Nigeria to lose N5tr from petrol subsidy, says World Bank

BY EMEKA EJERE

Nigeria could lose around N5trillion in the year from subsidising petrol, with the way the subsidy bill is increasing, the World Bank has warned.

The global lender, in its Nigeria Development Update (NDU) released on Tuesday in Abuja, noted that N5 trillion is urgently needed to cushion ordinary Nigerians from the crushing effect of double-digit increases in the cost of basic commodities, to invest in Nigeria’s children and youth, and in the infrastructure needed for private businesses small and large to flourish, grow and create jobs.

Business Hallmark had reported that data obtained from the NNPC last week showed a monthly rise in PMS subsidy spending by the oil firm which, however, described it as under-recovery/value shortfall. Importation of petrol into Nigeria and payment of subsidy for the product have solely been handled by the NNPC for a while.

The approved subsidised pump price of PMS in Nigeria is between N162 and N165/litre, but oil marketers say the actual cost should be a little higher or about the same price as diesel were PMS deregulated.

Latest figures from NNPC showed that the amount spent on fuel subsidy maintained an upward trend from January to April this year. In January, February, March and April, the national oil firm incurred N210.38bn, N219.78bn, N245.77bn and N271.58bn respectively, amounting to a total of N947.51bn during the four-month period.

The World Bank report said, “When we launched our previous Nigeria Development Update in November 2021, we estimated that Nigeria could stand to lose more than N3 trillion in revenues in 2022 because the proceeds from crude oil sales, instead of going to the federation account, would be used to cover the rising cost of gasoline subsidies that mostly benefit the rich”.

The bank’s Country Director for Nigeria Shubham Chaudhuri, however, noted: “Sadly, that projection turned out to be optimistic. With oil prices going up significantly, and with it, the price of imported gasoline, we now estimate that the foregone revenues as a result of gasoline subsidies will be closer to N5trillion in 2022.

“N5 trillion is urgently needed to cushion ordinary Nigerians from the crushing effect of double-digit increases in the cost of basic commodities, to invest in Nigeria’s children and youth, and in the infrastructure needed for private businesses small and large to flourish, grow and create jobs.

“Nigeria is in a paradoxical situation: growth prospects have improved compared to six months ago but inflationary and fiscal pressures have increased considerably, leaving the economy much more vulnerable”.

The NDU highlighted: “The inflationary pressures will be compounded by the fiscal pressures Nigeria will face this year because of the ballooning cost of gasoline subsidies at a time when oil production continues to decline.

“Nigeria, for the first time since its return to democracy, and alone amongst major oil exporters, is unlikely to benefit fiscally from the windfall opportunity created by higher global oil prices.

“Nigeria’s growing macroeconomic challenges in 2022 highlight the continuing urgency of a departure from business as usual, and the need for consensus around a package of robust reforms.”