The World Bank has raised alarms over the prevailing fuel prices in Nigeria, stating that current rates are not cost-reflective and hint at the federal government’s continued payment of petrol subsidies.
During the presentation of the Nigeria Development Update (NDU), December 2023 Edition, the World Bank’s lead economist for Nigeria, Alex Sienaert, expressed concern that fuel prices in Nigeria, currently around N650 per litre, do not align with market conditions.
He suggested that Nigerians should pay around N750 per litre for petrol.
His words: “It does seem like petrol prices are not fully adjusting to market conditions. So, that hints at the partial return of the subsidy if we estimate what is the cost reflective of the retail PMS price of the would-be and assume that importation is done at the official FX rate.
“Of course, the liberalization is happening with the parallel rates, which is the main supplier, the price would be even higher. These are just estimates to give you a sense of what cost-reflective pricing most likely looks like.
“We think the price of petrol should be around N750 per litre more than the N650 per litre currently paid by Nigerians.”
Despite the removal of the petrol subsidy on June 1, 2023, the World Bank’s report highlighted the potential for over N11 trillion in savings from fuel subsidy removal by 2025.
However, it noted that Nigeria might still be experiencing implicit fuel subsidies due to petrol prices not adjusting to market factors.
The World Bank emphasized transparency, particularly in the Nigeria National Petroleum Corporation, urging openness in disclosing oil revenues and ensuring accurate remittance to the Federation Account.
Additionally, it recommended regularly posting information on petrol pump pricing to enhance transparency.
In response to the World Bank’s suggestions, some experts criticized the call for a fuel price increase, terming it insensitive, especially following the recent removal of the fuel subsidy.
