Remove Fuel Subsidy Now, World Bank Advises Buhari | Independent Newspapers Limited
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Remove Fuel Subsidy Now, World Bank Advises Buhari

Posted: Dec 8, 2015 at 11:14 pm   /   by   /   comments (0)

The World Bank has told President Muhammadu Buhari that the present moment when the price of crude oil is at its lowest level in the global market is the best time for Nigeria to do away with the contentious fuel subsidy.

This was disclosed on Tuesday by World Bank’s Lead Economist, John Litwack during the launch of the new edition of Nigeria Economic Report. He stressed that if the government really meant to take a decision on the issue of fuel subsidy removal, the best time to act would be now.

On Monday, the issue was discussed at the emergency Federal Executive Council (FEC) meeting, with the Minister of Budget and National Planning, Udoma Udoma, stating that the government was seriously weighing the options of either removing or retaining fuel subsidy next year.

But while presenting the economic outlook of the global economy and the crude oil market, Litwack revealed that the Bank foresaw continuous decline in global crude oil price.

He stressed that now is the best time for the government to scrap the subsidy, as doing so would not push retail pump price beyond an average of N100 per litre, or generate the kind pressure that would negatively impact on the people beyond what they are currently facing.

“The fuel subsidy appears to have vast modest benefits for the majority of citizens, but the costs are quite high,” the World Bank Chief noted, adding that “There is a strong tendency for the cost of the fuel subsidy to increase over time as increasing domestic demand for petrol outpaces growth in oil output or revenues.

“The $35 billion cost of the fuel subsidy during 2010 – 2014 was one of the reasons why Nigeria was unable to accumulate a fiscal reserve n the Excess Crude Account that could have protected the country from the recent oil price shock.”

Litwack, who noted that fuel subsidy obligations is likely to consume about 18 per cent of all government oil revenues in 2015, averred that if the current regulated price regime of N87 per litre was retained, subsidy is projected to increase to more than 30 per cent by 2018.