The World Bank has projected about N3.9 trillion revenue savings for Nigeria to enable it reduce the current fiscal deficit as a result of removal of subsidy on gasoline.
The new federal administration of President Bola Ahmed Tinubu announced full deregulation of the oil sector on May 29, 2023, causing a sharp increase in prices of petroleum products from N194 per litre to between N537 and N542 per litre across the country.
World Bank and the International Monetary Fund (IMF) has been among the key advocates for removal of fuel subsidy and the floating of the nation’s hitherto managed exchange rate regime.
Speaking at the presentation of the World Bank report to assess Nigeria’s economy over the past six months that was released in Abuja yesterday, lead economist at the bank, Alex Seinart, projected that the removal of fuel subsidies would yield fiscal gains estimated at about 3.9 trillion Naira in 2023.
Seinart however warned that the subsidy removal would likely lead to a temporary increase in inflation in the coming months but predicted it would contribute to disinflation in the medium term.
Based on the report, the World Bank has expressed its support for the federal government’s decision to remove subsidies and unify the country’s exchange rate.
World Bank country director, Dr. Subham Chadhuri, said although the policy would be painful, it is essential for rebuilding the nation’s economy.
He also called for measures to mitigate the impact on the population moving forward.
Dr. Chadhuri revealed that the World Bank’s concessional funding to Nigeria currently amounts to over ten billion dollars, underscoring the organisation’s commitment to supporting the country’s economic reforms.
On the exchange rate, the senior economist highlighted that the previous foreign exchange management approach hindered investment and economic growth, contributed to inflation, and undermined the effectiveness of monetary and fiscal policies.
