The federal government may still be incurring expenses for petrol subsidies, according to the World Bank, as current fuel prices in Nigeria do not align with actual costs. The World Bank suggests that Nigerians should be paying around N750 per litre, compared to the present price of N650 in certain areas. Petrol is already being sold at approximately N690 in Kano and Sokoto, and over N700 per litre in northeastern states like Yobe and Borno,Dsily Trust reports.
Due to the current prices, many Nigerians have chosen to park their vehicles, while the costs of essential goods have surged, and citizens’ income has been eroded by inflation. Despite President Bola Ahmed Tinubu’s assurances in September that the petrol subsidy was eliminated, the government reportedly paid N169.4 billion as subsidy in August to maintain the pump price at N620 per litre.
The World Bank’s lead economist for Nigeria, Alex Sienaert, confirmed the ongoing petrol subsidy payments during a presentation in Abuja. He emphasized that petrol prices are not fully adjusting to market conditions, suggesting a partial return of the subsidy. The World Bank recommends that the subsidy should not be reinstated to maintain market-reflecting pricing.
According to the Nigeria Development Update (NDU) report, sustaining savings from the petrol subsidy reform is crucial for Nigeria’s fiscal health. The report emphasizes the need for transparency, suggesting that the NNPC should provide accurate information on oil revenues and profits remitted to the Federation Account.
The NDU report also predicts significant savings from fuel subsidy removal, exceeding N11 trillion by 2025. However, the Office of the Accountant General of the Federation (OAGF) states that gains in net oil revenues were lower than expected due to exchange rate improvements, and there is a risk of an implicit fuel subsidy re-emerging.
The World Bank recommends increasing the VAT rate to boost non-oil revenue, with provisions for input tax credits and the removal of exemptions on petrol. The report acknowledges that President Tinubu’s reforms, if sustained, could lead to a reduction in inflation, an increase in GDP growth, and a decrease in the fiscal deficit ratio and public debt service.
Despite these recommendations, a professor of Finance and Capital Market at Nasarawa State University, Keffi, Prof. Uche Uwaleke, criticizes the World Bank’s advice on a fuel price increase, considering it insensitive and a distraction from measures to improve the living conditions of Nigerians.