The World Bank said the federal government may still be paying gasoline subsidies because fuel prices in Nigeria do not currently reflect costs.
It said Nigerians should pay about 750naira per liter against the current price of 650naira in some places.
One of our correspondent reports that gasoline is already sold at about N690 in Cano and Sokoto, and more than N700 per liter in the northeastern provinces of Yobe and Borno.
At current prices, many Nigerians are parking their cars even as the cost of basic necessities of life skyrocketed and the value of citizens’ incomes eroded by inflation.
Many observers have already condemned the World Bank’s prescription and advised the federal government to look for homemade solutions to the country’s general economic challenges.
Freshreporters News learned that despite numerous assurances by President Bora Ahmed Tinub that the gasoline subsidy scheme was gone, the government paid補助金169.4 billion as a subsidy to keep pump prices at N620 per litre.
Alex Sienaert, Nigeria’s lead Economist at the World Bank, yesterday confirmed the continued payment of gasoline subsidies by the Abuja government during the presentation of the Nigeria Development Update (NDU), the 2023-12 edition…[CONTINUE READING HERE]>>
He said: “Gasoline prices do not seem to be fully adjusted to market conditions.” So if we estimate the cost, which reflects retail PMS prices, and assume that imports take place at the official FX rate, it suggests a partial return of the subsidy.
“Of course, liberalization is happening at parallel rates, which are the main suppliers, prices will be even higher. These are just estimates to understand what pricing will look like, reflecting costs.
“We believe that the price of gasoline should be around the N750 per liter than the n650 per liter that Nigerians are currently paying.”
According to the NDU report, on the financial side, it will be important to keep the savings from PMS subsidy reforms.
According to the report, the high cost of gasoline subsidies has weakened Nigeria’s financial position, leading to a rapid increase in deficit monetization through CBN methods and financing and inflation promotion.
“It is important that the subsidies do not revive, and ongoing progress is being made to ensure pricing that reflects the market,” he said.
The report noted that removing the PMS subsidy would create an opportunity to open up the gasoline market and allow other market participants outside the NNPC to import gasoline.
“This will benefit consumers from market competition, bring more revenue to federal accounts and ultimately flow to all layers of government.”…[CONTINUE READING HERE]>>
Nigeria should have exceeded n11Trn fuel subsidy savings by 2025
The World Bank’s NDU report also said that by 2025, Nigeria will need to save more than n11 trillion from the removal of fuel subsidies.
With the abolition of fuel subsidies, which came into force in 2023/6/1, in 2023 it is expected to save about 0.9 trillion N, which is about 2% of the total economic output of the government.
“Looking to the future, between 2023 and 2025, the expected savings could exceed N11 trillion compared to the scenario where the subsidies were continued,” he said.”
Removal of subsidies does not bring the expected benefits of oil revenues – OAGF
According to the Federal General Administration of Accounting (OAGF), the Fiscal Balance report found that the federal net oil revenue profit was lower than what should have been given the removal of expensive gasoline subsidies.
It stated: “The subsidy costs about N380 billion each month, and it was assumed that removing it would significantly increase the country’s oil revenues.
“However, most of the revenue growth reported in the second half of 2023 was due to an improvement in the exchange rate.
“Without these gains, oil revenues from the 1st to 8th month would have been down by 7% of the overall annual economic output, mainly generated between the 7th and 8th month, 0.2%,” he said.
“On May 8, we had additional revenue from production sharing agreements (PSCs) and annual dividends, but these profits did not match the expected benefits of removing fuel subsidies….[CONTINUE READING HERE]>>
”Because gasoline prices are not adjusted in line with market factors such as exchange rates and global oil prices, implicit fuel subsidies have resurfaced and potentially oil revenues are expected.”
“NNPC needs to be more transparent”
According to the World Bank report, the increase in revenue from FX reform is visible, but more clarity is needed on oil revenues, including the financial benefits from PMS subsidy reform.
The report said that the increase in nominal oil revenues has been evident since May 6. “These are mainly classified as ‘exchange rate increases’ and suggest that they are due to the depreciation of the Nigerian Naira.
Except for exchange rate-related increases, however, there is a lack of transparency regarding oil revenues, particularly the financial benefits of the Nigerian Petroleum Corporation (NNPC) from the removal of subsidies, the arrears of subsidies that are still being deducted, and the impact this will have on federal revenues.
Sienaert said nnpc Limited must be open and honest in order for the government to achieve its new desired agenda.
This openness, he noted, requires making sure that the oil revenues and revenues that go to the federal account are accurate.
The World Bank suggested that the government regularly post information explaining the price of gasoline pumps.
It stressed the need for the government to ensure transparency in its own oil companies – Nnpc, “with respect to profits and oil revenues will be remitted to federal accounts.””
Increase the VAT rate
The World Bank also asked the federal government to increase the VAT rate as a measure to boost non-oil revenues to fg coffers.
In the report, the bank recommended hiking the current VAT rate of 7.5% as a measure to create more fiscal space and increase non-oil revenues.
However, the Bank noted that such an increase should allow for input tax credits, and the exemption of gasoline is one of the recommended measures to increase non-oil revenues.
Other recommendations from banks towards increasing non-oil revenues include the use of data for tax audits and the introduction of a simple sales tax for small businesses at the state level, rather than multiple levies and fees….[CONTINUE READING HERE]>>
“The reform of Tinubu will be profitable if it is maintained”
The report also noted that if President tinubu’s reforms persist, they will help reduce inflation by 2025 to 19.6%. The current inflation rate in Nigeria is 2023/10 at 27.33%.
President Tinubu is targeting inflation of 21.4% in 2024, according to his budget presentation speech.
Since taking office in May, the President has implemented two large–scale reforms – the unification of the foreign exchange market and the removal of expensive subsidies for gasoline.
In addition, he highlighted other benefits of reforms if sustained in the long term, such as a rise in GDP growth to 3.7% in 2025, a reduction in the budget deficit ratio from the current 5.1% to 3.7% in 2022, and a reduction in public debt services as a revenue ratio from 102% in 2025 to 51%.
Advice on Rising Fuel Prices – Prof. Uwareke
Keffi, Uche Uwaleke, professor of Finance and capital markets at Nasarawa State University, said in his response, “This is not the kind of advice that Nigeria should expect from its development partners at the moment.”
Another bitter pill is suggested too soon after the removal of painful fuel subsidies insensitive to the part of the World Bank.
“I consider this call a distraction and urge the president to ignore it and continue to focus on measures to improve the living conditions of Nigerians in line with his 8-point agenda.”…[CONTINUE READING HERE]>>
DISCLAIMER
For publication of your news content, articles, videos or any other news worthy materials, please send a mail to thefreshreporters@gmail.com
Join Other Great Readers, FOLLOW us On WHATSAPP>> https://chat.whatsapp.com/DN0y4bGIbVI4II6aNcPssb
Join Other Great Readers On TELEGRAM>> https://t.me/freshreporters
For Advert and other info, Click this link to send a Message to the Admin https://freshreporters.com/advertise/