As the federal govt plans towards fuel subsidy removal by mid-2022, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has announced that the Federal Government plans to pay N5,000 monthly stipend to between 30-40 million vulnerable Nigerians to ameliorate the anticipated scorching effect on them and the economy in general.
While stating this in Abuja at a conference tagged Nigeria Development Update (NDU), hefty subsidy payouts remain injurious to the development of the Nigerian economy and Nigerians.
She said trillions of Naira used for subsidy payments could now go into more strategic economic development programmes. She expressed optimism that the recent developments in the oil sector, such as the Petroleum Industry Act (PIA) 2021 and the full reactivation of the four public refineries in the country, and the completion and coming on stream of the three private refineries under construction in 2022, would significantly boost contribution from the sector to our economic growth efforts.
In the same vein, the World Bank advised the Federal Government to remove fuel subsidy, reduce its indebtedness to the Central Bank of Nigeria (CBN) and increase tax on certain items as a way of shoring up the fortune of the economy.
The bank also raised its 2021 and 2022 economic growth forecasts for Nigeria to 2.7 per cent and 2.8 per cent respectively from the 1.8 per cent and 2.1 per cent growth projection it made in June.
These are contained in the November 2021 Nigeria Development Update (NDU) released by the bank in Abuja on Tuesday. According to the World Bank, the poor, for whom the subsidy was instituted, do not benefit from it. so, the government needs to dump it.
The World Bank report stated that, “Nigeria is the only country in the world with a universal price subsidy that applies exclusively to PMS. Universal price subsidies for liquid fuels are almost always regressive, as the rich consume far more fuel than the poor.”
It adds, “PMS subsidies are especially regressive because PMS is used primarily in light- and medium-duty motor vehicles, which are rarely owned by the poor. Since raising PMS prices tends to have minimal adverse effects on poor households, governments worldwide have typically prioritised the elimination PMS subsidies over those that apply to other fuels.
“However, Nigeria has done the opposite—eliminating all subsidies for liquid fuels other than PMS. Moreover, the Nigerian PMS subsidy is exceptionally generous, and in October 2021 the PMS pump price was the seventh-lowest among 168 economies surveyed at just ¦ 495 per liter.”