The World Bank has urged President Muhammadu Buhari to remove petroleum subsidy, saying that the time has come for the president to take the decision.
Speaking at the launch of the new edition of Nigeria Economic Report, the World Bank’s Lead Economist, John Litwack, said the best time to remove fuel subsidy is now when global crude oil price is at its lowest level, noting that the Bank foresaw continuous decline in global crude oil price.
According to Litwack, now is the best time for the government to scrap the subsidy, as doing so would not push retail pump price beyond an average of N100 per litre, or generate the kind of pressure that would negatively impact on the people beyond what they are currently facing.
Litwack said, “The fuel subsidy appears to have vast modest benefits for the majority of citizens, but the costs are quite high. There is a strong tendency for the cost of fuel subsidy to increase over time as increasing domestic demand for petrol outpaces growth in oil output or revenues.
“The $35 billion cost of fuel subsidy during 2010 – 2014 was one of the reasons Nigeria was unable to accumulate a fiscal reserve in the Excess Crude Account that could have protected the country from the recent oil price shock.”
He explained that fuel subsidy obligations were expected to reach 18 per cent of all government oil revenues in 2015, pointing out that if the current regulated price regime of N87 per litre was maintained, subsidy was projected to increase to more than 30 per cent by 2018.