*World Bank warns that Nigeria will lose whopping N5trn oil revenue in 2022
*Says funds would be used to cover cost of gasoline subsidies benefiting only the rich
*That N5trn is needed to cushion ordinary Nigerians from high cost of basic commodities
*Reveals 1 million Nigerians likely to be pushed into poverty by end of 2022
By Onu Okorie
Highlights of the latest World Bank Nigeria Development Update NDU has disclosed that the country stands to lose more than five trillion Naira in revenues in 2022 from crude oil sales.
This was part of the revelations during the presentation of the NDU report in Abuja yesterday.
According to the report, “When we launched our previous Nigeria Development Update in November 2021, we estimated that Nigeria could stand to lose more than three trillion Naira in revenues in 2022 because the proceeds from crude oil sales, instead of going to the federation account, would be used to cover the rising cost of gasoline subsidies that mostly benefit the rich.”
Sadly, that projection turned out to be optimistic,” said Shubham Chaudhuri, World Bank Country Director for Nigeria. “With oil prices going up significantly, and with it, the price of imported gasoline, we now estimate that the foregone revenues as a result of gasoline subsidies will be closer to N5 trillion in 2022.”
And that five trillion is urgently needed to cushion ordinary Nigerians from the crushing effect of double-digit increases in the cost of basic commodities, to invest in Nigeria’s children and youth, and in the infrastructure needed for private businesses small and large to flourish, grow and create jobs.”
The UDU report explained that the inflation in Nigeria, already one of the highest in the world before the war in Ukraine, is likely to increase further as a result of the rise in global fuel and food prices caused by the war.
The report also argued that Nigeria is in a paradoxical situation as growth prospects improved compared to six months ago but inflationary and fiscal pressures have increased considerably, leaving the economy much more vulnerable,
The World Bank estimates, also said Nigeria is likely to push an additional one million Nigerians into poverty by the end of 2022, on top of the six million Nigerians that were already predicted to fall into poverty this year because of the rise in prices, particularly food prices.
This latest edition of the NDU highlights also said that the inflationary pressures will be compounded by the fiscal pressures Nigeria will face this year because of the ballooning cost of gasoline subsidies at a time when oil production continues to decline.
Hence, Nigeria, for the first time since its return to democracy, and alone amongst major oil exporters, is unlikely to benefit fiscally from the windfall opportunity created by higher global oil prices.
According to the report, Nigeria’s growing macroeconomic challenges in 2022 highlight the continuing urgency of a departure from business as usual, and the need for consensus around a package of robust reforms.
The Report highlights three policy priorities which include, reducing inflation through a sequenced and coordinated mix of exchange rate, trade, monetary, and fiscal policies including the adoption of a single, market-responsive exchange rate; addressing mounting fiscal pressures at the federal and sub-national levels by phasing out the petrol subsidy (estimated to cost up to 5 trillion naira in 2022) and redirecting fiscal resources to investments in infrastructure, education, and health services; increasing “pro-health taxes”, and improving tax compliance; and catalyzing private investment to boost job creation by improving the transparency of key government-to-business services and eliminating trade restrictions.
“Despite the better-than-expected performance of the services and agriculture sectors and higher oil prices stemming from the war in Ukraine, Nigeria is experiencing a curious case of lower fiscal revenues. This is limiting the government’s ability to expand basic services, support the economic recovery, and protect the poor during this difficult time” said Marco Hernandez, World Bank Lead Economist for Nigeria and co-author of the Report.
In addition to assessing Nigeria’s economic situation, this edition of the NDU also casts a spotlight on the unintended effects of Nigeria’s trade restrictions; the importance of investing in adolescent girls to defuse Nigeria’s demographic time bomb; and the imperative of bringing Nigeria’s out-of-school children back to school.
“Unusual” approach, even more urgently needed to reduce inflation, lessen fiscal pressures and attract investment for jobs”, it added.
