The World Bank has said Nigeria’s electricity subsidy is “wasteful, regressive” subsidy, warning that the subsidy continues to undermine hard-won economic gains from ongoing reforms.
According to the Nigeria Electricity Regulatory Commission, Nigeria spends approximately N200 billion on subsidies monthly.
The world bank, while calling on the Nigerian government to address the subsidy as it did with the petrol subsidy, urged the government to sustain the ongoing reforms, including the removal of foreign exchange (FX) controls, and even undertake more reforms to further improve macroeconomic and fiscal enviroment, critical for economic stability.
“The first two roads; eliminating the PMS subsidy and eliminating the FX subsidy have really been critical reasons why the fiscal situation has improved so dramatically. But of course, there’s still a range of fiscal policy and fiscal management issues where more can be done to safeguard the gains that have already been achieved, but also just to extend them and to really move fiscal policy into making sort of active contributions to the development space in Nigeria”, Alex Sienaert, World Bank lead economist for Nigeria said while presenting the May 2025 Nigeria Development Update (NDU) report in Abuja on Monday.
“So just to name, there is still one kind of wasteful, regressive subsidy, which is the electricity subsidy, so work to address that”, he said.
According to the Nigeria Electricity Regulatory Commission, Nigeria spends approximately N200 billion on subsidies monthly.
Nigeria has witnessed a notable acceleration in economic activity as GDP growth in 2023 reached its fastest pace since 2015, while the FX reforms helped achieve a more unified and stable exchange rate. He said foreign reserves also rose, from a low of $32 billion to over $37 billion, with net reserves showing significant improvement.
“The bottom line is a 4.5% of GDP increase in total revenues in 2024, which is not something that, as economists looking across different countries and recovery stories, we see very often,” Sienaert noted.
Read also: NNPC remitting only 50% of subsidy gains to Federation Account – World Bank
Despite these improvements, the economists acknowledged increased cost-of-living pressures and stressed the importance of cushioning the poorest and most vulnerable households.
He noted that the government does have an ambitious targeted cash transfer programme for three months for 15 million recipients, but regretted that the implementation has been quite slow. “So only about a third of those recipients have received transfers so far”, he said.
The Economist further urged the government to increase transparency of oil revenues, following the revenue gains from the PMS subsidy flowing to the Federation.
“PMS subsidy was effectively ended last October, but revenue gains from this are yet to fully flow to the Federation. As of January, NNPC was still only transferring about half of the resulting revenue gains from the subsidy elimination to the Federation”, he noted.
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