The World Bank has said the removal of the petrol subsidy in Nigeria has not yielded the full revenue benefits expected, revealing that only half of the projected gains are currently being remitted by the Nigerian National Petroleum Company (NNPC) Limited. Alex Sienaert, the banks lead economist for Nigeria, disclosed this on Monday during the launch of the May 2025 Nigeria Development Update (NDU) in Abuja. Other things to keep an eye on at present include the good news, of course, that the PMS subsidy was effectively ended last October, but revenue gains from this are yet to fully flow to the federation, Sienaert said. NNPC began applying the official exchange rates for all its kind of transactions and fiscal revenue calculations back in October, so no more implicit subsidy. But as of January, NNPC was still only transferring about half of the resulting revenue gains from the subsidy elimination to the federation, and thats because of arrears and counter-arrears and what have you. He stressed the importance of closely monitoring the situation to ensure that the anticipated gains eventually support the national budget. Its just going to be important in the coming months to keep tracking this, and ultimately that all revenue gains from the difficult job of eliminating the subsidy do flow to the federation, so that that can support a continued healthy fiscal picture, and in turn stand in on the government priorities for Nigeria, he said. The World Bank also raised concerns over the federal governments 2025 budget, describing it as ambitious and warning that the revenue projections may be difficult to achieve. Sienaert highlighted assumptions such as a daily oil production of 2.1 million barrels and a crude price of $75 as possibly too optimistic. Even with the very positive revenue sort of tailwind that I described, it looks like its going to be pretty hard to meet some of the ambitious revenue targets that are in there, he said. He warned that failing to meet those targets could force the government into increased borrowing or the use of deficit financing methods it had pledged to avoid. If the financing requirements exceed whats budgeted, then thats either going to create arrears, pressures, which is not healthy for the public finances or the economy, or it could renew risks of recourse to things like deficit monetisation under large-scale ways and means, he said. The authorities have been very clear that they will by no means be going back to large-scale use of ways and means. But were that to happen, it would be extremely destructive to the whole rebuilding of confidence in fiscal sustainability and in the naira, ultimately. Sienaert acknowledged that key policy reforms, including the petrol subsidy removal, have contributed to a rise in the cost of living, particularly affecting low-income households. Although this government does have an ambitious targeted cash transfer programme, N25,000 a month for three months for 15 million recipients, the implementation has just been quite slow; so only about a third of those recipients have received transfers so far, he said. He added that the programme is now being scaled up and implemented more quickly, describing it as essential to ensuring broader relief. The World Bank economist noted improvements in fiscal and monetary policies, citing the unification of exchange rates, tighter monetary controls, increased transparency, and the administrations resolve not to monetise its deficit. In its May 2025 NDU, the World Bank stated that Nigeria must accelerate economic growth and job creation to reach its target of becoming a $1 trillion economy by 2030. Sienaert also called for the elimination of the electricity subsidy, which he described as wasteful and regressive. There is still one kind of wasteful, regressive subsidy, which is the electricity subsidy, so work to address that, he said. He added that non-oil revenues are rising due to tax reforms and new legislation, and oil revenue transparency has improved. While recognising recent gains in budget credibility through improved assumptions and disclosures, he said more needs to be done to reduce the cost of governance and enhance the budget process. The Nigerian Electricity Regulatory Commission (NERC) previously reported that the federal government incurred an electricity subsidy cost of N471.69 billion in the fourth quarter of 2024.
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