BREAKING: World Bank Calls For Full Transfer of Fuel Subsidy Gains to Federation Account

The World Bank has called for the complete transfer of revenue gains from the total removal of fuel subsidy into the Federation Account. It said despite the full subsidy removal in October 2024, Nigerian National Petroleum Company Limited (NNPCL) started transferring the revenue gains to the federation only in January 2025.

The bank also stated that resolving any remaining net arrears and channelling the full benefits of subsidy reform to the Federation Account was critical for sound fiscal management.

The recommendations were contained in the World Bank Nigeria Development Update (NDU), which was launched in Abuja on Monday.

On NNPCL, the report titled, “Building Momentum for Inclusive Growth,” said, “First, it is essential to ensure that the full revenue gains from the removal of the PMS subsidy— estimated at about 2.6 per cent of GDP in 2024 – are transferred to the Federation.

“Despite the subsidy being fully removed in October 2024, NNPCL started transferring the revenue gains to the Federation only in January 2025. Since then, it has been remitting only 50 per cent of these gains, using the rest to offset past arrears.

“Resolving any remaining net arrears and channelling the full benefits of subsidy reform to the Federation is critical for sound fiscal management.”

The report also called for close monitoring of the 2025 budget implementation, owing to what it described as “overly ambitious revenue assumptions”, which might lead to a larger-than-anticipated fiscal deficit.

The NDU report said, “The budget aims to boost capital spending, and this must be done sustainably, within the broader objective of fiscal consolidation to complement monetary policy and achieve an overall policy mix that maintains fiscal discipline and brings down inflation.

“Third, sustained efforts to enhance expenditure efficiency and transparency are crucial to maximising development outcomes.”

The report added that inflation remained high and sticky, but it was expected to fall to an annual average of 22.1 per cent in 2025, as a sustained tight stance firmly established monetary policy credibility and dampened inflationary expectations.

It said, “Now, the challenge is to consolidate macroeconomic stability and ignite inclusive growth through deeper, wider structural reforms. There is a need for the economy to generate more and better jobs at scale and reduce poverty.”

The report also pointed out that Nigeria’s quest to attain a $1trillion economy could only be possible with an annual growth rate five times faster than its current rate of 3.8 per cent.

In his remarks, Acting World Bank Country Director for Nigeria, Taimur Samar, said, “Nigeria has made impressive strides to restore macroeconomic stability. With the improvement in the fiscal situation, Nigeria now has a historic opportunity to improve the quantity and quality of development spending, investing more in human capital, social protection, and infrastructure.

“The allocation of public resources can begin to shift away from the past unsustainable pattern and rather towards meeting Nigeria’s large development needs, including the government playing its essential role of providing basic public services and serving as an enabler of the private sector–led growth.”

Unveiling the report, the World Bank Lead Economist for Nigeria, Alex Sienaert, applauded the macroeconomic reforms initiated by the federal government, explaining that they have stabilised the economy and set it on a growth trajectory.

But Sienaert stated that a lot needed to be done to deepen growth and make it inclusive.

He stated that international experience suggested that the public sector could not sustainably generate growth and jobs by itself.

He explained, “Nigeria is no exception, particularly since public resources remain constrained. A useful strategy is to position the public sector to play a dual role as a provider of essential public services, especially to build human capital and infrastructure, and as an enabler for the private sector to invest, innovate, and grow the economy.”

Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, who was one of the many top government functionaries at the event, said the economy had moved from a period of crisis to a period of macroeconomic stability, which needed to be safeguarded.

According to Edun, the government needs to push for transparency of fiscal data and transparency in the oil and gas sector, explaining that this is critical to what the government is trying to achieve.

He said, “In terms of where we go next, the key is investment. It is investments that allow increases in productivity that grows the economy and creates jobs.”

Edun disclosed that the government was conducting a forensic audit of NNPCL, promising that all monies due to the Federation Account from the state-owned oil company would be recovered.

He applauded the tremendous partnership between Nigeria and the World Bank, the major development partner.

However, Edun’s Budget and Economic Planning counterpart, Abubakar Bagudu, who reacted to NDU’s suggestion that the parameters of the 2025 budget were overly ambitious, disagreed.

Bagudu said the parameters were based on the country’s potential.

He said, “Are the projections in the 2025 budget ambitious? No, they are not, in all modesty. This is because even in the presentation, two things were said: the oil price, which is now $60 per barrel, but the average for Nigeria is $73 because of our premium grades. And then 1.6 million barrels per day production, though disappointing, but we have produced 2.2mbpd and the Ministry of Petroleum has said we have technical and physical capacity to produce these volumes in terms of acreages and technology.”

In his remarks, Governor of Central Bank of Nigeria (CBN), Yemi Cardoso, said the economy required a period of sustained stability to grow, adding that this is what the apex bank has been doing.

Cardoso stated, “We recognise our role as the custodian of stability and we recognisewhat we have to do to ensure that we accomplish and attain stability. We continue not just in attaining but we continue to protect. With that comes the need to be proactive to be able to understand risk and to be able to move before the risk overwhelms us.”

He said actions taken by CBN had moderated the volatility in the foreign exchange sector, from about four per cent a year ago to less than half per cent currently.