By Nduka Chiejina, Abuja and Okwy Iroegbu-Chikezie, Lagos
The Federal Government plans to give N5,000 each to 40 million Nigerians, equivalent of about 40 per cent of the nation’s estimated population of 200 million ahead of the target date of mid-2022 for the complete removal of fuel subsidy.
The money would be used to address a monthly transport subsidy in the form of cash transfer of N5,000 to between 30 to 40 million deserving Nigerians. The provision is also intended to cushion the expected impact of the removal of the subsidies on the most vulnerable 40 per cent of the population.
Minister of Finance, Budget and National Planning Mrs. Zainab Ahmed, who spoke yesterday in Abuja at the launch of the Nigeria Development Update, said “with the expansion of social protection policies during the pandemic, the government has an opportunity to phase out subsidies such as the PMS subsidy, while utilizing such cash transfers to safeguard the welfare of the poor and middle-class households.”
At N5,000 for 40 million Nigerians, the Federal Government will be incurring N200 billion monthly as a consequence of the remedial policy.
She said government intends to accelerate its “structural reforms, particularly in the power sector, in governance, in business environment to unlock the huge potentials of the economy, scale up social safety net and deepen financial inclusion to reduce poverty and inequality gaps,” adding that government “will carefully calibrate the sequencing of these reforms to manage their attendant political fallouts.”
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Mrs. Ahmed said government is optimistic that “the recent developments in the oil sector, such as the Petroleum Industry Act (PIA) 2021, the full reactivation of the four public refineries in the country and the completion and coming on stream of the three private refineries under construction in 2022, would significantly boost contribution from the sector to our economic growth efforts,” stating that “the subsidy regime in the sector remains unsustainable and economically disingenuous.”
She agreed that Nigeria’s digital economy “can transform economic activities by unleashing new productivity gains, offering new services and improving government’s efficiency,” pointing out that government sees “enormous opportunity for our teeming youth population that remain largely unharnessed with isolated progress and possibilities.”
Mrs. Ahmed said Nigeria needs greater investments in newer and competitive technologies to be made for the provision of critical infrastructure in the telecoms sector to unleash potentials, saying to protect such investments, government has been mobilising national security outfits, and even local ‘vigilantes’ to provide added layers of security for existing infrastructure, while at same time engaging local communities towards addressing the likely root causes of infrastructure vandalization.
The World Bank in the development update had said the poorest 40 per cent in Nigeria consume less than three per cent of the total PMS in the country, stressing that the rich were benefiting more from the subsidy.
An Economist and Chief Executive Officer (CEO), Centre for the Promotion of Private Enterprise, (CPPE), Dr. Muda Yusuf, said there is a need to creatively manage the transition from the current fuel pricing regime to a fully deregulated arrangement.
Yusuf, who was reacting to the Federal Government’s planned replacement of fuel subsidy with payment of N5,000 transport grant for 40 million vulnerable poor Nigerians by mid-2022, observed that it is a tricky issue which could pose a serious challenge to government if not tactically managed.
“The reality is that the sentiments among the citizenry are not favourable to the deregulation of petroleum product pricing or petroleum subsidy removal. Even some elites are curiously not persuaded on the justification for the subsidy removal. If the policy transition is not properly managed, the risk of a social and political backlash could be quite high,” he told The Nation.
Yusuf, who was former Director General of Lagos Chamber of Commerce and lndustry (LCCI), said no doubt, there is a sound economic and business case in favour of fuel subsidy removal, but the social and political contexts are equally critical.
“Certainly, subsidy is not sustainable, which is why there is need to accelerate engagement with the relevant stakeholders to come up with a policy transition strategy that is sustainable, realistic and pragmatic. The conversation should not only be economic, but also social and political,” he said.
While stating that direct cash transfer to the vulnerable segments of the population is not a bad idea, the CPPE CEO said the credibility of the database must be assured, and the database must be inclusive.
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