Data from the National Bureau of Statistics (NBS) shows that the average price paid for premium motor spirit (petrol) by consumers increased by 10.79 percent year-on-year to N161.17 in October 2020 from N145.48 in October 2019.1 This increase can be attributed to the removal of fuel subsidy which is driven by the government’s inability to generate sufficient revenue to fund the subsidy.2 Going forward, pump price is expected to be market-determined, as pump prices will no longer be fixed. From an environmentally sustainable perspective, the subsidy removal is a commendable development in disincentivizing the use of fossil fuel and incentivizing the use of renewable energy while reducing the crowding out of public revenue. However, the subsidy reform is being introduced in a worsening economic climate with implications on the living standard of most citizens. The government can leverage on the opportunity presented by the pandemic to introduce additional structural reforms such as streamlining government Ministries, Departments, and Agencies (MDAs) in order to make resources available for development spending.
December 14, 2020
Nigeria Economic Update (Issue 46)
Related
Nigeria Economic Update (Issue 37)
Recent
data by the CBN shows a decline in manufacturing capacity utilization by 2.0
percentage points to 50.7 percent in 2016Q2. Foreign exchange
challenges in addition to cash squeeze in the review quarter, led to the
decline in capacity utilization. This has hindered activities in the sector
while impacting negatively on business confidence. Nonetheless, the CBN
recently directed authorized FX dealers to dedicate 60 percent of FX purchases
to manufacturers. This policy measure is therefore expected to meet
the sectors critical FX need for the purchase of imported raw material and
other machineries, while boosting the potential for economic growth in the long
term.
Nigeria Economic Update (Issue 33)
The naira depreciated by 4.3 percent to a
record low of N313/$ at the interbank market segment on July 29, 2016.Precisely, the lack of liquidity in all FX market segments continues to weaken
the naira. In order to increase FOREX liquidity, moderate inflationary
pressures, encourage capital inflows and support the naira, the CBN may need to
increase the supply of FOREX in the interbank market while simultaneously
mopping up idle funds through the sale of securities.