Wealthy households’ benefiting from ‘regressive’ oil subsidies shortchanges Nigerians –World Bank

*The World Bank, in a report released Monday, November 21, frowns on how a large share of Nigeria’s resources have financed inefficient and regressive subsidies benefiting ‘primarily wealthy households’ but discouraging investment, and minimising spending on pro-poor programmes to hinder societal development

Alexander Davis | ConsumerConnect

The World Bank, again, has reacted to a situation in which large chunks of Nigeria’s oil wealth have financed inefficient and regressive subsidies which benefit primarily wealthy households.

The global finance body expressed its displeasure over the lot of several millions of Nigerians in its report on Nigeria Public Finance Review, released November 21, 2022, in Abuja, FCT.

The World Bank emphasised the urgent need for Nigeria to fix its public finances to promote inclusive and sustainable development for the good of all.

The Bank’s report noted the macroeconomic and fiscal reforms are urgently needed to lift the West African country’s development outcomes, which it’s said were severely constrained by financial recklessness abd inefficient use of resources in the economy.

The World Bank stated in the report: “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 scrutinise.”

The report also noted: “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.”

According to the report, subsidies as well distort incentives, discourage investment, and crowd-out spending on pro-poor programmes, thereby, hindering progress in Nigeria’s social development.

The World Bank further disclosed that Nigeria has one of the lowest public expenditure and revenue levels in the world.

This situation undermines the government’s ability to improve service delivery, it stated.

The report also noted: “Between 2015 and 2021, total public spending in Nigeria averaged 12 percent of Gross Domestic Product, less than half the world average of 30 percent.”

The report said that improving service delivery in Nigeria required more resources.

The need for public revenue mobilisation

The report said: “One of the most critical aspects of meeting Nigeria’s vast development needs lies in raising more revenues, as the country ranks consistently among the world’s poorest-performing countries in terms of public revenue mobilisation.”

It stated the total revenues averaging just seven percent of GDP in 2015-2021 are far below the global average of 24 percent.

According to the Bank, low tax rates and poor utilisation of tax bases, weaknesses in tax administration, and large deductions from oil revenues were constraining Nigeria’s inability to generate enough revenues.

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