World Bank Proposes Fuel Prices at N750/ltr Aligned with Exchange Rate

In a recent revelation by the World Bank, it has been indicated that the Federal Government of Nigeria may still find itself saddled with the financial burden of fuel subsidies due to the current non-cost-reflective nature of fuel prices in the country.

During the presentation of the Nigeria Development Update (NDU) for December 2023 in Abuja, the Lead Economist for Nigeria at the World Bank, Alex Sienaert, highlighted the disparity between the recommended cost and the prevailing retail prices. According to the World Bank’s assessment, Nigerians should ideally be paying around N750 per litre, a significant increase from the current rate of N650 per litre.

Sienaert emphasized the apparent failure of petrol prices to fully align with market conditions, indicating a potential partial return of the subsidy. He explained, “It does seem like petrol prices are not fully adjusting to market conditions so that hints at the partial return of the subsidy if we estimate what is the cost reflective of the retail PMS price of the would-be and assume that importation is done at the official FX rate.”

While acknowledging the ongoing liberalization with parallel exchange rates, Sienaert noted that if the main supplier, which is the parallel market, is considered, the price could be even higher. These estimates were provided to offer insights into what cost-reflective pricing might entail, with the suggestion that the petrol price should be closer to N750 per litre.

The Need for Transparency at NNPC

In addition to the concerns about fuel subsidies, the World Bank also underscored the imperative for increased transparency at the Nigerian National Petroleum Company (NNPC) Limited. Often criticized for its lack of transparency, the NNPC is urged to embrace openness to ensure accurate reporting of oil revenues and earnings allocated to the federation account.

As the Nigerian government pursues reforms aligned with its renewed hope agenda, the World Bank proposed that the NNPC regularly discloses information regarding petrol pump pricing. This disclosure would contribute to ensuring accountability and transparency within the state-owned oil company.

The World Bank emphasized the significance of the NNPC’s transparency, stating that it is crucial “with regards to profits and oil revenues to be remitted to the Federation Account.” The call for increased openness aligns with broader efforts to enhance governance and accountability in the oil and gas sector, a key focus area for the Nigerian government’s reform agenda.

In conclusion, as the World Bank sheds light on the potential persistence of fuel subsidies and calls for greater transparency at the NNPC, these issues become pivotal considerations for Nigeria’s economic landscape. The need for a balanced and sustainable approach to fuel pricing and transparent financial practices within the NNPC remains crucial as the country navigates its economic development path. Infostride News will continue to monitor and report on these developments to keep the public informed.