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29.11.2021 Featured ANALYSIS: Can FG Pay Poor Nigerians N5,000 Monthly After Removing Petrol Subsidy?

Published 29th Nov, 2021

By Daniel Ojukwu

Almost every Nigerian news platform has, over the past week, reported the inevitable rise in petrol price, following the federal government’s decision to withdraw subsidy in 2022.

Zainab Ahmed, Minister of Finance, Budget and National Planning, had said the country would remove subsidy in 2022 and replace it with a monthly N5,000 transportation grant to 30 to 40 million poor Nigerians.

At the World Bank Nigeria Development Update (NDU) on Tuesday, she said the country was looking to eliminate fuel subsidy and implement measures to cushion the effect on the poorest 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 to 40 million deserving Nigerians,” said Ahmed.

READ ALSO: Nigerians to Battle With High Cost of Food as Inflation Rises to 22.95%

Several questions continue to surround the news as Nigerians prepare to come to terms with possible 100 percent increase in the cost of petrol.

Meanwhile, the minister contradicted herself in her speech. Her numbers were wrong, and the statistics show her ministry is either under-prepared for the move or has a plan to trap Nigerians.

THE FACTS

Prior to promising N5,000 monthly to 40 million Nigerians (N2.4 trillion annually), Ahmed said her ministry would target cushioning the effect of the subsidy removal on “the most vulnerable at the bottom 40 percent of the population.”

This was in line with the bank’s findings that the poorest 40 percent consume less than 3 percent of the total petrol in Nigeria.

However, with Nigeria’s roughly 200 million human population, 40 percent of that number is an estimated 80 million people, meaning Ahmed’s speech was, in fact, about taking care of the poorest 15-20 percent.

Another important mention was that the total disbursement and beneficiaries would depend on the resources available after the subsidy removal.

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In 2019, the federal government submitted a budget containing N305 billion earmarked for subsidy. At the time, Ahmed said the government projected a N900 billion subsidy cost for 2022, but in the 2022 budget already submitted to the national assembly, subsidy stands at slightly over N1 trillion, significantly less than the N2.4 trillion the government would need to pay N40 million Nigerians N5,000 twelve times in a year.

THE NUMBER GAME

The federal government reserves the right to amend the 2022 budget or submit a supplementary one. Currently, the petroleum ministry has a N33.218 billion budget, while the Ministry of Finance, Budget and National Planning has a N6.4 trillion budget.

Paying 80 million Nigerians (the actual 40 percent of the population) N5,000 monthly each would cost the federal government N4.8 trillion annually. This means that over 50 percent of the two ministries’ budget would be used to pay transport subsidy to poor Nigerians.

However, this may be impossible as it would prevent the ministries from meeting several obligations, including the payment of salaries.

NLC, TUC REACT

Ayuba Wabba, president of the Nigerian Labour Congress (NLC), has been vocal about the union’s rejection of a hike in fuel price which would come with the subsidy removal.

He said it has “cast in very bad light our utmost good faith with regards to government explanations that it lacks funds to continue bankrolling the so-called subsidy payments as such would sooner than later cripple the entire economy, throw the country into severe economic crisis and cause loss of jobs in millions.”

He said this in his statement titled ‘The NLC condemns and Rejects the Recent Increase in the Price of Petrol’.

READ ALSO: FACT CHECK: Is Nigeria World Leader in Media Freedom as Lai Mohammed Claimed?

Wabba’s reaction came as Mele Kyari, Group Managing Director of the Nigerian National Petroleum Company (NNPC), said fuel price would jump to N340 per litre in 2022 from its N167 per litre pump price.

Musa Lawal, Secretary-General of the Trade Union Congress (TUC), told FIJ that government’s decision to remove subsidy would not stand.

“We think the minister is joking for now, because we have an ongoing stakeholder meeting,” he said. “The last meeting was in April, so they cannot increase fuel price without bringing that meeting to the table. So, to us, they are jokers.

“We have been having this meeting since last year, about the fuel price and other things. They cannot now jettison that meeting and declare a new price.”

Kyari said if the government decided to go ahead with its plan to remove subsidy, the TUC and NLC might embark on industrial action.

“They are only calling for labour to mobilise. We will not take it easy,” he said.

COST OF TRANSPORTATION WILL INCREASE

FIJ spoke with drivers in Lagos for their reactions on how a potential price hike would affect transportation. Bolaji Awe said if the price increased, all drivers would have to increase the cost of transportation.

If dem increase fuel, we too go put money on top wetin we de carry na. If you collect N100 from 14 people, you go still buy fuel. If we de buy N1,500 fuel before, we go de buy N3,000 now. Who go pay am?” He asked.

His sentiments were shared by Paul Olagunju, who felt the government should keep the subsidy and make efforts to reduce the fuel price even more.

“This government is just increasing everything,” he told FIJ. “Rice is expensive; house is expensive; dollar is expensive. Now, they want to increase fuel [price].

“Look at it. How will a country that has oil be paying double to buy fuel? Go to Delta and Bayelsa; oil is wasting. We have refineries, we cannot produce fuel, but we will sell the oil and buy for double.”

Published 29th Nov, 2021

By Daniel Ojukwu

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