Fuel subsidy removal: Nigeria’s inflation to hit 25 per cent in five months – World Bank
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The World Bank has projected that Nigeria’s inflation would hit 25 per cent in the coming months due to the adverse effect of fuel subsidy removal.
The Washington-based bank disclosed this in its June 2023 edition of the Nigeria Development Update.
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The World Bank’s projection comes amid the hike in the pump price of petrol from N197 per litre to over 500 per litre after subsidy removal in June.
According to the National Bureau of Statistics, Nigeria’s inflation figure is 21.41 per cent.
The World Bank stressed that it would jump to 25 per cent in 2023.
However, it projected that the headline inflation would fall in the first quarter of 2024.
“Headline inflation is expected to rise from 18.8 per cent in 2022 to 25 per cent in 2023. However, by Q1 of 2024, the subsidy removal will start to have a disinflationary effect, alleviating inflationary pressures despite higher petrol prices.
“This is because the subsidy removal creates additional fiscal space and reduces reliance on financing from the CBN, curbing the growth of the money supply”, World Bank stated.
As a way forward, the bank urged that the Nigerian government should adopt macro-fiscal policy settings conducive to price stability and provision of palliative to cushion the effect of fuel subsidy removal.
“To limit the risk of so-called second-round effects, where one-off price increases trigger more generalized inflation including through wage-price spirals, it will be important to adopt macro-fiscal policy settings conducive to price stability,” it stated.
