By Michael Chibuzo
Following the removal of fuel subsidy by President Bola Ahmed Tinubu on Day 1 of his presidency, the pump price of PMS was adjusted to reflect market realities. This naturally brought about increase in cost of transportation and commodities such as food and household items. With no commensurate increase in their incomes, the worst hit by this increase in cost of living are the very low income earners who are already below the poverty line.
It was therefore necessary to roll out palliative measures to cushion the effect of the fuel subsidy removal on the most vulnerable segment of the society. President Muhammadu Buhari few days to the end of his administration sent a letter to the National Assembly requesting approval for an $800 million loan from the World Bank for the National Social Safety programme. The loan was meant to fund conditional cash transfers to millions of people in the National Social Register as a way to cushion the effects of the anticipated removal of fuel subsidy.
The lawmakers could not conclude action on the request before the expiration of the 9th National Assembly hence the request to the 10th National Assembly by President Bola Tinubu for approval to get the World Bank loan especially now that fuel subsidy is officially gone. The Senate and House of Representatives have approved the loan. The President also requested both Chambers of the National Assembly to amend the Supplementary Appropriation Act, 2022. On this 2022 Supplementary Appropriation Act amendment, a little explanation is need to address some confusion and concerns raised by people and some CSOs on why 2022 Supplementary budget is still operational well into the second half of 2023.
President Buhari in December 2022 had signed the Supplementary Appropriation Bill 2022 into law. A breakdown in the original Supplementary Appropriation Act signed by Buhari shows that the Ministry of Agriculture was to get N69 billion, Ministry of Water Resources, N15.5 billion, FCT, N30 billion and Ministry of Works and Housing, N704 billion. The 9th National Assembly in March 2023 in an emergency session in March extended the validity period of the N819 billion 2022 Supplementary Appropriation Act till June 30th, 2023. On May 24th, 2023 a Bill to further amend the 2022 Supplementary Appropriation Act to extend the implementation from June 30th to December 31st 2023 was read and eventually passed into law.
It is this amended 2022 Supplementary Appropriation Act, which is still valid till December 31, 2023 that President Bola Tinubu wrote to the NASS to further amend. The amended Supplementary Appropriation Act now provides N500 billion for palliatives and other capital expenditures to cushion the effect of the recent subsidy removal policy; N185 billion to the Ministry of Works and Housing; N19.2 billion to the Federal Ministry of Agriculture to ameliorate the massive destruction to farmlands across the country during the severe flooding experienced last year; N35 billion to the National Judicial Council; N10 billion to the FCTA for critical projects; and N70 billion to the National Assembly.
Now, we are back to the palliatives. From the foregoing it appears we have two sets of provisions for post-subsidy palliatives – the $800 million World Bank loan and the N500 billion allocation from the Supplementary budget. The World Bank loan is the fund meant for sharing to 12 million vulnerable Nigerians and households with the President saying each beneficiary will receive a monthly payment of N8,000 for the next six months. The former Minister of Finance had earlier announced in April 2023 that 10 million households or beneficiaries in the National Social Safety Register will receive N5,000 monthly for six months as part of the post-subsidy removal palliatives for the most vulnerable across the country.
It is the same loan that we are still talking about, however the number of beneficiaries have risen to 12 million while the amount has equally increased from N5,000 to N8,000 with the duration remaining constant. This is obviously due to gains in Naira terms following the unification of the exchange rate. One dollar now exchanges in the official market for around 776 Naira up from the 474 Naira to the dollar rate when the former Finance Minister made her projections in April. As for the N500 billion component, the President has not announced how it would be spent. It is therefore necessary to separate these two components to avoid confusion and misrepresentation of the true situation.
Many have questioned the rationale behind the sharing of N8,000 to 12 million vulnerable people on the National Social Register as a means to cushion the effect of fuel subsidy removal, with some suggesting that the loan be used instead to subsidise mass transits, build roads, invest in power etc. Others such as NLC, TUC and other labour unions kicked against the N8,000 palliative, other critics outrightly described N8,000 as insulting to Nigerians. I totally understand their positions and criticisms and after carefully looking at the issues I would like to respond to some of these reservations.
The NLC, TUC and few other Labour Unions by their statement kicking against the N8,000 palliatives are actually mistaking the $800 million loan meant for the National Social Safety programme for the palliatives the President requested N500 billion for from the 2022 Supplementary Appropriation Act. Like I pointed out, this disbursement to 12 million poor people was planned by the last administration and negotiations for the loan were commenced and concluded with the World Bank. The approval of this $800 million facility by the World Bank was hinged on the understanding that it would be used to fund the National Social Safety programme where vulnerable people in the National Social Register will get direct cash payments. You cannot divert these funds for other purposes unless you decide to renegotiate the terms afresh.
Secondly, as paltry as N8,000 may seem to most people, the sum can actually relieve a lot of pressure for a lot of beneficiaries that are very very poor. It is therefore not a waste if the Social Register is ascertained to contain the data of truly highly vulnerable people. Anyone who feels N8,000 cash grant is nothing, certainly is not in the category of those the funds are meant for. What I will strongly advocate for is that the integrity of the National Social Register be put to the strictest test and scrutiny to avoid siphoning of funds. The suggestion of investing the money in subsidising mass transit as enticing as it is, may be less practical. The impact of the fuel subsidy removal is not just hike in transport fares but in cost of food and other household commodities. So, channelling the money to only mass transits will mostly cater for transportation of those in the urban centres many of whom may not be highly vulnerable.
Also, the world Bank loan disbursement and the N500 yet to be specified palliatives are not the only measures the federal government is putting in place. The President has stated that considerable increase in the minimum wage will happen and the framework is being worked out together with the organised Labour. The federal government cannot unilaterally increase national minimum wage in the country, there has to be a tripartite consultation and agreement. Wage increase is a more long term palliative because all you need to balance up increase in cost of living is to raise the income of the people. Wage increase is one way of doing that.
Increasing productivity is another way of raising people’s income, which the federal government has already taken critical steps to show its seriousness in that regard. For example, the President on Thursday declared a state of emergency in agriculture and outlined various measures to boost food production and reduce prices of food. This has huge potentials to lower the cost of living and equally raise the national income and are therefore key long term measures to cushion the impacts of the fuel subsidy removal.
It is also necessary to point out that cushioning the effects of the removal of fuel subsidy is not the sole responsibility of the federal government. States and local governments have the capacity to put in place measures at their own levels to help the people. All eyes should therefore not be fixated on the federal government to wave a magic wand. The only magic wand to bring overnight relief is introducing other forms of subsidies, which is a no go area for Nigeria at the moment.