THE World Bank has said that President Bola Tinubu may still be paying for petrol subsidy as fuel prices in Nigeria are currently not cost-reflective.
It said Nigerians should pay about N750 per litre as against the current price of N650 in some places.
Our correspondent reports that petrol is already selling at around N690 in Kano and Sokoto, and over N700 per litre in far northeastern states of Yobe and Borno.
With current prices, many Nigerians have parked their vehicles even as costs of basic necessities of life have skyrocketed and value of income of citizens eroded by inflation.
Many observers have already condemned the World Bank’s prescription and advised the federal government to look for a home-grown solution to the prevailing economic challenges in the country.
This newspaper had reported in September that despite the numerous assurances by President Bola Ahmed Tinubu that the petrol subsidy regime was gone, the government paid N169.4 billion as subsidy in August to keep the pump price at N620 per litre.
The World Bank’s lead economist for Nigeria, Alex Sienaert, confirmed the continuous payment of petrol subsidy by the government in Abuja yesterday during his presentation of the Nigeria Development Update (NDU), December 2023 Edition.
He said: “It does seem like petrol prices are not fully adjusting to market conditions. So, that hints at the partial return of the subsidy if we estimate what is the cost reflective of the retail PMS price of the would-be and assume that importation is done at the official FX rate.
“Of course, the liberalization is happening with the parallel rates, which is the main supplier, the price would be even higher. These are just estimates to give you a sense of what cost-reflective pricing most likely looks like.
“We think the price of petrol should be around N750 per litre more than the N650 per litre currently paid by Nigerians.”
According to the NDU report, on the fiscal front, it will be crucial to sustain the savings from the PMS subsidy reform.
The report said the high cost of the gasoline subsidy was weakening Nigeria’s fiscal position, in turn leading to a rapid increase in deficit monetization through CBN Ways and Means financing and fueling inflation.
“It is important that the subsidy is not reinstated, and that continued progress is made to ensure market-reflecting pricing,” it said.
The report noted that removing the PMS subsidy creates an opportunity to open up the gasoline market, enabling other market players apart from NNPC to import gasoline.
“This would yield benefits to consumers from market competition, and more revenues to the Federation Account, ultimately flowing to all tiers of government.”
The World Bank’s NDU report also stated that by 2025, Nigeria should have over N11 trillion saved from fuel subsidy removal.
The removal of subsidy on fuel which came into effect on June 1, 2023, is expected to save the government around N2 trillion in 2023, which is about 0.9% of the country’s total economic output.
“Looking ahead, between 2023 and 2025, the anticipated savings could exceed N11 trillion compared to a scenario where the subsidy continued.”