The World Bank has advised Nigeria to rethink its policy of making a provision of N4 trillion for petrol subsidy payments in the 2022 budget.
President of the World Bank Group, David Malpass, said this on Wednesday at the opening press conference of the 2022 IMF-World Bank Spring Meeting.
The advice comes after Nigeria National Assembly approved the request of President Muhammadu Buhari to earmark N4 trillion for petrol subsidy in 2022.
Subsidy or under-recovery is the underpriced sale of premium motor spirit (PMS), better known as petrol.
The N4trillion budgetary allocation for petrol subsidy is more than 2021 Company Income Tax and Value Added Tax combined collection
According to the World Bank boss, the provision of petrol subsidy in Nigeria is not targeted at those mostly in need, hence the urge for the country to rethink its subsidy effort.
“Generalised subsidies have significant negatives. One is, they are expensive because they go to everyone, and they’re often taken–more by people with upper incomes than by people with lower incomes; they’re not targeted,” Malpass said.
“So, we encourage, when there needs to be a subsidy for either food or fuel, that it be carefully targeted, well-targeted for those most in need. And we have encouraged Nigeria to rethink its subsidy effort.”
The World Bank president also cited multiple exchange rate systems and trade barriers as factors affecting Nigeria’s growth.
He said while the multiple exchange system is complicated and shows a lack of discipline in the country’s fiscal policies, trade barriers distort trade flows.
“Also, two other things that I’ll mention on Nigeria that are important. It runs a multiple exchange rate system, which is complicated and is not as effective as it would be if there were a single exchange rate,” he added.
“The most useful thing for development is to have a single exchange rate that’s market-based, that is stable over long periods of time. That attracts investment and it also means that there is discipline within the country’s fiscal policies. That would help.
“And then, Nigeria also has trade barriers that distort trade flows, and that could be improved substantially to help the people in Nigeria move forward. I do take note of the complicated situation that they face.
“Weapons are flowing in through northern Africa that finds their way to non-Nigerians that create violence in Nigeria. This is a very challenging situation that the government faces.