April 11, 2023/CSL Research
Based on news reports, the Minister of Finance, Budget, and National Planning Zainab Ahmed disclosed that the government has secured a World Bank facility worth US$800 million as the first tranche of palliatives to be disbursed through cash transfers to about 10 million households, equivalent to about 50 million Nigerians who belong to the most vulnerable category of the society as compiled in a national social register. The report also stated that discussions are on between the present administration and the incoming government on modalities for the removal of fuel subsidies by the middle of this year.
Nigeria is the only OPEC+ member without a working refinery, importing c.95% of refined petroleum products to meet its domestic consumption compared to other member countries with less than 20% dependency. The Federal Government has announced the removal of fuel subsidies in 2023 and has urged Nigerians to prepare for higher fuel prices that will follow. Though we realize how politically sensitive this discourse is, we see no option for the incoming government amidst a tight fiscal space. Undoubtedly, an attempt to revise the price to suit current realities will be strongly resisted by the populace who have been hard hit by two recessions and a pandemic in the last 7 years amid rising food and utility costs, making us believe the elimination of the subsidies will be gradual.
Though subsidies still exist, and the pump price of petrol remains fixed, the recent and persistent scarcity of the product has led to arbitrary increase in price above the government’s approved price of N185 per litre. The pump price of petrol, which was between N162 and about N170 per litre prior to last year, suddenly started moving up to c.N200 per litre when the first disruption in the petrol supply occurred in the first quarter of 2022. Since then, the product scarcity and racketeering have persisted. Oil marketers have consistently blamed the shortages and price hike on the unavailability of the product, the high cost of renting daughter vessels and the cost of trucking products to many parts of the country, particularly the far north and east.
Though the Minister was silent on the quantum of the cash transfer, US$800m for 50million Nigerians at the I&E window rate of c.N463/US$ comes to only N7,408 per individual. This will most certainly not provide the needed cushion by the time the effect of the removal reflects on the overall consumer wallet. Again, the Nigerian government has a long-standing history of poor implementation of crucial policies and projects that have to do with the masses – recalling 2020 lockdown palliative materials, most of which was hidden away and rebranded for election campaign. Also, corruption and paucity of data will most likely lead to exclusion of eligible people and inclusion of non-eligible people in the register.
