The federal government of Nigeria is mulling plans to replace the controversial petrol subsidy scheme with an N5,000 monthly transportation grant to the poorest Nigerians.
According to Zainab Ahmed, minister of finance, budget and national planning, the grant will go to about 30 to 40 million Nigerians who make up the poorest population of the country which will depend on the resources available after the removal of the fuel subsidy.
“The subsidies regime in the oil sector remains unsustainable and economically disingenuous,” she said at the launch of the World Bank Nigeria Development Update (NDU) on Tuesday.
She added, “Ahead of the target date of mid-2022 for the complete elimination of fuel subsidies, we are working with our partners on measures to cushion the potential negative impact of the removal of the subsidies on the most vulnerable at the bottom 40percent of the population.”
The petrol subsidy has cost Nigeria N864 billion ($2.1 billion) in the first nine months of 2021, it said, up from N107 billion in 2020 and the highest deduction in six years, as rising oil prices increase the cost of imports.
Read also: Nigeria’s oil dependence hits record low without government effort
Fiscal pressures are mounting for Nigeria due to lower-than-expected revenues in the wake of the rising petrol subsidy costs, the World Bank said in a report, urging bold reforms to boost income.
The World Bank in the development update had said the poorest 40percent in Nigeria consume less than 3percent of the total PMS in the country, highlighting that the rich were benefiting more from the subsidies.
“We are very optimistic that the recent developments in the oil sector, such as the Petroleum Industry Act (PIA) 2021, hopefully, the full reactivation of the 4 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,” Ahmed added.
“I agree with the Report that with the expansion of social protection policies during the pandemic, the government has an opportunity to phase out subsidies such as the PMS subsidy while utilizing cash transfers to safeguard the welfare of poor and middle-class households.”
Ahmed said this move is set for June 2022, but the federal government hopes to do this before June — in line with the Petroleum Industry Act (PIA).
The World Bank revised Nigeria’s GDP projection to 2.4percent this year, from 1.8percent earlier, after the economy grew just over 4percent in the third quarter, its fourth consecutive quarterly rise, following the COVID-19-induced recession in 2020.
The World Bank said prospects for the economy have improved, but the recovery is fragile and urgent action is needed to reduce poverty arising from high inflation.
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