The World Bank has advised President Muhammadu Buhari to remove fuel subsidy forthwith, saying now is the best time to do so.
The bank noted that global crude oil price is at its lowest level and that the federal government should therefore act now.
By 2018, the total spending on fuel subsidy will consume about 30 per cent of the entire oil earnings for Nigeria if the current regulated prices are maintained, the World Bank Group said yesterday in its Economic Report.
The federal government had included N150 billion as the balance of subsidy arrears for last year in the Medium Term Expenditure Frame work President Buhari sent to the National Assembly yesterday.
The World Bank report focuses on fuel subsidy and natural gas sector.
It said Nigeria was unable to accumulate a fiscal reserve in the Excess Crude Account that could have protected the country from the recent oil price shock by expending about $35 billion (About N7 trillion) from 2010 to 2014 in the subsidy scheme.
In recent years numerous audits and reports had identified widespread corruption and fraud in the administration of fuel subsidy.
Presenting the report yesterday in Abuja, Senior Director, Macroeconomics and Fiscal Management, World Bank, John Panzer said should Nigeria remove fuel subsidy now, the price of petrol would not cost more than a N100 per litre.
He said despite the fuel subsidy reports from the National Bureau of Statistics stated that Nigerians were buying petrol above N100 per liter for the major part of this year.
“With the right policies, the country can emerge stronger and more diversified from the oil shock,” said Rachid Benmessaoud, Country Director for Nigeria.
“Nigeria is hard pressed for a major fiscal adjustment to lower oil revenues – even if oil prices rebound, the general rapid trend toward a decline in the share of oil revenues in GDP should continue.” the bank said.
“There is a strong tendency for the cost of the fuel subsidy to increase over time as increasing domestic demand for petrol outpaces growth in oil output or revenues,” said John Litwack, Lead Economist of the World Bank.
On the Natural Gas Sector, the report said Nigeria is wasting a lot of opportunities by non-implementations of the regulation of the Gas Master Plan approved in 2008.
The natural gas which has enormous potential to boost the country’s power supply, drive accelerated growth and diversification has not been regulated properly said the report.
“With a new administration in place and the recent announcement by the NNPC of its change agenda, there is a historic opportunity to transform the gas sector,” said Masami Kojima, Lead Energy Specialist of the World Bank.
However, Senate Leader, Ali Ndume said more than half of the N522.3bn subsidy claims approved by the assembly were fictitious.
In an interview with Daily Trust, Ndume said the marketers were using the subsidy to blackmail Nigerians.
“Any time the claims get to a certain level, they will stop supplying fuel, the queues will resurface and everything will become very difficult in the country. Thus, the government will be forced to pay the claims whether they are right or not.
“If you check, the claim of the N522.3bn, I’m very sure that more than half of it, is just fictitious claims but we have to pay because we are depending on them to meet our fuel needs. And by extension, the lives of Nigerians are dependent on them.”
Crude oil yesterday fell below $40 per barrel due to the decision not to reduce production by the Organisation of Petroleum Exporting Countries (OPEC) at its meeting last Friday.