The World Bank Group says the costs of maintaining the Nigeria’s fuel subsidy is higher than the benefits.
It noted that the fiscal cost of the subsidy to the country was $35 billion from 2011-2014 and is expected to cost another 18 per cent of total oil revenues accrued to the country, equivalent to 25 per cent of federal budget in 2015.
The World bank, however, said that its duty was to offer advise to Nigerian authorities and not to decide for it what to do with the subsidy policy.
In its latest Nigeria Economic Report released Tuesday in Abuja, the Bank said the oil revenue and the fuel subsidy has been very controversy subject in Nigeria for a very long time and that the controversy have increased in the light of the budgetary crisis, which has raised critical questions as to the sustainability of the subsidy.
Presenting the report, a lead economist, Mr. John Litwack, said Nigeria’s fuel subsidies are currently regretted by larger households, who ought to benefits from it but pay higher to get each of the products.
He argued that the the controversial Nigeria’s fuel subsidy is uneconomical and should not be sustained.
Litwack, who faulted the enforcement of the subsidy policy by government, cited wide-spread fraud as one of the predominant trends that have characterized the process and have cost much on the reputation of the government.
He also listed chronic fuel shortages and price distortions as part of the factors that encourage over-consumption of fuel.
According to him, uncertainty about the fuel subsidy has also strongly discouraged investment in domestic oil refining.
Beyond the benefits, he pointed out that the continued sustenance of fuel subsidy had created more economic hardship to Nigeria, particularly in the area of budgeting.
He stated that the sharp declines in oil prices since the second half of 2014 can be associated with slower growth, falling budgetary revenues, and pressures on the Naira.
According to the economist, the short-term outlook for the Nigerian economy has continued to be modest in light of the difficult adjustment to lower oil prices.
He however, said that Nigeria has the opportunity to build a foundation to support growth and rapid development over the medium and longer term, if it reconsiders the sustainability of the subsidy regime.
The Nigeria Economic report is a regular publication of the World Bank. Each Nigeria Economic Report gives an overview of recent macroeconomic developments and devotes attention to special topics of immediate relevance.
The special topics of Nigeria Economic Report #3 are the fuel subsidy and the natural gas sector.
It noted that the fiscal cost of the subsidy to the country was $35 billion from 2011-2014 and is expected to cost another 18 per cent of total oil revenues accrued to the country, equivalent to 25 per cent of federal budget in 2015.
The World bank, however, said that its duty was to offer advise to Nigerian authorities and not to decide for it what to do with the subsidy policy.
In its latest Nigeria Economic Report released Tuesday in Abuja, the Bank said the oil revenue and the fuel subsidy has been very controversy subject in Nigeria for a very long time and that the controversy have increased in the light of the budgetary crisis, which has raised critical questions as to the sustainability of the subsidy.
Presenting the report, a lead economist, Mr. John Litwack, said Nigeria’s fuel subsidies are currently regretted by larger households, who ought to benefits from it but pay higher to get each of the products.
He argued that the the controversial Nigeria’s fuel subsidy is uneconomical and should not be sustained.
Litwack, who faulted the enforcement of the subsidy policy by government, cited wide-spread fraud as one of the predominant trends that have characterized the process and have cost much on the reputation of the government.
He also listed chronic fuel shortages and price distortions as part of the factors that encourage over-consumption of fuel.
According to him, uncertainty about the fuel subsidy has also strongly discouraged investment in domestic oil refining.
Beyond the benefits, he pointed out that the continued sustenance of fuel subsidy had created more economic hardship to Nigeria, particularly in the area of budgeting.
He stated that the sharp declines in oil prices since the second half of 2014 can be associated with slower growth, falling budgetary revenues, and pressures on the Naira.
According to the economist, the short-term outlook for the Nigerian economy has continued to be modest in light of the difficult adjustment to lower oil prices.
He however, said that Nigeria has the opportunity to build a foundation to support growth and rapid development over the medium and longer term, if it reconsiders the sustainability of the subsidy regime.
The Nigeria Economic report is a regular publication of the World Bank. Each Nigeria Economic Report gives an overview of recent macroeconomic developments and devotes attention to special topics of immediate relevance.
The special topics of Nigeria Economic Report #3 are the fuel subsidy and the natural gas sector.
Cost of Nigeria’s subsidy higher than benefits – World Bank
![Cost of Nigeria’s subsidy higher than benefits – World Bank]()
Reviewed by Vita Ioanes
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Tuesday, December 08, 2015
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