NNPC withholding half of fuel subsidy savings – World Bank

The World Bank has expressed concern that Nigeria is not reaping the full financial benefits of fuel subsidy removal, as the Nigerian National Petroleum Company (NNPC) Limited is reportedly remitting only half of the expected revenue to the federation account.

Alex Sienaert, the bank’s lead economist for Nigeria, revealed this during the launch of the May 2025 Nigeria Development Update (NDU) in Abuja. He said although NNPC began applying official exchange rates for transactions in October 2024—effectively ending implicit subsidies—it has failed to fully transfer the resulting gains.

According to Sienaert, as of January 2025, NNPC was still withholding a significant portion of the funds due to unresolved arrears and internal offsets. He stressed the importance of ensuring that all subsidy savings are remitted to support national priorities and maintain fiscal stability.

He described Nigeria’s 2025 budget as “ambitious” and warned that projected revenue targets could prove difficult to meet, citing assumptions like 2.1 million barrels of daily oil production and a $75 average crude price as overly optimistic.

Sienaert cautioned that missing these targets may lead to increased borrowing or a return to deficit financing through “ways and means”—a practice the government has vowed to end. Such a move, he noted, could undermine confidence in fiscal reforms and the naira.

The World Bank also acknowledged that recent reforms, including fuel subsidy removal and FX unification, have pushed up living costs. Although the government launched a N25,000 cash transfer programme for 15 million vulnerable citizens, only a third have received payment so far.

Sienaert called for faster implementation of the programme to ease the burden on low-income households. He also described the ongoing electricity subsidy as wasteful and urged the government to phase it out to free up resources.

The economist commended Nigeria’s progress in budget credibility, revenue transparency, and monetary tightening, but emphasized that more work is needed to cut governance costs and sustain growth to meet the target of becoming a $1 trillion economy by 2030.

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