The World Bank has decried Nigeria’s spending on petrol subsidy, which it said had exceeded the government’s spending on health, education and social protection for Nigerians.
This was contained in it’s latest Nigeria Development Update report, titled, ‘The Continuing Urgency of Business Unusual.’
The institution said removal of fuel subsidy will help the government towards its poverty reduction scheme.
According to the Bretton Woods institution, in 2021, Nigeria’s petrol subsidy cost around $4.5bn, or roughly two per cent of GDP, far exceeding federal government spending on health, education, and social protection, so diverting spending away from the petrol subsidy towards more pro-poor causes could help spread the gains of growth, which is essential for reducing poverty.
It further said Nigeria is not benefiting from high oil prices due to lower oil output and fuel subsidy cost.
The report read in part: “The cost of the petrol subsidy will increase significantly as higher global petrol prices will entail larger subsidy payouts if pump prices continue to be frozen.
“The removal of the subsidy that the authorities had originally planned by mid-2022 was postponed until 2023 or later, which is expected to generate considerable fiscal costs.
“The 2022 amended budget (yet to be adopted at the time of this publication) allocates N4tn (almost two per cent of Gross Domestic Product) for the petrol subsidy, higher than the combined budget allocated for education, health, and social protection.”
As of May 2022, the oil production output stood at 1.5 million barrels per day, which is the lowest in 15 years.
It was further stated that the fuel subsidy is estimated to cost the government over $9bn in 2022, which is almost two per cent of the Gross Domestic Product (GDP).
The report further indicated that due to the petrol subsidy and low oil production, Nigeria faces a potential fiscal time bomb and therefore encouraged the government to redirect the money spent on subsidy towards targeted and time-bound cash transfers and other priority investments in health, education, and critical infrastructure.
