As FG dodges inflation woes, Saudi, UAE pump oil billions into relief

Unlike Nigeria which is struggling to swing the current rally in oil prices in its favour, Saudi Arabia and the United Arab Emirates have announced additional billions of dollars spending on social welfare to protect low-income citizens from the impact of rising prices.

With the crude oil rally not looking to slow anytime soon, Saudi Arabia and UAE are leveraging on higher oil prices to prop up their national economies, fund their budgets, attract investments and deal with the impacts of inflation on their vulnerable citizens.

On Tuesday Saudi Arabia issued a royal decree approving the allocation of SR20bn ($5.3bn) as financial support to confront the repercussions of rising prices globally.

The financial support includes SR10.4bn ($2.7bn) to be distributed as direct cash transfers, SR2bn ($53m) given as an additional one-time salary to social insurance beneficiaries, SR8bn ($2.13bn) allocated as additional financial support to the beneficiaries of the Citizen Account Programme, and SR408m ($108.6m) given to the beneficiaries of the Small Livestock Breeders Programme.

In Abu Dhabi, President Sheikh Mohamed bin Zayed al-Nahyan also directed the restructuring of the Social Welfare Programme for low-income citizens into an integrated programme worth AED28bn ($7.6bn) instead of AED14bn.

The UAE’s expanded budget allocation, reported by state news agency WAM on Tuesday, includes increasing existing benefits and establishing new ones targeted at mitigating the impact of inflation on food prices, and rising fuel and household energy costs.

“Some of the new benefits for Emirates include financial support for university students and the unemployed who are over 45 years old,” the emirates state news agency said.

Analysts say the move by both Saudi Arabia and UAE reflects the increasingly comfortable fiscal position of both countries this year, a development that is in contrast with Nigeria, Africa’s biggest oil producer.

Unlike Saudi Arabia and UAE, Nigeria is shedding its position as Africa’s top oil producer; multinational oil companies are fleeing onshore fields, final investment decisions on oil projects which started over a decade ago have stalled, sabotage of oil infrastructure has worsened and fuel subsidy payments are eroding government revenue as never before.

“Saudi Arabia and UAE is everything Nigeria wants to be, but an inability to wean itself off petrol subsidies, coupled with a struggling oil field and policy somersaults, continues to rain on its parade,” Joe Nwakwue, former chair of Society of Petroleum Engineers (SPE) said.

Read also: Oil and Gas: ‘IOCs’ divestment from upstream assets presents opportunity not threat- NUPRC boss

The Nigerian government’s response has complicated matters.

Analysts say the subpar quality of policy making and execution, inability to read the energy landscape, an obsession with litigating the past in phantom corruption fights, and a lack of pragmatic, business-oriented approach to resolving sticky situations have denied Nigeria benefits from rising prices today and build for tomorrow.

“Nigeria should be using higher oil prices to create systems and infrastructure that will reduce the pain of rising inflation on vulnerable Nigerians,” a development economist, Festus Ogbobine told BusinessDay.

In its latest Nigeria Development Update report, titled, ‘The continuing urgency of business unusual’, the World Bank argued that the Federal Government’s response to inflation is inadequate as the country continues to suffer double-digit inflation.

“Despite the urgency, the authorities’ response over the last two years has not been adequate, and inflation has increased and fuelled poverty and food insecurity,” World Bank said.

Although the World Bank said inflation in 2022 is projected to be 15.5 percent, Nigeria’s inflation as of May this year has raced ahead at 17.71 percent, which is higher than the World Bank’s projection.

According to the lending bank, inflation is currently pushing many Nigerians into poverty and food insecurity.

The global financial institution added that the inflation shock is projected to push about 15 million more Nigerians into poverty between 2020 and 2022.

“Nigeria is like a man who is dying from dehydration despite being in the midst of a ferocious rainfall,” Ogbobine said.

Analysts say Nigeria needs to begin full implementation of its petroleum industry law, engage professionals to run the sector and execute smarter policies like full deregulation of the downstream sector to have a fighting chance of reaping the benefits of its vast resources before the world completely moves away from oil.

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