The World Bank has contributed to the ongoing discourse on fuel subsidies in Nigeria, asserting that, absent government intervention, the appropriate petrol price should be around N750 per litre, a figure exceeding the current rate of N650. Alex Sienaert, the Lead Economist for the World Bank in Nigeria, shared this insight during his presentation in Abuja on Wednesday as part of the Nigeria Development Update for December 2023. The presentation, titled “Turning The Corner (from Reforms and Renewed Hope to Results),” highlighted the need for a cost-reflective pricing mechanism in the petroleum sector. Sienaert explained that considering the present official exchange rate, the cost-reflective retail price for Premium Motor Spirit (PMS) would be N750 per litre. He pointed out that the existing petrol prices do not align fully with market conditions, indicating a potential resurgence of subsidies. The economist highlighted the ongoing liberalization process, acknowledging that with parallel rates, the actual price could be even higher, underscoring that the suggested N750 per litre is an estimate. To ensure the government reaps the benefits of its reforms, Sienaert recommended further actions. He emphasized the importance of adopting policies that align more closely with market dynamics, urging the authorities to consider a pricing structure that reflects the true cost of petrol production and importation. In October, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) revealed that the government still subsidizes petrol due to the fluctuating cost of crude oil in the international market and exchange rate variations. PENGASSAN’s National President, Festus Osifo, explained on Channels Television’s Politics Today that the government is currently paying subsidies due to the increased price of crude oil, which has risen from around $80 per barrel to approximately $93/94 per barrel for Brent crude. Osifo outlined two key conditions for ending petroleum subsidies: effective management of the exchange rate and the introduction of a stable supply that can drive down the exchange rate. He emphasized that a reduction in the exchange rate would eliminate the need for subsidies, aligning with the World Bank’s call for policies that reflect market conditions in the pricing of petroleum products.
