The Nigerian government has said it’s set to disburse $800 million it secured from the World Bank to 10 million households across the country as a palliative measure it plans to tackle the effects of fuel subsidy with.
The move was announced on Wednesday by the Minister of Finance, Budget and National Planning, Zainab Ahmed, at the State House, during the Federal Executive Council (FEC) meeting presided over by President Muhammadu Buhari.
The plan was announced amid mounting pressure by the Nigerian Labour Congress (NLC) on the federal government to create a clear-cut post-subsidy palliative measure that will help the Nigerian people to cope with the likely economic hardship that will follow the removal of the fuel subsidy.
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The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) said last month that fuel prices will go up as much as N400 per liter if the subsidy is removed.
Ahmed had last year announced that the federal government plans to totally remove the subsidy by June 2003. She said the newly-formed Presidential Transition Council has been engaged to carry the incoming administration along for the implementation.
“This is a commitment in the Petroleum Industry Act. There’s a provision that says that 18 months after the effectiveness of the PIA that all petroleum products must be deregulated, that 18 months takes us to June 2023,” the minister said.
“Also, when we were working on the 2023 medium-term expenditure framework and the appropriation act, we made that provision to enable us exit fuel subsidy by June 2023.
“We are on course, we’re having different stakeholder engagements, we’ve secured some funding from the World Bank, that is the first tranche of palliatives that will enable us give cash transfers to the most vulnerable in our society that have now been registered in a national social register.
“Today that register has a list of 10 million households. 10 million households is equivalent to about 50 million Nigerians.
“But we also have to raise more resources to enable us to do more than just the cash transfers and also in our engagements with the various stakeholders, the various kinds of tasks that we have gone beyond the requirement of just giving cash transfers. Labour, for example, might be looking for mass transit for its members.
“So, there are several things that we are still planning and working on, some we can start executing quickly, some are more medium-term implementation.”
The World Bank, the International Monetary Fund (IMF) and others, have long advocated the removal of the fuel subsidy as a way the Nigerian government could save money amid dwindling oil revenue. The Nigerian National Petroleum Company Limited (NNPCL) said it spent $10 billion on fuel subsidy in 2022 alone. The NNPCL said in February that it is paying N400 billion monthly to fund the N3.35 trillion petrol subsidy budget expected to end in June.
While the government laments the impact of the subsidy payments, which gulp significant percent of its budgets, it has been restrained by potential NLC’s nationwide strike from removing it without provisions that will cushion the resulting high cost of living.
But Ahmed said this time, the government is ready, and is working to end the fuel subsidy regime in June. She said consultation is ongoing with stakeholders on how to disburse the money.
“$800 million for the scale up of the national social investment programme (NSIP) at the World Bank and it’s secured, it’s ready for this disbursement.
“We are currently engaging with all the stakeholders. We know that various plans are being considered, including the need for buses by the Labour, amongst several other palliative measures,” she said.
However, concerns are being raised about transparency and how long the disbursement of the fund will run. The minister had last year, decried that the federal government was borrowing to pay for fuel subsidy, calling it “double tragedy.” Experts believe that if the palliative plan isn’t well executed, the government may end up borrowing more to ameliorate the impact of the subsidy removal.