As the price of crude oil continues to plummet in the international market, the World Bank has advised the Federal Government of Nigeria to remove the controversial fuel subsidy.
The World Bank advised that this was the best time to remove subsidy because the price of oil is already at its lowest ebb.
This was disclosed by the World Bank’s lead economist, John Litwack at the launch of the latest edition of the Nigeria Economic Report on Tuesday.
While stating that the bank expects oil prices to continue to decline in the global market going into the year 2016, Litwack said it was the best time to scrap subsidy because it would not push retail pump price of petrol beyond N100 per litre or subject the people to harsher conditions than they are already experiencing in order to get the product.
“The fuel subsidy appears to have vast modest benefits for the majority of citizens, but the costs are quite high”, he said. “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 in the Excess Crude Account that could have protected the country from the recent oil price shock.”
Recall that the Minister for Budget and National Planning, Udoma Udo Udoma, had said on Monday after the first Federal Executive Council (FEC) meeting that the Federal Government will make a decision on whether to retain or remove fuel subsidy next year.
Disclosing that demands of maintaining the fuel subsidy would consume about 18 per cent of the country’s income from oil in 2015, Litwack said the figure will increase to 30 per cent by 2018 if subsidy is not removed now.