World Bank, Country Director, Shubham Chaudhuri, says that the Federal Government decision to delay the full deregulation of the downstream sector of the petroleum industry by 18 months may cost the country an additional N4tn in subsidy payments on petrol in 2022.

World Bank advises on fuel subsidy.

Shubham Chaudhuri, further noted that the World Bank could come up with advice on subsidy removal, its role was not to dictate as it had no ability to do such.

Shubham Chaudhuri noted, “With economics, really, you are not meant to make a political decision. What you are meant to do is to lay out what are the cons and consequences of different decisions.

So that is what we are doing, we are just being very clear that this would come with a financial cost and the fiscal cost is the number, perhaps N4tn this year.

Despite the fact that the price of oil had gone up, the rise in global crude oil prices was not helping Nigeria that much”.

The figures seen on Sunday showed that the price of Brent,  Nigeria’s oil is priced was $118.11 per barrel at 5.06 pm Nigeria time as it traded at the same rate the preceding day.

World Bank speaks on the rising oil price.

Asked on why the rising oil price was not helping Nigeria as expected, Chaudhuri stated, “The reason is that the cost of the PMS subsidy is going up. So, at $85 per barrel, the NNPC was projecting that the cost of the PMS subsidy will be around N180bn to N200bn per month.

In January when crude oil prices had already gone up to $90, $93, it (subsidy) still went up to N250bn per month. Now you just mentioned it is $100 per barrel, our guess right now is that we are looking at N4tn or even more in the year 2022 as the cost of PMS subsidy.

You take 60 million liters a day, which the NNPC said is being evacuated from its depots, you take what is happening to the cost of imported world gas, price of gasoline, which is going up because of the crude oil price is going up.

Right now, the differential I believe is about N200 per liter. So 60 million times N200 every day is N12bn per day. Multiply that by 30, that is N360bn per month. Multiply that by 12, it will be somewhere about N4tn per year”. He added.

However, it was noted that the current oil price of $118.11/barrel is almost a dual of the $62/barrel benchmark that was set by the lawmakers.