World Bank insists Nigeria must stop petrol subsidy
The World Bank has urged Nigeria to discover a new avenue for expansion through an identified range of reforms, including the removal of fuel subsidies, and has cautioned that this is influencing net government income alongside crude oil theft.
This information was relayed by Alex Sienaert, the new chief economist for Nigeria at the World Bank, during the Thursday Nigeria Development Update and Country Economic Memorandum in Abuja.
Reiterating the necessity for Nigeria to curtail inflation, Sienaert stressed the importance of the federal government depending less on financing from the Central Bank of Nigeria (CBN).
The senior representative of the World Bank indicated that for Nigeria to pursue a new avenue for growth, several essential reforms in the sectors of macroeconomic and institutional facilitators, as well as investment stimulators, are needed.
Despite the surge in oil prices, Sienaert encouraged the Federal Government to discontinue the subsidy on fuel, highlighting that oil revenue has consistently declined.
He noted that the primary element exerting pressure on crude oil revenue has been the fuel subsidy, which has escalated from N4 trillion to over N9 trillion.
He stated, “Despite the production challenges, production revenues have risen, but PMS subsidies have also increased. Consequently, net revenues would be lower this year at N2.3 trillion than they were in 2020; this is the main issue.”
However, Sienaert observed that this has been adequate to counterbalance what they have witnessed regarding net oil revenues. Sienaert indicated that Nigeria has been striving to mitigate this by enhancing non-oil revenues, which has been crucial to avert an even more severe squeeze.
He underscored how the cost of debt has noticeably escalated as a result of this.
The Brettonwood Institution advocated for the implementation of a unified, market-reflective exchange rate, the increase of VAT and excise duties, the improvement of tax administration, and the reduction of the federal government’s dependence on CBN financing to boost non-oil revenues and manage inflation.
The Federal Government, he added, can also foster competition by integrating it into policy, enhancing enforcement, and streamlining regulations to lower costs.
Investment Enablers for Nigeria
Some of the investment enablers recommended by the World Bank senior official for the nation comprise;
Facilitating trade and enhancing domestic value addition by removing import and foreign exchange limitations.
Improving access to finance by fortifying the institutional framework for financial remediation.
Enhancing power generation by investing in infrastructure to mitigate technical and commercial losses.
Facilitating transport connectivity by lowering interstate transport expenses.
