The World Bank says Nigeria should end fuel subsidies and speed up reforms

the world bank says nigeria should end fuel subsidies and speed up reforms
the world bank says nigeria should end fuel subsidies and speed up reforms

The World Bank on Tuesday urged Nigeria to stop its costly fuel subsidy over the next three to six months, strengthen exchange rate management, and speed up other changes in order to enhance growth.

Oil prices have pushed Nigeria’s gasoline subsidies up to 864 billion naira in the first nine months of 2021, up from just 107 billion naira in 2020 and the largest deduction in six years.

This year, Nigeria’s finance minister, Zainab Ahmed, announced that the government plans to phase down subsidies and replace them with 5,000 naira monthly handouts for the poorest families.

The bank noted in a study that higher petrol subsidy costs had intensified fiscal pressures in Nigeria and urged bold changes to improve income.

“The PMS subsidy is eroding Nigeria’s limited fiscal headroom to offer basic services,” it stated. For a sustained time of high oil prices, aggressive reform efforts may have a greater impact on growth than this.

Bank of America warns that if momentum isn’t recovered, Nigeria’s growth rates will trail behind other emerging economies because of the country’s failure to complete changes begun during the peak of the COVID-19 outbreak.

Subsidies are “unsustainable and economically dishonest,” Ahmed remarked when he presented the research on the issue.

This year’s GDP growth in Nigeria has been raised up to 2.4 percent by the World Bank, from 1.8 percent previously, following the fourth consecutive quarterly improvement in the economy following the COVID-19-induced recession in 2020.

The World Bank stated the economy’s prospects have improved, but the recovery is still weak and effort is needed to decrease poverty resulting from high inflation.

In the next three to six months, “urgent tasks include cutting inflation, enhancing exchange rate management, abolishing the PMS subsidy, and boosting infrastructure,” the report stated.

According to the bank’s analysis, the naira’s premium on the black market is causing inflation, as is central bank financing of the government’s deficit.

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