The World Bank has suggested that the Federal ]Government may still be paying for petrol subsidy even as it described as fuel prices in Nigeria as not being cost-reflective.
It said Nigerians should pay about N750 per litre as against the current price of N660 in some places.
The World Bank’s lead economist for Nigeria, Alex Sienaert, confirmed the continuous payment of petrol subsidy by the government in Abuja during his presentation of the Nigeria Development Update (NDU), December 2023 Edition.
He said: “It does seem like petrol prices are not fully adjusting to market conditions. So, that hints at the partial return of the subsidy if we estimate what is the cost reflective of the retail PMS price of the would-be and assume that importation is done at the official FX rate.
“Of course, the liberalization is happening with the parallel rates, which is the main supplier, the price would be even higher. These are just estimates to give you a sense of what cost-reflective pricing most likely looks like.
“We think the price of petrol should be around N750 per litre more than the N650 per litre currently paid by Nigerians.”
The NDU report further suggests that, on the fiscal front, it will be crucial to sustain the savings from the PMS subsidy reform.
According to the report, high cost of the gasoline subsidy was weakening Nigeria’s fiscal position, in turn leading to a rapid increase in deficit monetisation through CBN’s Ways and Means financing and fueling inflation.
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