In its bi-annual report evaluating Nigeria’s economic and social changes, the World Bank forecasts substantial savings for the country, projecting over N11 trillion in savings by 2025 following the removal of fuel subsidies.
The report indicates that the subsidy removal, effective since June 1, 2023, is expected to save the government approximately N2 trillion in 2023 alone, accounting for 0.9% of the nation’s total economic output.
Despite the removal of the costly fuel subsidy, the Office of the Accountant General of the Federation (OAGF) reveals that the expected increase in net oil revenues did not materialize as anticipated.
Formerly costing N380 billion monthly, the subsidy removal was expected to significantly boost oil revenues; however, most gains in the second half of 2023 were attributed to exchange rate improvements rather than the elimination of the subsidy.
The World Bank report points out a potential risk of an implicit fuel subsidy re-emerging, which could hinder oil revenue growth. To restore macroeconomic stability, the report recommends that the government reaffirms its commitment to not subsidize gasoline, ensures retail prices align with this commitment, regularly publishes pump prices information, and provides detailed financial statements for the Nigerian National Petroleum Company Limited (NNPCL).
SOil Production Shows Slight Improvement, but Exports Face Challenges
The report indicates a 4.6% year-on-year growth in Nigeria’s oil production during the initial nine months of 2023. However, this growth is below pre-pandemic averages, falling short of both OPEC quotas and the Federal Government’s production estimates. While oil production is expected to rise, exports may shrink in 2024 due to anticipated lower oil prices.
As Nigeria charts its economic course, the World Bank underscores the importance of prudent fiscal measures and transparent practices to ensure sustained macroeconomic stability and optimal utilization of the anticipated fuel subsidy savings.
