Zainab Ahmed, Nigeria’s finance minister said the government planned to remove the subsidy by the middle of next year and replace it with 5,000 naira monthly payments to the poorest families.
Even as petrol subsidy has cost Nigeria 864 billion naira ($2.1 billion) in the first nine months of 2021, it said, up from 107 billion naira in 2020 and the highest deduction in six years, as oil prices increase the cost of imports.
Fiscal pressures have increased for Nigeria as higher petrol subsidy costs cut revenues, the bank said in a report, urging bold reforms to boost income.
“The Premium Motor Spirit (PMS) subsidy is eroding Nigeria’s limited fiscal space to provide essential services,” it said. “Aggressive reform effort could contribute more to growth than a sustained period of high oil prices.”
Nigeria has fallen behind on implementing reforms started at the height of the COVID-19 pandemic, the bank said, adding that growth rates will lag those of other emerging economies, unless momentum is restored.
“The subsidies regime in the (petroleum) sector remains unsustainable and economically disingenuous,” Ahmed said during the launch of the report.