Analysts Divided Over FG’s Proposed N2.4trn Payment to 40m Poor Nigerians

Peter Uzoho

The latest move by the federal government to end petrol subsidy next year and introduce a monthly payment of N5,000 to cushion the effect of the action on 40 million poorest Nigerians has received dissenting views from economic and public policy analysts in the country.

While the majority was unanimous in supporting the plan to remove the subsidy in 2022 , owing to its drain on the economy, some of the analysts, however kicked against the monthly palliative, which cumulates to N2.4 trillion in 12 months.

Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had last week announced the government’s plan to jettison petrol subsidy payment to be replaced by the N5,000 while the Nigerian National Petroleum Corporation (NNPC) also hinted that petrol could sell for between N320 and N340 per litre by February, 2022.

However, some analysts have questioned the rationale and the economic sense in the federal government’s proposal, partly due to the lack of reliable database to determine the real poor Nigerians, the template to be used, as well as the absence of transparency and accountability.

Speaking to THISDAY, Outcome Lead for Industry Restructuring at the Facility for Oil Sector Transformation (FOSTER), a DFID-funded programme, Mr. Michael Faniran, who opposed the N5,000 palliative, said owing to the trust deficit between the government and the people, Nigerians do not believe the money would be transparently administered.

Faniran said: “Owing to the trust deficit between government and the people, the populace do not believe the money will be transparently administered. Also, if the cost of the palliative is more than the subsidy we are trying to remove, of what essence will it be? The National Assembly has equally raised the issue that the cost is not included in the 2022 budget, so where will government fund the allowance from?

“I think government should look for better and more creative ways of cushioning the effects of subsidy than embarking on another exercise which is very prone to corruption.”

Also throwing his support behind the subsidy removal, the Chief Executive Officer of Centre for the Promotion of Private Enterprises (CPPE), Dr Muda Yusuf, advised that the transition needs to be strategically managed because of the political and social contexts.

“The proposal on cash transfer to the vulnerable segments of the society is not a bad idea. It is essentially a transitional policy to mitigate immediate shocks. It also has a symbolic significance. But we need to be sure of the integrity of the database that contains the 40 million people.

“This should be validated by key stakeholders including the labour unions and the civil society groups. It is important as well to validate the inclusiveness of the database,” he argued.

He added that more enduring reforms would have to take place to ease transportation costs, build domestic petroleum refining capacity, and attract more investors into the downstream petroleum sector.

He said: “On the appropriation for the cash transfer, this can be resolved through engagement with the National Assembly. This should not be difficult given the rapport between the National Assembly and the executive”.

Another economic policy analyst, Mr. Chika Mbonu, told THISDAY that the removal of petrol subsidy was a good economic decision and that the palliative was a good one if it can be handled in a way that the targeted beneficiaries are the ones benefitting.

“I’ve been saying that Nigeria cannot sustain the fuel subsidy burden we are carrying. N250 billion a month turns to about N3 trillion in a year, more than our capital budget in every way. Now, a lot of research has shown that the people who really profit from this subsidy are not the poor people.

“The bigger picture is that the money that we get from selling crude oil, we use it to import petrol, sell it at N162 per litre. More than a half of that is smuggled out to Benin Republic, Cameroon and all other places because our price is low compared to their own. So, there must be an end to subsidy, one way or the other,” Mbonu said.

He added: “Having said that, the next issue is how do you provide succour to those Nigerians that will be more affected by the removal of subsidy, and that’s where the safety net comes in. Now, if it is where things are working very well, what you will do is to find ways to reduce the cost of transportation, health and all those things.
“But you know that if you put this money, most times in Nigeria, it disappears. Worldwide, the best method for this kind of thing is what they call conditional cash transfer. You actually reach the citizens directly and put money in their pockets. In this case, N5,000 per person every month for 12 months for each individual identified in the 40 million poor Nigerians.

“It is so easy to be done if people have the heart to do it because literally everybody around us has a Biometric Verification Number (BVN), has an account number and phone number. So, you can even use it to achieve another purpose, which is, to get a lot of people into the banking system.”