The World Bank has cautioned that another rise in the price of Premium Motor Spirit (PMS), commonly known as petrol, could negate the already diminishing benefits of subsidy removal in Nigeria.
This warning is included in the October edition of its Africa’s Pulse report.
In May 2023, President Bola Tinubu officially announced the termination of petrol subsidies in Nigeria, leading to a dramatic increase in PMS prices from N175 per litre to over N1,000 nationwide.
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The report said; “While the inflationary effects of a weakened naira in the first months of this year and the removal of the gasoline subsidy in the second half of 2023 appeared to be gradually subsiding, a further increase in gasoline prices by 40-45 per cent in September may reverse the disinflationary trend.”
It said economic growth in Nigeria is projected at 3.3 per cent in 2024 and 3.6 per cent in 2025–26 as macroeconomic and fiscal reforms gradually start yielding results.
“Inflation peaked in June 2024 (at 34.2 per cent year-on-year) and decelerated to 33.4 per cent in July and further to 32.2 per cent in August,” it said, adding that the consolidation of macroeconomic reforms should support higher growth in the country in 2025.
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The report indicated that the naira is among the worst-performing currencies in Sub-Saharan Africa for 2024.
By the end of August 2024, the naira had experienced a depreciation of around 43% year-to-date, positioning it as one of the weakest currencies in the region, alongside the Ethiopian birr and South Sudanese pound.
This decline in the naira’s value is attributed to multiple factors, including a surge in demand for US dollars in the parallel market, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s central bank.
Additionally, the World Bank’s report emphasized that the heightened demand for dollars from financial institutions, non-financial end-users, and money managers has intensified the pressure on the naira.
It noted, “By August 2024, the Ethiopian birr, Nigerian naira, and South Sudanese pound were among the worst performers in the region. The Nigerian naira continued losing value, with a year-to-date depreciation of about 43 per cent as of end-August.
“Surges in demand for US dollars in the parallel market, driven by financial institutions, money managers, and non-financial end-users, combined with limited dollar inflows and slow foreign exchange disbursements to currency exchange bureaus by the central bank explain the weakening of the naira.”
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