The current petrol subsidy regime poses an “existential threat” to Nigeria, the World Bank has said, even as Labour party presidential candidate, Peter Obi on Thursday said the country must end the regime of ‘criminal fuel subsidy.
The PUNCH reports that Rajul Awasthi, senior public sector specialist, domestic resource mobilisation, World Bank, made the disclosure at a virtual pre-summit themed ‘Critical Tax Reforms for Shared Prosperity’, organised by the Nigerian Economic Summit Group (NESG) on Wednesday.
Petrol subsidy claims amounted to N2.6 trillion in the first half of 2022, a figure above crude oil sale receipts from the Nigerian National Petroleum Company (NNPC) Limited.
The federal government has also projected to spend N6.7 trillion on petrol subsidy payments in 2023.
According to Awasthi, Nigeria is in an unfavourable economic situation due to dwindling revenue, the continued payment of trillions of naira on fuel subsidy by the government, and the attendant economic challenges.
He maintained that Nigeria would have no choice but to get rid of subsidy eventually.
In a slide he shared during his presentation, which showed Nigeria’s Development Update (NDU), Awasthi said that between 2015 and 2019, Nigeria’s non-oil revenue was among the lowest in the world and as a result the second lowest in spending.
He said that the country’s oil revenue was also falling even when oil prices were higher.
“Nigeria has the largest economy in Africa and the largest country in Africa by population, so it is critical to Africa’s progress. There is no doubt about that,” Awasthi said.
“But the government of Nigeria, from the public finance perspective, is facing an existential threat. Let’s not downplay the situation. That is the actual reality.
“Nigeria is 115th out of 115 countries in terms of the average revenue to Gross Domestic Product ratio. Despite the oil prices rising the way they have been, net oil and gas revenues have been coming down because of the tremendous impact of the subsidy.
“So, what is going to happen in 2022? The federation’s revenues are going to be significantly lower. They are already very low, and Nigeria is already the lowest in the world out of 115 large countries, and this year, it’s going to be lower than what it was in 2020 because of the debilitating impact of fuel subsidy.”
Speaking on how to tackle the impending threat, Awasthi said that in the non-oil sector, value-added tax (VAT) compliance gaps were immense and they needed to be breached.
He also said that tax expenditures should be rationalised.
The World Bank official further emphasised the need for technology deployment in tax administration and data sharing between the Federal Inland Revenue Service (FIRS) and the states’ internal revenue services to boost the revenue from personal income tax.
Nigeria must end ‘criminal’ petrol subsidy – Peter Obi
Meanwhile, The Presidential candidate of the Labour Party in the 2023 elections, Peter Obi, on Thursday also said the country must end petrol subsidy.
“Going forward, we must look for ways to move Nigeria beyond oil,” Obi said in a series of tweets.
“We must end this criminality called ‘oil subsidy’.”
He said Nigeria is “vastly polarised and wrecked by divisions that run deep along religious, ethnic and regional lines.
“There is a staggering level of corruption. Our universities have remained closed for over five months. While our healthcare system remains comatose, power generation and distribution are also at an all-time low.”
Obi said he plans to create jobs and reduce insecurity and poverty if elected.
“After we win the 2023 elections, we intend to use the instruments of job creation and regenerative investments to drastically reduce the high incidence of insecurity and poverty, while moving the economy from the consumptive to the productive mode,” he said.
“Undoubtedly, the greatest challenge we face beyond bad leadership, is lack of elite consensus. But, let us not forget Dante Alighieri‘s admonition, that ‘The hottest places in hell are reserved for those who, in times of great moral crisis, maintain their neutrality.’
“History must serve as a tool in our decision making. The implosion of Nigeria has long been forecasted. Year 2023 could be a tipping point in the annals of our history. But that must not happen, even as the options before the electorate seem stark.”
Obi said he has the structure to win the 2023 election and stressed that Nigeria’s democracy must survive.
“The new alliance that we seek is between Nigerian Youths, the Labour Party, which represent Nigerian workers, and Like Minds,” he said. “Collectively, it is an alliance of the OBIdients!”
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