The World Bank has warned that a further increase in the prices of Premium Motor Spirit also known as petrol may reverse the already dwindling effects of subsidy removal in Nigeria.
The warning is contained in the October edition of its Africa’s Pulse report.
President Bola Tinubu as of May 2023, officially pronounced an end to petrol subsidies in Nigeria, jerking PMS prices from N175 per litre to over N1000 across the country.
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.
The report also said the naira has been listed among the worst-performing currencies in Sub-Saharan Africa in 2024.
As of the end of August 2024, the naira had depreciated by approximately 43 per cent year-to-date, making it one of the region’s weakest currencies alongside the Ethiopian birr and South Sudanese pound.
The depreciation of the naira is attributed to several factors, including surging demand for United States dollars in the parallel market, limited dollar inflows, and delays in foreign exchange disbursements by Nigeria’s central bank.
The World Bank’s report further highlighted that demand for dollars, driven by financial institutions, non-financial end-users, and money managers, has exacerbated the pressure on the naira.
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