The World Bank yesterday called on the Federal Government to reallocate part of the savings from fuel subsidy removal to reduce the suffering of Nigerians worsened by the negative impact of the policy
Making this call in its latest Nigeria Development Update, NDU, released yesterday, the World Bank noted that an additional 7.1 million Nigerians would be pushed into poverty, especially without measures to compensate for the negative impact of subsidy removal on the populace.
The removal of the petrol subsidy and foreign exchange (FX) management reforms, according to the World Bank, are crucial measures to begin to rebuild fiscal space and restore macroeconomic stability, and the opportunity should be seized to take further, necessary policy reform steps.
It noted that the new administration had initiated critical reforms to address macroeconomic imbalances.
Specifically, the organisation said the president should seize the window of opportunity for a transformative impact on the lives of millions of Nigerians and establish a solid foundation for sustainable and inclusive growth.
In the NDU report, titled “Seizing the Opportunity”, The World Bank added that it is critical to implement a comprehensive reform package encompassing a range of complementary measures, including a new social compact, to protect the poor and most vulnerable, to maximize the collective impact on growth, job creation, and poverty reduction.
The report showed that in the first part of 2023, Nigeria’s economic growth weakened, as real Gross Domestic Product, GDP, growth fell from 3.3% in 2022 to 2.4% year-on-year (y-o-y) in Q1 2023.
It added: “The challenging global economic context has put pressure on Nigeria’s economy. However, domestic policies play a major role in determining Nigeria’s economic performance and resilience to further external shocks.
“The previous mix of fiscal, monetary, and exchange rate policies, including the naira redesign programme, did not deliver the desired improvements in growth, inflation, and economic resilience.
“The new government has recognized the need to chart a new course and has already made a start on critical reforms, such as the elimination of petrol subsidy and reforms in the FX market.
“With the petrol subsidy removal, the government is projected to achieve fiscal savings of approximately N2 trillion in 2023, equivalent to 0.9% of GDP. These savings are expected to reach over N11 trillion by the end of 2025.
Impact of subsidy removal on Nigerians
The World Bank stated: “In the immediate term, the removal of the petrol subsidy has caused an increase in prices, adversely affecting poor and economically insecure Nigerian households.
’Petrol prices appear to have almost tripled, following the subsidy removal. The poor and economically insecure households who directly purchase and use petrol as well as those that indirectly consume petrol, are adversely affected by the price increase.
‘’Among the poor and economically insecure, 38 per cent own a motorcycle and 23 per cent own a generator that depends on petrol. Many more use petrol-dependent transportation.
“The poor and economically insecure households will face an equivalent income loss of N5,700 per month, and without compensation, an additional 7.1 million people will be pushed into poverty.
“Many current, as well as newly, poor and economically insecure households, will likely resort to coping mechanisms that will have long-term adverse consequences, such as not sending children to school, or not going to the health facilities to seek preventative healthcare or cutting back on nutritious dietary choices.”
Measures to compensate Nigerians