#TransparencyWatch: Nigeria’s subsidy removal quagmire and the imperative for sustainable policies

Over the years, putting an end to the payment of petrol subsidies has been a conundrum for the Nigerian government.

The federal government is trapped between subsidy removal as a cost cutting measure and the resultant public outcry as well as possible inflation, or retaining the payment of subsidy to at least, keep public approval.

The usual justification for the payment of subsidy Is that it helps to lower the cost of living in the country particularly for millions of Nigerians living below the poverty line. However, international organisations like the International Monetary Fund and World Bank have always held the stance that subsidies make up an unsustainable drain on the needed public resources for crucial developmental projects.

While the government has repeatedly adopted payment of subsidies, recent reports reveals government’s plan to completely abolish the fuel subsidy regime by June 2022.

In what seemed like a strategy to avoid the expected public dissatisfaction and disapproval, the Minister of Finance, Budget, and National Planning, Zainab Ahmed, while announcing the plan, added that the government plans to pay a monthly N5,000 transport grant to about 40 million poor Nigerians. This, she says is to mitigate the negative effects of the policy.

By implication, this means that the government plans to replace her annual subsidy payment of N1.8trn with N2.4trn. If subsidy removal is an economic necessity as has been argued by government, then the N5,000 transport allowance appears illogical and unwise. How logical is the intention to cut cost through the removal of N150 billion monthly in subsidy payments, and then replace it with N200 billion monthly payment?

Even though the Finance Minister has said that the proposed palliative will only be implemented for six months, there are still several questions begging for answers. Who are the poorest and vulnerable in Nigeria and what would be the yardstick to determine this demography? What difference will a monthly allowance of N5000 make on any Nigerian, given the incessant inflation and price hike?

Given that the 2022 budget estimates reads a deficit of about N6.25trn to be financed by new borrowings, privatisation proceeds and draw down on loans secured for specific projects. Why should a plan to reduce cost and shore up revenue for government still incur much more funds than those voted for crucial projects like education and Infrastructure? The total budget on infrastructure comes up to about N1.45trn, while education is just about 1.29trn and Social Development as well as Poverty Eradication has N863 billion of the total amount.

Rather than monthly giveaways of N5000 with the likelihood of no significant impact, the government should divert the gains from subsidy removal to crucial developmental projects.

The current situation of the Nigerian economy points to the fact that retaining petrol subsidies is hardly sustainable and its removal would further stiffen the livelihood of citizens. This development thus calls for responsible, accountable, and creative governance.