Politics and Economics of Palliatives

As state governments begin to announce palliative measures to cushion the effects of the rising costs of living, analysts warn that the process should not be seen as a competition by governors but as a well-thought-out measure that should serve as a balm to the current economic pains of their citizens, writes Festus Akanbi

Following the decision of the National Economic Council (NEC) to tweak the federal government’s palliative programme in a way that makes state governments the new custodians of the programme, attention shifted to the states last week with a few of them unveiling plans to tackle the current harsh economic climate unleashed by the recent removal of fuel subsidy.

President Bola Tinubu had sought the approval of N500billion from the National Assembly by adjusting the 2022 supplementary budget to offer palliatives of N8,000 monthly for six months to 12 million households each, which according to him, was to cushion the effect of the removal of fuel subsidy. Alongside, he had demanded the approval of an $800million loan from the World Bank for funding.

The president had on July 13 announced that a monthly transfer of N8,000 would be made to the bank accounts of 12 million households classified as poor or low income. This cash transfer programme is intended to be implemented for six months.

As part of the relief efforts, the president was also said to have directed the release of fertilizers and grains to approximately 50 million farmers and households across all 36 states and the Federal Capital Territory (FCT).

The Pains

There has been a combination of frustration and confusion over the implementation of fuel subsidy removal from May 29, 2023, which global and local financial experts criticised for plunging more Nigerians into poverty and hopelessness. The criticisms stemmed from the lack of a clear-cut palliative programme before the implementation of the fuel subsidy removal which many analysts described as long overdue. 

For instance, the World Bank in June this year warned that about 7.1 million poor Nigerians would become poor if the federal government failed to compensate or provide palliatives for them, following the removal of fuel subsidy. This was disclosed during the launch of the June 2023 edition of the Nigeria Development Update. According to World Bank data, 89.8 million Nigerian were poor as of the beginning of this year. The lender noted that additional four million Nigerians became poor between January and May this year, raising the figure to 93.8 million. The latest projection means the number of poor Nigerians will rise to 100.9 million if the government fails to compensate vulnerable citizens for fuel subsidy removal. 

The bank, therefore, stressed the need for adequate compensation, noting that compensating transfers will be essential in helping to shield Nigerian households from the initial price impacts of the subsidy reform. 

States Roll out Palliative Measures

Following the decision of the NEC to make states the custodians of the palliative programmes, some of them have embarked on a rash of policy measures aimed at cushioning the effects of the hike in fuel prices and the general increase in the costs of living in their respective states.

For instance, while Ebonyi, Edo, and Imo states have announced an increase in workers’ salaries by N10,000, Rivers State said it is going to flag off a free transportation scheme to help the residents. On its part, Bayelsa launched 106 vehicles to assist the residents while Edo has decided to reduce working days to three. Oyo State is deploying more buses to ease transportation and has decreed that there will be no increase in the fare paid on these buses. School children and senior citizens are to board the buses at half-price, with Governor Seyi Makinde promising to announce more palliatives later.

The Kwara State Governor, Abdulrahman Abdulrazaq, has approved ‘multi-billion naira’ palliatives to alleviate the effect of the petrol subsidy removal across different demographics in the state.

In June, the state government announced a three-day workweek adjustment to cushion the effects of the subsidy removal and the high transportation rate. But the directive was later suspended due to “an advisory from the national economic council (NEC).”

The governor said one of the palliatives is a cash support of N10,000 for every public servant in the state, beginning in July, a programme that is to last till a new minimum wage is introduced.

He promised that modalities for the occasional distribution of food to poor and most vulnerable households would be activated soon, saying the Kwara State Social Investment Programme (KWASSIP) will also activate N500 million worth of conditional support for petty traders and MSMEs in the state.

“To boost farming, outputs, and food security in the state, our government will pay to receive fertilisers and grains from the federal government. Modalities for the handling of these will be made available later.” Abdulrazaq said he has also approved the extension of free bus rides for students of tertiary institutions and the continuation of the three-day work schedule,” the governor stated.

In Ogun State, Governor Dapo Abiodun announced the payment of an additional N10,000 monthly to civil servants for six months, cash transfer to the poorest of the poor by the states, and the payment to public servants on outstanding liabilities such as pension, allowances among others. He also said that the government is looking at the possibility of funding Micro Small and Medium Enterprises (MSMEs) which he said are the engine room of business. He further said the government plans immediate implementation of energy transition plants, converting mass transit buses to Compressed Natural Gas (CNG), adding that the long-term vision was to establish electric automobile plants.

Trust Issues

Reacting to the various policies announced by the states, analysts wondered how the governors expect the citizens to trust them given their history of unfulfilled promises. Analysts explained the lack of trust could be traced to the shoddy handling of the Covid-19 palliatives which many of the governors turned into personal properties. 

“A governor that could not handle such an emergency like the Covid-19 palliatives will mess up the current arrangement,” an Ogun State-based economic analyst stated.

He lamented the failure of some of the state executives to fulfill their promises on infrastructure provision in their jurisdiction, wondering how they will expect the people to believe them. 

“Apart from the issue of fuel price increase, many Nigerians do not have access to basic infrastructure. In Olambe, Ogun State where I live, we have been cut off from the rest of the state by the bad condition of our roads. What impact will cash transfer have on people whose businesses have been paralysed by lack of good road infrastructure?”, he said.

However, another analyst, Dr. Kingsley Obinna feared that in dispensing the palliatives at the state level, political consideration may determine who gets what. According to him, “The question is where is the data to be used by states to ensure the money gets to those who badly need it.”

Analysts also wondered why the Small and Medium Enterprises Development Agency (SMEDAN) was not involved in the handling of the palliative programme given its closeness to nano, small, and medium-scale businesses in the country.

When contacted, the Director General of the agency, Mr. Olawale Fasanya, explained that his organisation has made its input to the federal government. He explained that those at the lowest wrong of the business ladder could be helped by providing funds to create business hubs where artisans could come and share equipment and other facilities. He also suggested little amount of grants to nano businesses, saying these will have a lasting effect on the economy.

How the state governments administer these palliative measures will determine the speed at which Nigerians will get a reprieve from the current harsh economic realities.