy reform, citing its impact on Nigeria’s fiscal position and the rise in deficit monetization through CBN Ways and Means financing.

Additionally, the World Bank anticipates substantial savings, exceeding N11 trillion by 2025, resulting from the removal of fuel subsidies. However, concerns have been raised regarding the actual gains from the subsidy removal, as the Office of the Accountant General of the Federation points out that reported revenue gains are primarily due to exchange rate improvements rather than the expected boost in oil revenues.

The report emphasizes the need for increased transparency from the Nigeria National Petroleum Corporation (NNPC) and recommends regular disclosure of petrol pump pricing information. Furthermore, the World Bank suggests an increase in the Value Added Tax (VAT) rate to bolster non-oil revenue for the federal government, with considerations for input tax credits and removal of exemptions on petrol.

While the report acknowledges the potential benefits of President Tinubu’s reforms, including a reduction in inflation and improved economic indicators, it has been met with criticism. Professor Uche Uwaleke of Nasarawa State University deems the World Bank’s advice on fuel price increase as insensitive, urging the president to focus on measures that enhance the living conditions of Nigerians.