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)
The naira/dollar exchange rate remained largely stable at the parallel market at ?320/$ during the period7, albeit slight fluctuations on February 29, 2016 (?325/$) and March 2, 2016 (?328/$). The decline in the hoarding of foreign currency as well as the substantial reduction in the speculative demand for dollars were the two key factors responsible for the ease of fluctuations in the forex market8. With the slight increase in the price of crude oil, Nigerias foreign reserve slightly grew by $56 million, from 27.81 billion to $27.84 billion9. With the continued increase in the price of crude oil, a modest build-up of foreign reserve to guard against unfavourable commodity price movements is expected in the near term.
OPEC basket price increased (Week-on-Week) by 1.6 percent to $49.45 per barrel on March 31, 2017- the first increase recorded in three weeks. Also, Bonny light rose by 4.7 percent to $51.92 per barrel. The rise in crude oil prices reflects demand-side expansion, consequent upon a myriad of factors: slower rise in USA crude reserves, huge supply disruptions in Libya, and the prospective extension of OPEC supply cut deals in member countries. The strengthening of crude oil price amid calm in the Niger Delta oil region, presents positive outlook for the Nigerian economy. However, given the adverse implications of sole dependence on crude oil revenue, the government should avoid returning to the norm and make efforts to intensify investments in other key sectors of the economy