The Federal Government and the citizens must agree on the removal of petrol subsidy that will cost Nigeria over N3 trillion by the end of 2021, the World Bank’s Country Director for Nigeria, Shubham Chaudhuri, has said.
Nigeria’s rising fiscal deficit is yet another sign of the country’s ailing finances and makes a mockery of the government’s insistence to continue with a wasteful petrol subsidy regime that gulps over a trillion naira per annum, among other overly expensive ventures of a cash-strapped government.
To solve this, Chaudhuri said “there has to be a consensus within and among the political elites which he insists is the main reason Nigeria has not achieved its potential as Africa’s biggest economy. There has been no consensus agreement between the elites and everyone else on how best to solve this subsidy problem”, Chaudhuri said, during a visit to a corporate office in Lagos on Tuesday.
He called on the Nigerian government to consider the opportunity cost of its continued fuel subsidy and decide whether to end the policy completely or maintain the drain on its scarce resources.
Calculations have shown Nigeria’s petrol subsidy projected to hit N3 trillion based on current market realities is 46% higher than the N1.6 trillion ($4 billion) the government raised through a Eurobond in September. “Nigeria’s fiscal position is deteriorating, resulting in higher debt and less space for investments in human capital and infrastructure”, the World Bank said.
Data from the Central Bank of Nigeria (CBN) showed that the Federal Government’s fiscal deficit hit N2.4 trillion in the first quarter of 2021, up from N1.6 trillion in the fourth quarter of 2020 and N1.4 trillion in the first quarter of 2020. That is after the government kept up with its expenditure plans, but fell way short of its revenue projection.
Also, World Bank’s data showed the cost of petrol subsidy is at a six-year high from N107 billion in 2020 to N864 billion between January and September 2021, significantly reducing fiscal space for social spending,
The World Bank also recommended that part of the money should be set aside for development priorities at all levels of government, including local government area development funds, State development funds, and national priority programmes.
Nigeria is the only country in the world that subsidizes only petrol, the cost of which is massive and unsustainable; as a result, Nigeria is sacrificing critical investments in physical and human capital. The report said 40% of the poorest consume less than 3% of the total PMS consumption in Nigeria, adding that by creating a large price differential between Nigeria and its neighbours, the PMS subsidy is incentivising smuggling.
