Subsidy Removal: FG transport palliative scheme may end-up as a barren exercise

Subsidy Removal:  FG transport palliative scheme may end-up a barren exercise

 Perhaps, the best  thing  that can be  said  about  the Federal  Government  planned  removal  of petroleum  subsidy and its replacement  with  transport palliatives   is that it will end up as a barren  exercise.  Its  objective  will never  be realised  as it will on the  contrary  be another  way of compensating  the beneficiaries  of the corruption  infested  petroleum  subsidy scheme.

It is replica of the palliative scheme  introduced by Ibrahim Babangida Administration to cushion the harsh effect of Structural Adjustment Programme (SAP) in 1986. Instead  of achieving objective  it became  a source  self-enrichment  by government  officials  entrusted  with the responsibility  of making  living  meaningful  for Nigerians. 

Last week, the Federal Government was reported to have announced plans to spend N2.4trillion under a transport palliative scheme to cushion the effect of the planned removal of oil subsidy proposed for next year.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, who made this announcement at the launch of the World Bank Nigeria Development Update in Abuja said the subsidy was not benefiting the poor as she re-echoed the government’s determination to remove both subsidies on petrol and electricity next year.

She said that the petrol price would be jerk up before June 2022, in line with the Petroleum Industry Act (PIA), which stipulates the removal of petrol subsidy within six months of the Act’s implementation. The PIA was signed by President Muhammadu Buhari on August 16, 2021.

The Group Managing Director of NNPC Ltd, Malam Mele Kyari, who was also at the event said petrol price, may rise to N340/litre upon the removal of the subsidy.  To cushion the effect, the Finance Minister said, the Federal Government would give the poorest Nigerians a transportation grant of N5, 000 every month. She estimated that about 30 to 40 million Nigerians, who are the poorest in the country, would have access to the grant. 

 This amount, according to a computation by Daily Trust, is over N600 billion higher than what the government spends to keep the price band of the Premium Motor Spirit (MPS) otherwise called petrol, at between N162 and N165 per litre. The government’s annual subsidy spending stands at N1.8trillion.

Analysis of the proposal shows that at N5, 000 for 40million Nigerians, the government will spend N200billion every month and that will amount to N2.4trillion within 12 months of the scheme.

Surprisingly, the scheme is being arranged despite a lapse in the national data to determine the poorest category of Nigerians, with experts doubting the government’s claim for a dispassionate social register.

 In March this year, the Permanent Secretary, Ministry of Humanitarian Affairs, Disaster Management and Social Development, Alhaji Bashir Alkali,  was reported to have said  that only 30million Nigerians are captured in the National Social Register (NSR) from 36 states and the Federal Capital Territory (FCT) comprising seven million poor and vulnerable households.

The Minister of Finance on Wednesday said the government was yet to determine the modalities for administering the palliative. 

Clarifying the policy statement after the Federal Executive Council (FEC) meeting on Wednesday, the finance minister said the N5, 000 monthly transport grant planned for poor Nigerians would last for six to 12 months.

“How long will this intervention last? Okay, six months to 12 months. And we’re saying the committee is still working. So, we’ll know on Monday, how long, how much and then the procedure on a state-by-state basis,” she said.

The minister defended the need for the support, saying: “Government is providing the support and support is to augment what the families already have. We wish we could do more. But we’re also limited in terms of the maximum of what the government can afford. But there is nothing stopping the states from adding more than the N5, 000 that is going to come from the federation.

“So, some states might decide to do more where they can afford it. The Federal Government right now is just under this committee, looking at N5000 per month.”

 Meanwhile, the Senate Committee on Finance on Wednesday said there was no provision for a monthly N5, 000 transport grants to 40 million poor Nigerians in the 2022 budget currently being considered by the National Assembly.

The Chairman of the committee, Senator Adeola Olamilekan Solomon, stated this while speaking with newsmen after presenting his panel’s report on the 2022 budget to the Appropriations Committee.

He said before the executive could embark on such intervention, a proposal to that effect must be sent to the National Assembly for approval just as he raised questions about the criteria to select the beneficiaries of the proposed transport subsidy. 

  The Organised Labour, which reacted to the announcement on Wednesday, described proposed monthly transport allowance of N5, 000 as“bait”.

President of the Nigeria Labour Congress (NLC), Ayuba Wabba, in a statement said that the Nigerian workers reject the position of the Federal Government on subsidy removal in totality.

“The response of the Nigeria Labour Congress is that what we are hearing is the conversation of the Federal Government with neo-liberal international monetary institutions.

“The conversation between the government and the people of Nigeria especially workers under the auspices of the trade union movement on the matter of fuel subsidy was adjourned sine die so many months ago.

“Given the nationwide panic that has trailed the disclosure of the monologue within the corridors of government and foreign interests, the Nigeria Labour Congress wishes to posit that it continues to maintain its rejection of deregulation based on import driven model,” he said.

Meanwhile, varied reactions trailed the pronouncement with some experts saying the action could trigger more financial fraud among officials.  David Akwu, a lecturer at the University of Nigeria Nsukka, said that it doesn’t make sense to share N5, 000 to the so-called 40million vulnerable Nigerians, insisting it will only breed corruption without any impact.

He said it is difficult to get the real vulnerable Nigerians because the politicians will adulterate the process.

He added that, even if it were possible to get the data, it makes no economic sense as what the government would be spending annually on the stipends is just as good as the subsidy which could deprive the country of funds for the needed infrastructure.

