World Bank Says Government Subsidies Not Beneficial To Poor Nigerians

The World Bank has said that subsidy payments by the Nigerian government, particularly on petrol and electricity do not benefit the country’s poor population which was recently projected to be at least 133 million.

In a statement announcing the launch of the new Nigeria Public Finance Review report, the World Bank Nigeria’s resources had been consumed by inefficient and regressive subsidiaries on petrol, electricity and foreign exchange.

It pointed out that subsidies benefit only rich households and reduce government spending on poor Nigerians and that the subsidies were far more than what was spent on education, health and social protection in 2021.

“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,” the statement read in part.

According to the World Bank, Nigeria has one of the lowest public expenditure and revenue levels in the world, which undermines the government’s ability to improve service delivery and that low tax rates and poor utilisation of tax bases, weaknesses in tax administration, and large deductions from oil revenues were limiting Nigeria’s ability to generate enough revenues.

The statement quoted the president of the World Bank Group, David Malpass, to have reiterated a call on the government to urgently strengthen fiscal management, create a unified, stable market-based exchange rate, phase out its costly, regressive fuel subsidy and rationalise preferential trade restrictions and tax exemptions, noting that these would lay the groundwork for the increases in public revenues and spending needed to improve development outcomes.