At last it looks like the federal government is now set to take the gauntlet and remove the controversial fuel subsidy.
Just last week the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed told reporters that the federal government has secured an $800 million facility from the World Bank to provide post-petroleum subsidy palliatives for over N50 million Nigerians in 10 million households.
The issue of removal of petroleum subsidy or not has been a contentious one over the years with claims in some quarters that the whole idea of subsidy was a scam while others, especially the organised labour insists that government must not tamper with the subsidy.
Labour however gave a condition that before subsidy is removed, the government should fix the nation’s refineries and make them functional to ensure that Nigeria does not only depend on importation of petroleum products.
The present administration in 2015 campaigned that it would remove the subsidy if it was elected into power. Eight years down the line, the government has not had the nerve to remove the subsidy and the country has been paying heavily to subsidise petroleum products.
A recent Nigerian Extractive Industry Transparency Initiative (NEITI) report submitted to the House of Representatives ad hoc committee investigating the fuel subsidy regime from 2013 to 2022, showed that fuel subsidy has jumped from N316.7 billion in 2015 to well over N2.565tn in 2023. For the 2023 budget, this administration provided N3.6 trillion for subsidy from January to June when it is expected to be removed.
Nigeria has struggled with rising budget deficits driven mainly by rising fuel subsidy figures. President Muhammadu while presenting the 2023 budget to the National Assemble last year, said that the subsidy regime must cease for the country’s economy to blossom. He warned that the subsidy regime must stop to save the nation’s economy from avoidable bleedings on yearly basis.
The government was however clever to fix the terminal date of the subsidy regime for June 2023, a month after it has handed over to another administration. This decision has been described in some quarters as shifting responsibility since it did not have the courage to remove subsidy in eight years, why imposing it on another government?
The announcement from the Minister of Finance, Budget and National Planning, appears to be a confirmation that the government was prepared to follow through with the removal of fuel subsidy although it will still have to contend with organised labour which still stands it’s ground that it is not yet time for subsidy removal.
Addressing State House correspondents on Wednesday last week, after the Federal Executive Council meeting at the Aso Rock Villa, Abuja, Ahmed, said the $800m forms the first tranche of palliatives ready to be disbursed to 10 million households in form of cash.
She said, “There’s a provision (of the Petroleum Industry Act) that says 18 months after the effectiveness of the PIA that all petroleum products must be deregulated. That 18 months takes us to June 2023.
“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’re 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 are equivalent to about 50 million Nigerians.”
The minister confirmed that the federal government has already secured the $800m for the scale-up of the National Social Investment Programme at the World Bank and it is ready for disbursement.
She however noted that the federal government must raise more resources to enable it to do more than cash transfers.
According to her, wide-ranging negotiations are underway to deploy non-cash palliatives such as a “mass transit” system for workers’ daily commute.
“So there are several things that we’re still planning and working on, some we can start executing quickly, some are more medium-term implementation,” she said.
But the question on the lips of Nigerians is why take care of only 50 million Nigerians when the National Bureau of Statistics ( NBS), last year reported that Nigeria has over 133 million multidimensionally poor people.
Efforts to speak with the Minister of State for Budget and National Planning, Prince Clem Agba failed as he did not pick calls put across to him nor respond to a text message sent to him.
One of the aides of the Minister of Humanitarian Affairs, Disaster Management and Social Development, who pleaded anonymity said the Finance Minister has just made the announcement, that she was not sure the Humanitarian minister has been briefed on the modalities for the disbursement of the palliative funds or who should get what.
Reacting to the information from the federal government on its readiness to begin the disbursement of the post-petroleum subsidy palliatives, a human rights activist, Comrade Emmanuel Onwubiko described the decision as an unprecedented crime against the national economy for the government of Muhammadu Buhari that has less than a month to go to be borrowing money and heaping the burden of repayment on the coming administration.
He said it is wrong for an outgoing government to collect credit from the multilateral body, start disbursement, then shift implementation to the next administration.
Comrade Onwubiko who is also the Executive Director, Human Rights Writers Association of Niggeria (HURIWA), said there is need to first and foremost initiate wide-ranging forensic financial investigation of the administration of subsidy under the administration of President Muhammadu Buhari.
In his own reaction, founder/CEO of the Centre for the Promotion of Private Enterprise ( CPPE) Dr. Muda Yusuf said this administration has no business disbursing any funds in form of palliatives for the removal of fuel subsidy.
According to him, “The whole idea of palliatives should be left for the new administration to handle. If we say it is the new administration that will remove the subsidy, let them come on board with their own framework for removing the subsidy.”
He said this is because there is no way the new administration will come on May 29 and announce subsidy removal, “it is not possible,” he said, adding, “They have to sit down, look at the numbers for the palliatives and all of that, and also engage as a new administration. This is not something you do in a week or two, you need some time to be able to do them and lay down how you want to transit from the current policy regime that you met.”
Dr. Yusuf said the new administration cannot use the current social investment framework because there has been a lot of credibility problems around the social investment programme. “Even the register they are talking about, there is a whole lot of question marks around the register, how transparent is the register, what is the spread, is it equitable, how did they come about the so called households? These are issues to be sorted out.
“They should just allow the new administration to handle the matter. I hear they have already got the money, I don’t think it is proper for them to disburse it, how many more weeks do they have, why the rush?”
For Professor Jonathan Aremu an economist, it is not about taking a loan or giving money to people, the question according to him is, how is the money given to the people improving the productivity in the economy?
He said “Borrowing is not wrong, but it becomes wrong when the reason for the borrowing is not productive. So the question now is to what extent will the borrowing from the World Bank be productive?. “How will this money you are disbursing make the beneficiaries more productive in the economy? Will it not increase the National debt. If you cannot determine the level of productivity it will bring to the economy or the welfare implications, then there is a question mark there.
“I believe the government has all the parameters that is why they are going ahead with it, I don’t have all that. I don’t also have any problem with when it is starting or who is starting it, after all, government is a continium, what matters to me is what will be the effect on the economy, will it not increase the National debt, will it improve the productivity level?