World Bank Says Benefits of Nigeria Fuel Subsidy Eluding the Poor
By Benjamin Orisemeke
The benefits of Nigeria’s fuel-subsidy regime are reaching only the rich and eluding the poor, thereby thwarting its objective, World Bank President David Malpass said.
“We encourage, when there needs to be a subsidy for either food or for fuel, that it be carefully targeted, for those most in need,” Malpass said while talking questions from Nigerian journalists at his organizations Spring meeting in Washington D.C. “And we have encouraged Nigeria to rethink its subsidy.”
For decades, Nigeria has maintained a fuel subsidy to ensure lower and uniform retail prices. With the country largely dependent on road transportation for the movement of most goods, higher fuel prices usually translate into a quicker rate of inflation, often sparking anti-government protests.
As Nigeria became dependent on fuel imports with neglected state refineries in disrepair, the size of the subsidy continued to grow. It rose from 350 billion naira in 2019 to 1.5 trillion naira, with the government estimating subsidy expenditure of 4 trillion naira in 2022 on higher oil prices.
Last November, Nigeria’s Finance Minister Zainab Ahmed announced that the subsidy would be phased out this year. However, with elections due in one year, the government buckled over fears of losing votes for taking an unpopular step and decided to reinstate the subsidy.
“I do take note of the complicated situation that they face,” Malpass said. “Nigeria has a huge opportunity because of its natural resources and because of its people, and I think it could see its growth accelerate with improvements in policy.”