VenturesNow

IMF says Nigeria’s quiet reinstatement of petrol subsidy to gulp 50% of oil revenue

Published

8 months ago

May 11, 2024

The International Monetary Fund (IMF) has stated that President Bola Tinubu’s administration’s quiet return of petrol subsidy is anticipated to consume about 50% of its estimated oil earnings for this year.

Based on the IMF’s assessment, Africa’s largest producer of crude oil is expected to incur an implicit subsidy of around N8.43tn ($5.9bn), which will reduce its projected N17.7tn of oil earnings. This advice was stated in the most recent IMF staff country report for Nigeria.

The Bank of America estimated that Nigeria may incur a cost of $7 billion to $10 billion this year if it imported a quantity of gasoline ranging from 18 billion to 25 billion litres. Tatonga Rusike, an economist specializing in sub-Saharan Africa at Bank of America, stated in a written communication.

This recent comment was made about a year after the President, during his inaugural speech, publicly halted the disbursement of subsidies.

“Subsidy can no longer justify its ever-increasing costs in the wake of drying resources. We shall instead re-channel the funds into better investment in public infrastructure, education, health care, and jobs that will materially improve the lives of millions. Petrol subsidy is gone,” Tinubu had declared.

The President’s declaration resulted in a surge in petrol prices, which rose from N197 to a range of N480 to N570. The pump price was then increased to N617 per litre and is currently being sold for prices ranging from N620 to N700 per litre.

The report read, “Fuel subsidies were reformed in June 2023, however, adequate compensatory measures for the poor were not scaled up promptly and subsequently paused over corruption concerns.”

“The devaluation of the naira days later, which was aimed at creating a free-floating currency, led fuel prices to more than triple, fanning inflation and protests.

“To help Nigerians cope, authorities started capping fuel pump prices below cost, reintroducing implicit subsidies by end-2023,” the IMF said.

The currency has experienced a depreciation of around 70% against the dollar since last June. Nigeria, although it is the biggest oil producer in Africa, relies on imports for most of its gasoline requirements due to insufficient refining capacity to satisfy domestic demand.

The International Monetary Fund (IMF) stated that it anticipates the elimination of the fuel subsidy to be fully implemented within two years. This will occur as the government expands its cash transfer program, which is specifically aimed at assisting the most impoverished individuals in the country.

VenturesNow

IMF, Egypt reach agreement for fourth review of Egypt’s $1.2 billion loan request

Published

6 hours ago

December 26, 2024

Ifeoluwa Dada

Egypt and the International Monetary Fund (IMF) have reached a staff-level agreement over the fourth review of the Extended Fund Facility arrangement, which might lead to a $1.2 billion payout under the program.

In March, Egypt, struggling with rising inflation and cash shortages, consented to the $8 billion, 46-month facility. Its economic problems were made worse by a precipitous drop in Suez Canal revenue over the last year due to regional tensions.

Over the next two years, Egypt’s government has committed to raising its tax-to-revenue ratio by 2% of GDP, according to the IMF, emphasising removing exemptions rather than raising taxes.

According to a statement from the IMF, this would allow it to expand social expenditure to support vulnerable populations.

“While the authorities’ plans to streamline and simplify the tax system are commendable, further reforms will be needed to enhance domestic revenue mobilization efforts,” the statement said.

According to the IMF statement, Egypt had also committed to maintaining its commitment to a flexible currency rate and to taking more urgent action to guarantee that the private sector became the primary driver of development.

The IMF’s executive board still has to accept the fourth review’s staff-level agreement.

VenturesNow

Libya’s eastern govt accepts petrol subsidy elimination

Published

6 hours ago

December 26, 2024

Ifeoluwa Dada

In a recent statement, the eastern government of Libya claimed it had reached a consensus on a plan to eliminate gasoline subsidies and would draft a mechanism to carry out the accord.

Additional information on the idea was not released by the administration led by Osama Hamad, a challenger to the internationally acknowledged Tripoli-based government.

However, it is uncertain if Hamad’s government would be able to carry out the plan in the divided nation.

According to the Global Petrol Prices online tracker, a litre of gasoline costs just 0.150 Libyan dinars ($0.03) in OPEC member Libya, making it the second-cheapest in the world.

Following an uprising against former ruler Muammar Gaddafi in 2011, smuggling networks have thrived in the ensuing political unrest and armed fighting. In 2014, conflicting eastern and western governments separated the nation.

A World Bank analysis estimates that the annual value of fuel smuggling from Libya is at least $5 billion.

In a meeting with Mari Barrasi, the deputy governor of the Central Bank of Libya (CBL), located in Tripoli, and four members of the bank’s board of directors, Hamad in Benghazi supported the idea of removing subsidies.

The CBL’s Benghazi branch offices served as the venue for the conference.

The eastern parliament appointed Hamad in 2023 to succeed Abdulhamid Dbeibah, who had been put in position in 2021 under a U.N.-backed procedure that the parliament said had lost its legitimacy.

Dbeibah, who is located in Tripoli, stated in January that he will conduct a public poll on the topic of eliminating gasoline subsidies, but he hasn’t done anything about it since.

According to CBL figures, gasoline subsidies cost 12.8 billion Libyan dinars between January and November of this year. 4.8 Libyan dinars to $1 is the official exchange rate.