The Federal Government and the World Bank have discussed further reforms to eliminate fuel and electricity subsidies in the country.
The Nigerian government had in March 2020 removed petrol subsidy after reducing the pump price of the product to N125 per litre from N145 on the back of the sharp drop in crude oil prices. But it re-emerged this year following the significant rise in oil prices.
The Federal Government’s removal of petrol subsidy and the increase in electricity tariff were in line with reforms being sought by the International Monetary Fund and the World Bank.
“The recent introduction and implementation of an automatic fuel price formula will ensure fuel subsidies, which we have eliminated, do not reemerge,” the Federal Government told the IMF in the letter of intent dated April 21, 2020 with respect to its request for emergency financial assistance of $3.4bn.
The Minister of State of Petroleum Resources, Chief Timipre Sylva, said in July last year that the Federal Government had reached a conclusion that it could no longer bear the burden of petrol subsidy.
The IMF said in February this year that Nigeria had expressed strong commitment to avoid the return of fuel subsidy and to put an end to electricity tariff shortfalls by June this year.
In a report after the conclusion of its Article IV consultation with Nigeria, the Washington-based fund said the authorities highlighted important recent reforms undertaken despite a difficult macroeconomic environment.
It said, “They expressed strong commitment to prevent fuel subsidies from resurfacing and to fully eliminate electricity tariff shortfalls by mid-2021.
“They believe that lifeline tariffs and other relief measures are adequate to protect poorer households from increases in electricity prices and highlighted the benefits from higher and more predictable availability.”
The President, World Bank Group, Mr David Malpass, met with the Minister of Finance, Budget and National Planning and the Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, on April 8 and discussed Nigeria’s ongoing COVID-19 response, and the need for fast deployment of vaccines.
The president and the minister ‘also discussed further reforms to phase out energy subsidies, noting the importance of compensatory measures for the poor and vulnerable’, the World Bank said on its website.
The World Bank had said in October that the Nigerian government had ‘taken important steps to reform its subsidy regime’.
It noted that the Nigerian government had eliminated petrol subsidy and established a market-based pricing mechanism with no price ceilings.
“The gasoline (petrol) price is set monthly by the Petroleum Products Pricing Regulatory Agency from market-based costs. When international petroleum product prices start to recover, the PPPRA will allow price increases accordingly,” it said in its Africa’s Pulse report.