The World Bank has yesterday queried the remittance of the proceeds of the petrol subsidy removal by the Nigerian National Petroleum Company Limited (NNPCL). During the very first hour that president Tinubu took over power on May 29, 2023, he announced the removal of petrol subsidy; the policy that triggered a hyper-inflation in price of the product and virtually all goods and services across the nation that have thrown the country into crisis.
According to some academic experts, the policy was projected to save the federal government billions of dollars annually being used for subsidizing of the petroleum product.
While the government believed, the subsidy removal was expected to free-up resources for critical infrastructural development and social program for the citizens.
However, two years down the line in the administration, citizens have continued to groan under the cost of living as due to inflation of food and average household products.
According to the World Bank, while the subsidy was fully removed in October 2024; the NNPCL did not begin the transfer of the gains to the federation account until January 2025.
Subsequently, it added that the national oil company has been remitting only 50 per cent of the subsidy proceeds and using the rest to offset “past arrears.”
An insider at the NNPCL, who spoke on condition of anonymity, said that the declaration by the World Bank and some officials of the government was not strange to them.
He explained “The truth is that Nigeria has been entrapped in these loans for nearly three decades and considering that subsidy has been removed, and in principle the government is getting more money, it is time to pay debts”.
“Nigeria has a lot of commitments with the multinationals and it is repaying those loans now. It is not a matter of whether what is being paid has been captured in the budget or not because it depends on the agreement.
The World Bank said
World Bank’s lead economist for Nigeria, Alex Sienaert stated these in Abuja, yesterday, while presenting the May 2025 Nigeria Development Update (NDU) report, where he urged the federal government to increase transparency of its oil revenues.
Accordingly, NDU is the World Bank’s regular flagship report on Nigeria. As it covers at least every six months, providing an insight into the Nigerian economy, covering recent developments in economic policy and providing perspective on the outlook for the economy going forward.
The present issue focused on this May 2025, NDU is concerned on inclusive growth, especially for the poor and economically insecure.
The NDU report was an update builds on the last edition in October 2024 that focused on jobs.
“Despite the subsidy being fully removed in October 2024, NNPCL started transferring the revenue gains to the Federation only in January 2025.
“Since then, it has been remitting only 50 per cent of these gains, using the rest to offset past arrears,” the World Bank said in its latest report.
“PMS subsidy was effectively ended last October, but revenue gains from this are yet to fully flow to the federation (account). As of January, NNPCL was still only transferring about half of the resulting revenue gains from the subsidy elimination to the federation,” the World Bank said.
The World Bank noted federal government’s revenues for 2025 were anticipated to be 70 per cent from oil and 30 per cent from non-oil sources, assuming full remittance of the fiscal savings from the PMS subsidy removal.
“However, as of March 2025, this full remittance had not yet occurred, as NNPCL claims it has large PMS-related subsidies that should be settled first,” World Bank said.
The World Bank enjoined the government to sustain its ongoing reforms, including the removal of foreign exchange (FX) controls, and undertake more reforms to further improve macroeconomic and fiscal environment, that is critical for economic stability.
“Eliminating the PMS subsidy and eliminating the FX subsidy have really been critical reasons why the fiscal situation has improved so dramatically. But of course, there’s still a range of fiscal policy and fiscal management issues where more can be done to safeguard the gains that have already been achieved
Sienaert applauded the impact of reforms appraised so far, reporting that Nigeria had witnessed a notable acceleration in economic activity as GDP growth in 2023 reached its fastest pace since 2015, while the FX reforms helped achieve a more unified and stable exchange rate.
He added that foreign reserves has also rose from a low of $32 billion to over $37 billion, with net reserves showing significant improvement.
“The bottom line is a 4.5% of GDP increase in total revenues in 2024, which is not something that, as economists, looking across different countries and recovery stories, we see very often,” Sienaert concluded.
Cost of living still high
Sienaert noted that despite these improvements in the economy, the cost of living has remain relatively high.
According to him, although the federal government has promised a targeted cash transfer programme for vulnerable for three months with 15 million beneficiaries, the implementation has been quite slow.
“So, only about a third of those recipients have received transfers so far”, he said.
He added, “In order for the economy to meet the government’s aspiration of achieving a $1 trillion economy by 2030 and deliver poverty reduction and shared prosperity, the pace of growth needs to accelerate further and its composition rebalanced towards those economic sectors and firms that are most productive, generate positive spillovers, and create jobs and opportunities at scale, especially for the poor and economically insecure.
“At present, the best-performing sectors of the economy, like finance and ICT, are important drivers of growth but are not sources of mass employment as many Nigerians do not yet have the skills and opportunities to participate in them.
“A private sector-led, public sector-facilitated growth strategy can boost inclusive growth. Key elements of this strategy to include addressing major infrastructure gaps, such as in electricity and transportation; fostering healthy competition, market openness, and improving the business environment to spur business dynamism; improving access to finance for new and existing firms to grow and improve productivity and improving policies in key sectors to help unleash the potential of these sectors.”
He disclosed that international experience has suggested that the public sector cannot sustainably generate growth and jobs by itself.
“Nigeria is no exception, particularly since public resources remain constrained.
“A useful strategy is to position the public sector to play a dual role as a provider of essential public services, especially to build human capital and infrastructure, and as an enabler for the private sector to invest, innovate, and grow the economy,” he said.
Inflation could average at 22% in 2025
The World Bank also predicted that inflation could get to an annual average of just over 22 per cent in 2025 if the Central Bank of Nigeria (CBN) maintains its current tight monetary stance.
Taimur Samad, the World Bank’s Country Director for Nigeria, during his presentation, said: “There is a lot to be positive about on Nigeria. Growth is up. The exchange rate is market reflective and more stable. Foreign reserves have increased.
“The fiscal position is much improved on the back of a surge in federation revenues. Now, needless to say, the war is not won.
“It will be crucial for the CBN to stay the course with tight monetary policy to anchor stability. But if it does so, as we anticipate it will, we expect that inflation will fall to an annual average of just over 22% in 2025. That is a major achievement”, Samad added.
He further highlighted that a key point of the NDU report is the recommendation for Nigerian government to stay the course on tough macro fiscal reforms, and undertake yet more reforms to fire up and drive growth, job creation and share an economic opportunity.
According to Samad, doing this will strengthen macroeconomic foundation as a launching pad to build on an economy that is conducive for the private sector to grow and generate more productive jobs for Nigerians.
Samad stressed that the NDU is more than just a report. “It is a tool for collective reflection and action”, he said.Dailytrus
