Fuel subsidy: Nigerian may not benefit from increasing oil prices — IMF
By Uthman Salami
The international Monetary Fund (IMF) has said Nigeria may not benefit from increased oil prices, if the government does not limit the amount of fuel subsidies it provides to citizens.
According to the IMF, Nigeria and other countries in Sub-Saharan Africa may spend $19 billion more on fuel imports as a result of higher oil prices.
This revelation was contained in a report themed, “Africa Faces New Shock as War Raises Food and Fuel Costs.”
It states that, “Net exporters, like Nigeria, are likely to benefit from rising oil prices, but a fiscal gain is only possible if the fuel subsidies they provide are contained.
“It is important that windfalls are largely directed to strengthen policy buffers, supported by strong fiscal institutions such as a credible medium-term fiscal framework and a strong public financial management system.”
The report further reveals that Nigeria and other sub Saharan Africa battle with rise in food and fuel prices because of the current war between Russia and Ukraine.
IMF’s report also posits that regional inflation is expected to remain at 12.2per cent in 2022 and 9.6per cent in 2023, according to the report.
It explains that, “Prices for food, which account for about 40 per cent of consumer spending in the region, are rising rapidly.
“Around 85 per cent of the region’s wheat supplies are imported. Higher fuel and fertiliser prices also affect domestic food production. Together, these factors will disproportionately hurt the poor, especially in urban areas, and will increase food insecurity.
“Higher oil prices will boost the import bill for the region’s oil importers by about $19billion, worsening trade imbalances and raising transport and other consumer costs.
“Oil-importing fragile states will be hit hardest, with fiscal balances expected to deteriorate by around 0.8 per cent of gross domestic product compared to the October 2021 forecast — twice that of other oil-importing countries.”
