President Muhammadu Buhari was advised to remove fuel subsidy as it is best time to act according to the World Bank.
John Litwack, the World Bank’s lead economist, said during the the Executive Council of the Federation meeting.
While the Buhari government has hinted at its intent to remove fuel subsidy, the discussion is still on in the country with many Nigerians.
Udoma Udoma, the Minister of Budget and National Planning, while announcing the Medium Term Expenditure Framework and the government’s N6 trillion budget proposal for 2016, said the authorities were seriously considering the options between removing or retaining fuel subsidy next year.
The government’s body language seems to approve the former, rather than the latter.
Litwack added that the new edition of Nigeria Economic Report that if the government really meant to take a decision on the issue of fuel subsidy removal, the best time to act would be now that world crude oil price was at its lowest level.
While presenting the economic outlook of the global economy and the crude oil market, Mr. Litwack said the Bank predicted continuous weakening in global crude oil price.
He said now is the best time for Nigeria to remove the subsidy, as doing so would not push retail pump price beyond an average of N100 per litre, or generate the kind pressure that would negatively impact on the people beyond what they are currently facing.
Litwack said: “The fuel subsidy appears to have vast modest benefits for the majority of citizens, but the costs are quite high,” Mr. Litwack noted.
“There is a strong tendency for the cost of the fuel subsidy to increase over time as increasing domestic demand for petrol outpaces growth in oil output or revenues.
“The $35 billion cost of the fuel subsidy during 2010 – 2014 was one of the reasons why Nigeria was unable to accumulate a fiscal reserve n the Excess Crude Account that could have protected the country from the recent oil price shock.”
Nigeria produces some two million barrels of crude a day but despite its big reserves, the country imports much of its fuel due to a lack of refining capability — a situation blamed on corruption and mismanagement.
To make petrol inexpensive, Nigeria froze the price of a litre of fuel at 87 naira ($0.44, 0.39 euros), lower than the market rate. Fuel importers expect subsidy payments from the government to make up the difference.
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| Nigerians que for fuel |
While the Buhari government has hinted at its intent to remove fuel subsidy, the discussion is still on in the country with many Nigerians.
Udoma Udoma, the Minister of Budget and National Planning, while announcing the Medium Term Expenditure Framework and the government’s N6 trillion budget proposal for 2016, said the authorities were seriously considering the options between removing or retaining fuel subsidy next year.
The government’s body language seems to approve the former, rather than the latter.
Litwack added that the new edition of Nigeria Economic Report that if the government really meant to take a decision on the issue of fuel subsidy removal, the best time to act would be now that world crude oil price was at its lowest level.
While presenting the economic outlook of the global economy and the crude oil market, Mr. Litwack said the Bank predicted continuous weakening in global crude oil price.
He said now is the best time for Nigeria to remove the subsidy, as doing so would not push retail pump price beyond an average of N100 per litre, or generate the kind pressure that would negatively impact on the people beyond what they are currently facing.
Litwack said: “The fuel subsidy appears to have vast modest benefits for the majority of citizens, but the costs are quite high,” Mr. Litwack noted.
“There is a strong tendency for the cost of the fuel subsidy to increase over time as increasing domestic demand for petrol outpaces growth in oil output or revenues.
“The $35 billion cost of the fuel subsidy during 2010 – 2014 was one of the reasons why Nigeria was unable to accumulate a fiscal reserve n the Excess Crude Account that could have protected the country from the recent oil price shock.”
Nigeria produces some two million barrels of crude a day but despite its big reserves, the country imports much of its fuel due to a lack of refining capability — a situation blamed on corruption and mismanagement.
To make petrol inexpensive, Nigeria froze the price of a litre of fuel at 87 naira ($0.44, 0.39 euros), lower than the market rate. Fuel importers expect subsidy payments from the government to make up the difference.
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