The World Bank has urged Nigeria’s President Muhammadu Buhari to act now if he is seriously considering the removal of fuel subsidy.
The issue was discussed on Monday, December 7, at the Executive Council of the Federation meeting.
According to the World Bank’s Lead Economist, John Litwack, on Tuesday, December 8, the best time to take such decision is now.
While the Buhari administration has hinted at its intention to remove fuel subsidy, the debate is still on in the country with many Nigerians, including the organised labour, rejecting the plan.
The Minister of Budget and National Planning, Udoma Udoma, while unveiling the Medium Term Expenditure Framework and the government’s N6 trillion budget proposal for 2016, said the government was seriously weighing the options between removing or retaining fuel subsidy next year.
The government’s body language appears to favour the former, rather than the latter.
Mr. Litwack said at the launch of the new edition of Nigeria Economic Report that if the government really meant to take a decision on the issue of fuel subsidy removal, the best time to act would be now that global crude oil price was at its lowest level.
“The fuel subsidy appears to have vast modest benefits for the majority of citizens, but the costs are quite high,” Mr. Litwack noted.
“There is a strong tendency for the cost of the fuel subsidy to increase over time as increasing domestic demand for petrol outpaces growth in oil output or revenues.
“The $35 billion cost of the fuel subsidy during 2010 – 2014 was one of the reasons why Nigeria was unable to accumulate a fiscal reserve n the Excess Crude Account that could have protected the country from the recent oil price shock.”