Interrogating the N5000 for subsidies palliative

Energyday Editorial


Since the issue of the current administration’s plan to give N5000 to about 40 millions poor and disadvantaged Nigerians came into the front burner of public discourse, it has continued to generate reactions of the people from the purely pedestrian to the informed opinions.

It could be noted that for years, successive Nigerian governments have trodden on eggshells in moves to put a stop to the payment of fuel subsidy.

Often sandwiched between reducing costs and igniting public anger, and using cheaper fuel to keep its approval ratings up, the government repeatedly adopted the latter despite promises not to.

Over the years, there have been arguments back and forth in support of and against the policy, some pundits have opined that it helps lower the cost of living and supports millions of Nigerians who live below the poverty line. Yet, some critics such as the International Monetary Fund say subsidies constitute an unsustainable drain on public resources needed for critical developmental projects.

The prices of diesel and kerosene have been largely deregulated, and retail prices at filling stations vary based on market forces, but petrol price is regulated. Nigerians typically use petrol to power their vehicles, tricycles, and motorcycles, and with erratic power supply something they still grapple with, millions rely on gasoline to power their generator sets.

Petrol is in high demand by Nigerians to fuel the cars and generating sets

It is on record that from 2006 to 2018, Nigeria spent about N10 trillion on subsidies, a study supported by the British government estimated — more than the health, education or defense budgets.

The Nigerian National Petroleum Corporation (NNPC) said Nigeria has already spent over N816 billion in the first seven months of this year in subsidising the cost of petrol.

Ending subsidy to pay subsidy? Propped by the newly passed Petroleum Industry Act, the Nigerian government has now set its sight on mid-2022 to fully remove fuel subsidy and move to a market-based pricing model.

Washington-based IMF advised the government to hand out “well-targeted social assistance… to cushion any negative impacts on the poor particularly in light of still elevated inflation.”

To achieve this, the government said it will pay “poor citizens” N5000 monthly as transport grants.

At EnergyDay, we are interested as a serious business journal interested in research methodology for social and economic planning, in how the federal government arrived at the 40 million figure it claims. Given that N5000 would be given to 40 million Nigerians each, how much would that amount to in five years?

Given the paucity of funds arising from dwindling revenues, the question that begs answer is where will the Government source the money to pay the N5000 stipend? Why can’t such money be used to provide more vehicles in our transport system like the El Rufai buses in Abuja? Why can’t the money be used to rehabilitate our dead refineries and make them work again? These are the kinds of sustainable paliatives Nigerians need from the government, not the distribution of N5000 meant to cushion the effects of subsidy removal.

What has happened to previous social interventions programs of the current administration from the TraderMoni to Cash Transfer, including Sure-P ?

These programs were not properly thought out and were poorly executed such that the objectives were defeated by execution hiccups, corruption, cronyism among other negatives. We are concerned that the current efforts may be another way and avenue to embezzle public funds?

We are at loss to explain why contradiction has continually trailed the positions of government officials regarding the date for effecting the subsidy removal?
Some officials of the administration say the measure will come to effect in June 2022, while some aver that the starting date is February.

EnergyDay in a previous editorial had taken a strong position calling for removal, but our fear then and now is that the government may not have the nerve to go the whole hog in removing the subsidies given what may seem to be a possible political backlash.

The financing of the palliative measure is what the current economic situation of the country has made even more hard to grasp.

Though the finance minister, Zainab Ahmed, said subject to the availability of resources and support from state governments, the handouts will target between 20 to 40 million Nigerians who make up the country’s poorest population. The programme is expected to run for six or 12 months, she said.

“Ahead of the target date of mid-2022 for the complete elimination of fuel subsidies, we are working with our partners on measures to cushion potential negative impact of the removal of the subsidies on the most vulnerable at the bottom 40 per cent of the population.

“One of such measures would be to institute a monthly transport subsidy in the form of cash transfer of N5,000 to between 30–40 million deserving Nigerians,” she added.

In the opinion of EnergyDay, arithmetic of arriving at the figure of 40 millions is confounding as we are not told the metrics or parameters deployed to get the number.

For us in this medium, when the numbers are taken together, the plan appears a tall order and seems a typical political Photoshop, a design by government to shore up its sagging popularity especially as the election year draws close.

When we consider the economic situation in the country the transport grant option is quite an expensive joke , Paying 40 million people N5000 a year will cost the country N2.4 trillion, about 15 per cent of Nigeria’s total budget in 2020.

On the other hand, if subsidies are retained, the government would spend a lot less. Judging by Mrs Ahmed’s estimation that the subsidy “costs as much as N150 billion” monthly, petrol subsidy would stand at about N1.8 trillion a year.

For us, the safer option is to purchase mass transit buses and make them affordable to the teeming masses.

Then, there is the simple matter of the palliative not being captured in the budget.

But beyond the transport challenge, such measure will have ripple effect on the living standards of Nigeria, but allowing market to determine the price is the best option, though in the short term,it will hurt the masses, but like the deregulated telecommunication it will gradually become affordable