Nigeria spent about $35bn (N6.9bn) in the last
five years to subsidise petroleum products, the
World Bank has said.
In its ‘Nigeria Economic Report No. 3’, which was
released in Abuja on Tuesday, the bank said fuel
subsidy incapacitated the country’s ability to save
for the rainy day occasioned by falling crude oil
prices in the international market.
On gas, the report stated that despite serious
disruptions in supply in the first half of the year,
the country flared more gas than the one used in
generating electricity, adding that much more gas
was sold to foreign consumers despite the huge
demand and inadequate supply at home.
The report presented by the World Bank Lead
Economist in Nigeria, Mr. John Litwack, stated,
“The fiscal cost of the fuel subsidy is very high,
reaching an estimated $35bn during 2010–2014.
Moreover, annual costs are increasing over time
due to rising fuel demand and the depreciation of
the naira.
“In recent years, numerous audits and reports
have identified widespread corruption and fraud
in the administration of the fuel subsidy, and
official petrol imports have substantially
exceeded actual consumption. Attempts by the
government to crack down on fraud and delay
payment of the subsidy have commonly met with
severe fuel shortages in the country that also
impose high economic and welfare costs on
Nigerians.
“The $35bn cost of the fuel subsidy during 2010–
2014 was a primary reason why 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. Fuel
subsidy obligations are expected to reach 18 per
cent of all government oil revenues in 2015, and,
if the current regulated prices are maintained,
this is projected to increase to more than 30 per
cent by 2018.”
The report added that the recent sharp decline in
oil prices and revenues had motivated the
country to reconsider its commitment to the fuel
subsidy regime that compensates importers and
traders of petrol and kerosene.
According to the report, annual spending on fuel
subsidy accounts for roughly one-fourth of all
federal budgetary spending, adding that the
spending was significantly greater than the entire
executed federal capital budget as well as the
combined spending on education and public
health.
The report stated, “The weak enforcement of
administrative prices further reduces the benefits
of fuel subsidies to Nigerian households. There
are other important costs as well. Uncertainty
about the fuel subsidy has strongly discouraged
investment in domestic refining.
“Moreover, artificially low fuel prices distort
incentives and encourage excessive consumption
of energy. Allegations of corruption and fraud
surrounding the implementation of the fuel
subsidy are costly to the reputation of
government.
“Finally, subsidy-related fuel shortages have
repeatedly disrupted economic activity and
imposed serious welfare costs on Nigerian
households. In addition, every time the naira
depreciates, the cost of subsidising a nominal
fixed price increases.”
It added, “Part of the reason that the burden of
the fuel subsidy did not decline in 2015, despite
much lower oil prices, was the decision in January
to decrease the administered naira price of petrol
from N97 to N87 per litre.
“The logic given for this was that at the time, the
world price of petrol had declined to the point
where the size of the fuel subsidy would become
negligible, and some of these benefits could
therefore be passed on to petrol consumers in
Nigeria.
“But the naira was under downward pressure at
the time as well as partial strengthening of oil and
petrol prices, the expected burden of the fuel
subsidy once again rose to a level comparable to
that of 2014.”
Noting that the country had the 9th largest gas
deposit in the world, the World Bank said before
the country could attract the huge investment
required to develop the gas sector, it needed a
well-designed institutional and policy framework.


www.punchng.com/nigeria-spent-n6-9tn-on-subsidy-in-five-years-wbank/?utm_content=bufferb703c&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer

MYND44 COMES TO MY MIND

Lies from the pit of Hell

Favparis:
Lies from the pit of Hell

?

if with looting of billions of dollars and a world bank trained economist as supervising minister we didnt go broke. I say to WB 'we'll take our chances with subsidy and baba at the top of affairs'.

hopefully halfway through baba's administration with the nairalization of value chain from well-head to pump-head we can do away with subsidy and its derivative scams in form of crude oil swaps

Poof.
The reason for the deficit is rampant looting, incompetence,mismanagement and corruption.
Not fuel Subsidy.
Competence- mass transit would have removed most vehicle from the road because of the provision mass transit.