The Federal Government’s removal of petrol subsidy and the increase in electricity tariff are in line with reforms being sought by the International Monetary Fund and the World Bank, economic experts have said.
The IMF had on April 28 approved Nigeria’s request for emergency financial assistance of $3.4bn to support the country’s efforts in addressing the severe economic impact of the COVID-19 shock and the sharp fall in oil prices.
The Washington-based fund also published the country’s letter of intent in a detailed report released on April 29.
In the letter, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, and the Central Bank of Nigeria Governor, Mr Godwin Emefiele, pledged that fuel subsidy would not return.
The sharp drop in crude oil prices on the back of the spread of coronavirus saw the landing cost of petrol hit a record low in March, wiping off subsidy on the product. The Federal Government, on March 18, reduced the pump price of petrol to N125 per litre from N145.
The Federal Government told the IMF in the letter dated April 21, 2020 “The recent introduction and implementation of an automatic fuel price formula will ensure fuel subsidies, which we have eliminated, do not reemerge,”
In a report on August 17, Reuters quoted sources as saying that the World Bank was unlikely to approve a much-needed $1.5bn for Nigeria in August as planned due to concerns over desired reforms.
It said the World Bank, which had said Nigeria could be heading towards its greatest fiscal crisis in 40 years, had aimed to bring the loan to its board for approval last month, but the sources said negotiations over what Nigeria would do to secure it were incomplete.
According to the report, World Bank loans are often contingent upon reforms, and it has not outlined any demands, but said previously that it was ‘recommending’ a more unified, flexible exchange rate.
Reuters said fuel subsidies and electricity tariffs were also being discussed, adding that a banking source said the loan could now not be approved until October.