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The World Bank says removal of the petrol subsidy, if carried out in January 2022, could cause the headline inflation rate to rise by an additional 2.0–2.5 percentage points.
The bank stated this in the November edition of its Nigeria Development Update.
The report read, “Assuming a 20-percent pass-through effect of PMS prices to inflation, removing the PMS subsidy in January 2022 could cause the headline inflation rate to rise by an additional 2.0–2.5 percentage points over the following two years.”
The report disclosed that while the change in fuel prices will be visible to all Nigerians immediately, changes in wage rates, vehicle parts and maintenance, and other costs would be known only to a much smaller group of people.
“In many countries, diesel dominates bus and freight transportation, but Nigeria’s history of diesel-price deregulation and the continuing PMS subsidy have encouraged the widespread use of PMS as an automotive fuel.
“As a result, service providers may take advantage of fuel-price increases to charge much more than the price increase itself would warrant,” the report read.
The report also cited an example of Bangladesh, where the government increased the prices of diesel by 11 percent in 2011 which translated into large trucking companies increasing their trucking fares by 22 percent while food transport companies announced that transportation prices would rise by 50 percent.
Source: Opera news.
