The World Bank has forecasted that President Bola Tinubu’s administration will realize significant savings with the elimination of fuel subsidy, with projected savings of at least ₦2 trillion in 2023 and ₦11 trillion by 2025.
The organization also highlighted the potential positive impact on the country’s economic stability and the attraction of foreign direct investment, thus bolstering long-term growth prospects.
The World Bank noted that ‘With the petrol subsidy removal, the government is projected to achieve fiscal savings of approximately ₦2 trillion in 2023, equivalent to 0.9% of GDP. These savings are expected to reach over ₦11 trillion by the end of 2025,’
Moreover, the report highlighted the significance of eliminating fuel subsidies as it would allow the government to redirect resources to vital areas including healthcare, education, and infrastructure. This shift would facilitate sustainable development and enhance the well-being of Nigerian citizens.
The June edition of the ‘Nigeria Development Update (NDU)’ report, published by the global financial institution, revealed this.
While the World Bank projected potential savings of at least ₦13 trillion from subsidy reform over a three-year period, it emphasized that ‘compensating transfers will be essential to help shield the most vulnerable Nigerian households from the initial price impacts of the subsidy reform.’
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In addition, the Washington-based financial institution stated that ‘Without compensation, many households could be pushed into poverty by higher petrol prices and have to resort to coping mechanisms with long-term adverse consequences.’
Upon assuming office on May 29, President Tinubu made the decision to remove the petrol subsidy, resulting in a sharp increase in the pump price of petrol from ₦195 to ₦540. However, the president did not address any measures or plans to mitigate the negative impact of this change on the Nigerian population.
This decision has sparked widespread concerns among citizens and various stakeholders, who fear the potential consequences on the already struggling economy.
Experts argue that the abrupt removal of the petrol subsidy without an actionable plan in place could further exacerbate the existing socio-economic challenges faced by many Nigerians.
The sharp increase in petrol prices is expected to have a ripple effect on transportation costs, food prices, and overall inflation, ultimately burdening the population already grappling with poverty and limited resources.
The absence of compensatory measures raises questions regarding the government’s dedication to safeguarding vulnerable communities and ensuring a seamless transition amidst policy changes.
While it is important to ensure the sustained growth of Nigeria’s economy through the introduction of policies that will strengthen it in the long run. It is equally important to address the immediate concerns of the struggling citizens and extend the required assistance to those affected.