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)
OPEC weekly basket price decreased marginally from $45.95 on June 24, 2016 to $45.26 on July 1, 2016,while Nigerias bonny light fell by $1, from $48.90 to $47.91. The apparent decline in crude oil price was driven by lingering market demand uncertainty, following the unexpected Brexit referendum. More so, ease in supply disruptions in Nigeria and Canada may have contributed to the downward pressure on prices. Going forward, until there is greater regulatory precision on global oil output levels, prices may likely remain stuck or continue to exhibit a downward trend. Although, Nigerias fiscal constraints slightly relaxed with oil production increasing in the review week (following repairs on sabotaged pipeline channels), potential global crude oil oversupply threatens governments revenues. However, oversupply threats could be reduced if there is a consensus on oil production quotas in the upcoming OPEC meeting.
International rating body, Fitch, has projected higher economic growth for Nigeria in 2018. The body estimated that Nigerias economy will grow by 2.6 percent, slightly higher compared to projections from the International Monetary Fund (2.1 percent) and The World Bank (1 percent). A myriad of factors may have driven the projected increase: improved availability of forex for the non-oil sector, higher government capital expenditure capability driven by more oil revenue, and fiscal stimulus. However, the relatively strong economic growth projected by Fitch and IMF may be hampered