The World Bank has projected Nigeria’s inflation rate to reach 25% in 2023 due to the removal of fuel subsidy.

This is coming after the country already experienced an inflation rate of 22.41%.

The World Bank had previously predicted that Nigeria would have one of the highest inflation rates globally and the seventh highest in Sub-Saharan Africa.

The Washington-based bank stated that the removal of fuel subsidy would lead to a significant increase in inflation.

President Bola Tinubu had announced the removal of fuel subsidy, which resulted in an increase in petrol prices across the country.

According to the World Bank, “The removal of the petrol subsidy is anticipated to cause a temporary increase in inflation in the upcoming months before contributing to disinflation in the medium term.

“The price increases resulting from the subsidy removal will have a one-time impact on prices, primarily affecting petrol purchases for transportation, power generation, and certain services.”

“Also, headline inflation is expected to rise from 18.8 percent in 2022 to 25 percent in 2023. However, by Q1 of 2024, the subsidy removal will start to have a disinflationary effect, meaning that it will alleviate inflationary pressures despite higher petrol prices.”

Despite the Central Bank of Nigeria’s efforts to control inflation, including raising the monetary policy rate, the country’s consumer price inflation remains high.

The World Bank also highlighted that high inflation has increased poverty, pushing an estimated 4 million Nigerians into poverty between January and May 2023.

However, the bank noted that the removal of fuel subsidy would reduce the government’s reliance on funding from the Central Bank of Nigeria in the long term.