According to the World Bank, subsidies cut down on government spending on helping poor Nigerians and only benefit wealthy households.
This information was presented in a statement posted on the bank’s website to mark the publication of the latest Nigeria Public Finance Review report.
The bank claimed that Nigeria’s resources had been used by ineffective and backward subsidiaries to purchase fuel, electricity, and foreign currency.
The subsidies, it continued, were significantly higher than what was spent in 2021 on social protection, health care, and education combined.
The statement read, “For years, a large share of Nigeria’s resources have financed inefficient and regressive subsidies for petrol, electricity, and foreign exchange. Not all these subsidies are accounted for in the budget, which makes them difficult to track and scrutinize.
“However, available data suggest that these subsidies, which accounted for more than the amount spent on education, health, and social protection in 2021, benefit primarily wealthy households. They also distort incentives, discourage investment, and crowd-out spending on pro-poor programs, thereby hindering progress in Nigeria’s social development.”
Further noted was Nigeria’s low public revenue and expenditure levels, which limited the capacity of the government to enhance service delivery.
The bank went on to say that Nigeria’s ability to generate enough revenue was being hampered by low tax rates, poor use of tax bases, flaws in tax administration, and significant deductions from oil revenues.
According to quotes from World Bank Group President David Malpass, “Nigeria’s government urgently needs to strengthen fiscal management, create a unified, stable market-based exchange rate, phase out its costly, regressive fuel subsidy and rationalize preferential trade restrictions and tax exemptions. These would lay the groundwork for the increases in public revenues and spending needed to improve development outcomes.
“Decisive moves would significantly improve the business enabling environment in Nigeria, attract foreign direct investment, and reduce inflation. The World Bank is ready to increase support to Nigeria as it designs and implements these critical reforms.”
On his part, the bank’s Nigeria Country Director, Shubham Chaudhuri, said, “Nigeria is at a critical historical juncture and has a choice to make. A child born in Nigeria today will be only 36 percent as productive when she grows up as she could be if she had access to effective public education and health services, and has a life expectancy of only 55 years. These stark indicators illustrate the urgency for action by Nigeria’s policymakers to improve the macroeconomic and fiscal framework, so as to sustainably enhance the quality of spending and public services at Federal and State levels.”
The Chief Economic Adviser to the President, Dr. Doyin Salami, the Director-General of the Debt Management Office, Patience Oniha, and the Director-General of the Budget Office of the Federation, Ben Akabueze, participated in a panel discussion at the launch on Monday in Abuja.
Every member of the panel emphasized the necessity for the government to raise taxes and close compliance gaps.
The DMO DG added that Nigeria needed to improve revenue generation rather than relying solely on debt.
