Nigeria will save more than 21 trillion naira ($28 billion) in two years after scrapping gasoline subsidies and allowing its currency to weaken, according to the World Bank.
The savings will help President Bola Tinubu’s government cut its record fiscal deficit and a debt-service burden that surpassed revenue in 2022, the Washington-based lender said in a report. The budget shortfall will narrow to 3.9% of gross domestic product by 2025 from 5.1% this year, according to the report.
Scrapping the fuel cap will enable Nigeria’s state oil company to export crude instead of setting it aside to pay for the subsidies. Easing foreign-exchange controls will help the government convert overseas earnings at market prices rather than at “overvalued” rates, the bank said.
It forecast Africa’s biggest economy will expand 4% from 2024 should it implement urgently required reforms. The continent’s most populous nation has for years resisted calls by the World Bank to do away with its costly gasoline subsidies and myriad exchange rates that have stymied growth.
Africa’s largest crude producer should take further steps to increase non-oil revenue, lower inflation and expand the social safety net to protect the poor and most vulnerable, the World Bank said.
“The government could propose a compact with Nigerian citizens that directly links the phased-out subsidy to compensatory cash transfers,” it said.
More from the report:
- Inflation will accelerate to an average of 25% this year, compared with 18.8% in 2022
- Debt service as a proportion of federal government revenue will drop to 76% by 2025 from 121% this year.