By Emmanuel Obisue
President of the World Bank Group, David Malpass has asked the Federal Government to have a rethink on its policy on fuel subsidy, stating that the huge amount being expended on the policy could be channeled into other critical sectors.
Malpass noted this on Wednesday at a media briefing at the ongoing World Bank/International Monetary Fund Spring Meetings in Washington DC, United States.
It would be recalled that the Nigerian Senate last week approved N4 trillion for petrol subsidy in 2022.
The figure represented the amount contained in two separate requests by President Muhammadu Buhari to the National Assembly for approval. The President, had in a letter to the Legislature dated February 10, 2022, sought an additional N2.557 trillion to fund subsidy payments from July to December, 2022.
According to Malpass, generalised subsidies have significant negative effects on any system. Thus, he reiterated the need for the country to do away with the multiple exchange rate system, which he said is “complicated and is not as effective as it would be if there was a single exchange rate.”
“One is that they are expensive because they go to everyone and they are often used by people with upper incomes than by people with lower incomes so they are not targeted.
“So, we encourage that when there is need for subsidy, either food or for fuel, that it should be carefully targeted at those most in need of it. And so, we have encouraged Nigeria to rethink its subsidy effort.
“The most useful thing for developing countries is to have a single exchange rate that is market-based, that is stable over long periods of time as that attracts investment and so that would help,” he noted.
Malpass further noted that Nigeria also has trade barriers that continue to distort trade and capital flows. He urged the Nigerian Government to improve to help the country and its people move forward.
“I take note of the complicated situation that they face where there are weapons flowing into northern Africa that find their way into non Nigerians that create violence in Nigeria.
“This is a very challenging situation that the government faces. I think all over the world, people should have an understanding of the fragility that is facing several parts of the world, but in particular, the Sahel and the Sub-Saharan Africa area where the weapons flow from outside of Africa are putting a great burden on governments around the continent.
“Nigeria has huge opportunity because of its natural resources and because of its people, and I think I could see its growth accelerate with improvements in policy,” he added while commenting on the spate of insecurity in the country.
The World Bank had in November 2021 warned Nigeria not to delay any further in removing the fuel subsidy which had been described as a major drain and waste on the economy.