The World Bank says increasing fuel subsidy puts the Nigerian economy at a high risk as subsidy payments could significantly impact public finance and pose debt sustainability concerns.
The National Assembly recently approved President Muhammadu Buhari’s request for N4trillion as fuel subsidy for 2022. The figure represents an increase of 179.72 per cent over the previous year’s subsidy bill of N1.43trillion.
In its Biannual report, the Fund said Nigeria is projected to have a 3.8 per cent growth in 2022, adding, as an oil-dependent country, weak oil production hampers economic recovery.
According to the Washington-based bank, the high level of oil prices will affect countries that are shielding the impact on their consumers through fuel subsidies, such as Nigeria and Ethiopia.
The IMF further added that the high cost of fuel subsidies, due to the increase in oil prices, may deteriorate the country’s fiscal balance.
Country Director, Shubham Chaudhuri, said Nigeria’s decision to postpone the full deregulation of the downstream sector of the petroleum industry by 18 months might cost the country over N4tn in subsidy payments on petrol in 2022.
Chaudhuri however, noted that while the World Bank could come up with advice on subsidy removal, its role was certainly not to dictate as it had no ability to do such.