Akwu, however, advised Nigerians to brace up for the hardship that would follow. “Since this increase is short term, how do you respond to the short-term shocks? This question calls for a lifestyle change.

“That is the only thing you can do to respond to short term shocks associated with the subsidy removal.”

In his reaction, a former PDP Chairman in Lagos, Capt. Tunji Shele, said the fuel subsidy removal is long overdue but urged the government to be careful in the process.

He recalled how former President Goodluck Jonathan attempted to remove the subsidy in 2012/2013 but was opposed by the political class; noting that if the full deregulation was done then, there would be no corruption in the petroleum industry as it is now.

Capt. Shele, however, rejected the N5, 000 transport allowance proposal for 40m poor Nigerians, saying the money should instead be invested in infrastructure.

Shele said the move might be another way for government officials to mismanage the money.

“They should repair the roads, provide basic transport facilities, good buses, train services and good waterway transportation,” Shele noted.

On her part, restaurant owner, Ms Tare Youdeowei, said in the usual Nigerian style, she is sure that she won’t qualify for the stipend, just the way she didn’t qualify for the ‘mysterious’ N5,000 COVID-19 stipends and the ‘magical’ call credit government claimed it paid.

A caterer in Surulere, Lagos, Mrs Bunmi Oreaje-Ogbori also said that giving transport stipends to poor Nigerians sounds ridiculous when Nigerians are still struggling to survive the persisting poverty.

“Government will need to get their priorities right if they are sincere about solving problems,” she stressed.

A trader, Mrs Kogi Vivian described the initiative as an avenue to embezzle public funds. “I have never and have personally not known anyone who had or had benefited from any government intervention. “I see it as another opportunity to embezzle as I do not see it getting to the right people. In the absence of accountability, data and transparency, I see it as dead on arrival,” she said.

The subsidy is currently being paid by the Nigerian National Petroleum Company (NNPC) Limited as it is the sole importer of petrol.

While it tags the monthly petrol subsidy as ‘Under-recovery of PMS/Value shortfall’, it deducts the sum upfront from the monthly remittances of oil proceeds it makes to the Federation Accounts.

 Figures on the payment of subsidy by NNPC are scanty in previous years, but according to a report released in October 2021 by NNPC it has spent N864.074billion from February to September, this year.

At a 12-month rate, the company would have spent N1.8trillion in one year to subsidise petrol and keep it at the current N162 to N165/litre.

In 2012, the President Goodluck Jonathan’s administration introduced a partial removal of fuel subsidy.  In place of the subsidy, the government initiated the Subsidy Reinvestment and Empowerment Programme known as ‘SURE-P’ which it said was about re-investing the Federal Government’s savings from fuel subsidy removal on critical infrastructure projects and social safety net programmes.

The programme was said to have gulped N453.8billion between 2012 and 2013 under the watch of pioneer Chairman, Dr. Christopher Kolade who left in September 2013 and handed over to General Martin Luther Agwai, later replaced by Mr Ishaya Dare Akau.

Documents from the office of the then Senior Special Assistant to President on Public Affairs, Dr. Doyin Okupe, indicated that the government spent N453.8billion between 2012 and 2013. While the federal government got 41 per cent of the fund, the states and the local governments got 59 per cent.

In 2012, the government used N38.44bn and another N40.83bn in 2013 on Social Safety Nets such as maternal and child health, mass transit, community services and graduate internship schemes. Another N21.70billion and N42.27billion were used in 2012 and 2013 on the Niger Delta East-West Road; while N197billion went for Benin-Ore Road, Kano-Maiduguri dual carriageway, Enugu-Port Harcourt, Abuja-Abaji-Lokoja and Apapa-Oshodi Expressway.

The Lagos-Kano, Port Harcourt-Maiduguri rail system gulped N 110.78billion, just as the government spent N2.5billion on the projects’ monitoring within the two years.

Labour has served notice of industrial action should subsidy be removed. Students Union has also added its voice of opposition and readiness for protests. But to continue to carry the burden of subsidy payments against the background of the fragile and precarious state of the Nigerian economy is no longer a sustainable option.

The local Refineries are undergoing turnaround maintenance as we discuss and the earliest relief could be expected from the refineries is in two years’ time! The Dangote Refinery is projected to come on stream in the first quarter of next year. But from the look of things that is not a realistic expectation.

Reacting  to the Federal Government  move ,Dr. Boniface Chizea,  an economist and consultant  , said “it is also a fallacy to claim that subsidy removal will not hurt the poor. Subsidy removal will stoke such massive inflationary pressure that what we are witnessing today would be a far cry.

“And the misery index in the land already elevated because of a high cost environment due to quantitative easing and the sharp depreciation in the exchange rate will worsen sharply that we risk civil insurrection.

“We are therefore most certainly in a cul-de-sac and there is the urgent need to think outside the box as the proposal on ground presents a scary scenario with potential unpalatable circumstances. What of exporting our crude to neighbouring countries with surplus refinery capacity to be refined and re-exported back to us. Let’s search for more options outside the current arrangements for the procurement of refined products as the experience with deregulated diesel and gas markets leave much to be desired.”

 Another important consideration will be how to locate the political will to push this proposal through as the backlash will badly hurt the party that dares. So, the chicken of not taking prompt decisions when they were opportune has now come to roost.