World Bank recommends resumption of petrol imports

Nigeria must increase petrol imports to cushion its economy against rising global energy costs, the World Bank warned, as tensions in the Middle East push domestic fuel and food prices higher.

In its April 2026 Nigeria Development Update (NDU), the World Bank highlighted that while Nigeria has made progress in stabilising its macroeconomy, households continue to feel the pinch of high inflation. It noted that domestic fuel prices surged sharply between February and March 2026, with diesel prices nearly doubling in some regions, contributing to rising costs across the economy.

The Bank, said that the suspension of import licenses since January 2026 has reduced competition, allowing prices to exceed import-parity levels.

The federal government in a move expected to strengthen domestic refining, had suspended the issuance of import licenses for premium motor spirit (PMS). This is in alignment with the Petroleum Industry Act (PIA) 2021, which prohibits import licenses where local production is sufficient.

Read also: Middle East war triggers fuel, food price surge as Nigerian traders warn of deeper crisis

Presenting the report during the launch, Fiseha Gebregziabher, World Bank Lead Economist said that allowing qualified marketers to resume imports would restore competition, reduce pricing distortions, and better align domestic prices with global benchmarks.

He explained that greater market contestability would also strengthen supply security by reducing reliance on a single refinery and broadening sourcing options, while remaining consistent with domestic refining objectives.

“To lower inflationary pressures, there are a couple of measures that we highlight in the report. One is the importance of restoring competition in the PMS market, including through reopening imports, which would help reduce prices.

“And then, there is a critical need to address supply constraints, including by reducing tariffs, lifting import bans, both on final products, but also on intermediate products. That would have significant implications for reducing production costs, and of course, by implication, inflationary pressures. But beyond the risks from the Middle East conflict, it’s important to sustain and deepen the ongoing reforms.” he said.

He also stressed the need to provide targeted social protection support while avoiding blanket subsidies in case inflationary pressures persist. “Why do we need to avoid blanket subsidies? Because they’re counterproductive and they’re distortive. In the area of monetary effects policy, it’s important to keep appropriate monetary policy until inflation is sustainably and significantly lower, and of course, ensuring flexibility in the exchange rate market is critical as well,” he added.

Speaking further, Gebregziabher commended Nigeria on the measures taken to facilitate trade, including the launch of the national single window and the financial sector measures, including by banking recapitalization process, which he said would strengthen financial sector resilience and expand lending capacity.

He however said that more needs to be done to consolidate these reforms and deepen them going forward.

In terms of some of the fiscal policy measures, Gebregziabher highlighted increasing access to cost-effective electricity for all Nigerians, including through improving performance, operational performance, but also reducing system losses, adopting cost-reflective tariffs.

“And another important action that we also recommend in the report is reducing the cost of government and this would include reforming the treasury single account, cutting unessential spending, and of course, reducing the cost of operations of government-owned enterprises.

Read also: Petrol imports hit nine-year low on Dangote output boost

“We also recommends measures to promote non-oil revenues, improving fiscal governance, and enhance budget credibility, which would start by preparing timely budget and making sure that the budget assumptions are realistic,” he added.

The report also indicated that with higher fuel and commodity prices, introducing inflationary pressures, monetary easing would be premature, hence the need to maintain a tight monetary policy stance.

“The Central Bank of Nigeria should consider maintaining a tight stance to prevent second-round effects and anchor expectations, particularly amid exchange rate pressures and potential portfolio outflows. Preserving positive real interest rates will also help sustain investor confidence amid elevated global risk aversion.

“Geopolitical risks may trigger capital outflows and exchange rate pressures. Policy needs to allow the exchange rate to absorb shocks rather than defend a specific level at high cost. Flexibility will help preserve reserves and support external adjustment, while targeted interventions can smooth excessive volatility.”

“Reduce supply-side constraints to ease inflationary pressures. Reduce selected trade tariffs—particularly on food and key intermediate inputs.” This it said can lower import costs, improve market supply, and help dampen price pressures, adding that such measures would complement tight monetary policy by addressing the supply side of inflation, especially amid rising global prices.

“In addition, removing the 4 percent levy imposed by the Nigeria Customs Service would further reduce import costs; its financing could instead be provided
through direct budget allocations rather than a surcharge on import values,” the report stated.

Also commenting on the report, Mathew Verghis, World Bank Country Director for Nigeria said that Nigeria has made efforts to stabilize its economy, but welfare gains are still modest. “Moreover, the conflict in the Middle East adds pressures. Sustaining and deepening macroeconomic stabilization, as well as addressing structural constraints, will be critical to translating reform dividends into faster, more inclusive growth, jobs and improved living standards,” said Verghis.

The World Bank urged the federal government to leverage increased revenues from oil prices to target support for vulnerable households while avoiding blanket subsidies.

Read also: Nigeria’s petrol import bill falls 29% to $10 billion – CBN

Investments in human capital, starting with early childhood, were highlighted as a critical lever for long-term growth. About 110 of every 1,000 Nigerian children die before age five, 40 percent are stunted, and more than half are not developmentally on track before entering school, the NDU noted.

“Investing early in nutrition, health, caregiving, safety and early learning is one of the most powerful ways Nigeria can convert today’s reform gains into higher productivity, better jobs, and lasting poverty reduction,” Verghis added.

The World Bank also stressed structural reforms in the energy sector. Off-grid solar energy is expanding rapidly, providing electricity to 3 million people between January and March 2026, but on-grid sector reforms remain essential to secure a $1 trillion economy and ensure affordable energy access.

With the Middle East crisis creating uncertainty for oil markets, Nigeria’s policymakers face the dual challenge of maintaining macroeconomic stability while protecting households from rising prices.