The World Bank has warned that a further increase in the price of Premium Motor Spirit (PMS) otherwise known as petrol, may reverse the dwindling effects of subsidy removal in Nigeria.

The multilateral institution also said Naira is among the worst performing currencies in sub-Saharan Africa in 2024.

The warning was contained in the October edition of its Africa’s Pulse report.

President Bola Tinubu, had shortly after he assumed office in May 2023, announced an end to petrol subsidy regime in Nigeria, a development, which has resulted in the sharp rise of petrol pump price from N175 per litre to N1,200, depending on the area it was purchased.

The report noted that “while the inflationary effects of a weakened naira in the first months of this year and the removal of the gasoline subsidy in the second half of 2023 appeared to be gradually subsiding, a further increase in gasoline prices by 40-45 per cent in September may reverse the disinflationary trend.”

The World Bank projected economic growth in Nigeria at 3.3 per cent in 2024 and 3.6 per cent in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results.

It said: “Inflation peaked in June 2024 (at 34.2 per cent year-on-year) and decelerated to 33.4 per cent in July and further to 32.2 per cent in August,” it said, adding that the consolidation of macroeconomic reforms should support higher growth in the country in 2025.

The World Bank noted that as of the end of August 2024, the naira had depreciated by approximately 43 per cent year-to-date, making it one of the region’s weakest currencies alongside the Ethiopian birr and South Sudanese pound.

It attributed the depreciation of the naira to several factors, including surging demand for United States dollars in the parallel market, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s central bank.

The multilateral institution further highlighted that demand for dollars, driven by financial institutions, non-financial end-users, and money managers, has exacerbated the pressure on the naira.

“By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the worst performers in the region. The Nigerian naira continued losing value, with a year-to-date depreciation of about 43 per cent as of end-August.

“Surges in demand for US dollars in the parallel market, driven by financial institutions, money managers, and non-financial end-users, combined with limited dollar inflows and slow foreign exchange disbursements to currency exchange bureaus by the central bank explain the weakening of the naira”, it stressed.