Nigeria could save N3.9trn in 2023 from fuel subsidy removal — World Bank

…savings to reach over N21 trillion between 2023 and 2025

The World Bank has projected that Nigeria will save up to N3.9 trillion this year with the removal of fuel subsidy and reforms of its foreign exchange market, noting that is expected to reach over N21 trillion between 2023 and 2025.

However, warnings have been made  that the petroleum subsidy removal is likely to lead to an increase in inflation in the upcoming months before contributing to disinflation in the medium term.

The World Bank Country Director, Chadhuri, explained that the policy though painful remains key to rebuilding the economy of the nation.

The World Bank has said that Nigeria is projected to save up to $5.1 billion (N3.9 trillion) in 2023 alone after the removal of fuel subsidy and reforms of its foreign exchange market.

The Bretton Wood institution which acknowledged the projected fiscal gains as a result of the two policies, however, warned of growing inflationary pressures in the short term.

This was made known by the World Bank lead economist for Nigeria, Alex Sienaert, during a presentation at an event organised by the bank to assess the country’s economy in the last 6 months on Tuesday in Abuja, noting that savings from the reforms did not amount to a fiscal windfall.

Sienaert also said that the gains from these policies are expected to reach over N21 trillion between 2023 and 2025.

He said, “They stop Nigeria from going over what you might call the fiscal cliff. They really set the stage for a new and an upward trajectory in terms of Nigeria’s development path.”

On the exchange rate, the World Bank Senior Economist said that the previous foreign exchange management approach impeded investment and growth, contributed to inflation and undermined the efficacy of the monetary and fiscal policies.

Also, speaking at the occasion, the World Bank Country Director for Nigeria, Dr Subham Chadhuri, said the international financial institution is in support of the Federal Government’s removal of fuel subsidy and exchange rate unification.

Furthermore, he stated that the World Bank’s concessionary funding to Nigeria currently stands at over $10 billion.