Nigerian petrol prices should be N750 a litre, says World Bank

Business a.m

The World Bank has in a recent statement, raised concerns that the Nigerian government may still be paying fuel subsidies, as the current pump price of N650 per litre is not cost-reflective. The bank noted that the true cost of fuel should be around N750 per litre, which is higher than the current price.

Alex Sienaert, the World Bank’s lead economist for Nigeria, stated this during his presentation of the Nigeria Development Update (NDU)  in Abuja. The NDU is a flagship publication of the World Bank, which provides an update on Nigeria’s economic and development progress.

Sienaert’s statement was based on the findings of the NDU, which indicated that the cost of fuel in Nigeria is not reflective of the true cost of production and distribution. He argued that the government may still be paying subsidies to keep the price of fuel artificially low.

In his words, “It does seem like petrol prices are not fully adjusting to market conditions so that hints at the partial return of the subsidy if we estimate what is the cost reflective of the retail PMS price of the would-be and assume that importation is done at the official FX rate. 

“Of course, the liberalisation is happening with the parallel rates, which is the main supplier, the price would be even higher. These are just estimates to give you a sense of what cost-reflective pricing most likely looks like. 

“We think the price of petrol should be around N750 per litre more than the N650 per litre currently paid by Nigerians.” 

The World Bank’s statement also noted that as the Nigerian government moves forward with reforms aimed at achieving its ‘Renewed Hope’ agenda, the Nigerian National Petroleum Company (NNPC) Limited must be transparent and accountable. The NNPC has been criticised for a lack of transparency and accountability, and the World Bank called for the company to ensure that oil revenues and earnings are accurately reported to the federation account.

The international financial institution suggested that the Nigerian government should regularly release information explaining the pricing of petrol at the pump. This, it said, would help to ensure transparency and accountability, as well as allow citizens to monitor the government’s actions in this regard.

The World Bank also stressed the need for transparency at the NNPC, including with regard to profits and oil revenues that are remitted to the federation account.