Saturday, 9th December 2023

Tinubu’s subsidy removal and palliative dilemma

By Kehinde Olatunji
24 July 2023   |   4:03 am
The Federal Government’s afterthought on giving palliatives to douse the biting inflation and other realities of the fuel subsidy removal is getting even more controversial than the era of prodigal spending on petrol, Kehinde Olatunji reports.

President Bola Ahmed Tinubu PHOTO; Twitter

The Federal Government’s afterthought on giving palliatives to douse the biting inflation and other realities of the fuel subsidy removal is getting even more controversial than the era of prodigal spending on petrol, Kehinde Olatunji reports.

President Bola Tinubu’s U-turn on proposed N8, 000 monthly palliative for 12 million vulnerable households didn’t come as a surprise to many.

The decision triggered a backlash following the realisation that the government earmarked N500 billion to cushion the effects of the subsidy removal, while N70 billion was earmarked to support “the working conditions of National Assembly members.”

In a letter the President wrote to the House of Representatives to approve the $800 million loan request by former President Muhammadu Buhari administration for the social safety net programme, Tinubu unveiled the plan for the loan.

According to the President, the money transfer to poor households would have a multiplier effect on about 60 million individuals. For credibility, the President said the money would be transferred to the households digitally.

Tinubu’s letter reads: “Please note that the Federal Executive Council (FEC) led by President Muhammadu Buhari approved an additional loan facility to the tune of $800 million.

“This is to be secured from the World Bank for the National Social Safety Net programme. You may also wish to note that the purpose of the facility is to expand coverage of shock-responsive safety net support among the poor and vulnerable Nigerians. This will assist them in coping with basic needs.

“You may further wish to note that under the conditional cash transfer window of the programme, the Federal Government of Nigeria will transfer the sum of N8, 000 per month to 12 million poor and low-income households. This is for a period of six months with a multiplier effect on about 60 million individuals.”

However, many Nigerians have criticised the proposed monthly stipend as insignificant and described the N70 billion budgetary allocation for lawmakers as being insensitive to economic hardship many Nigerians are passing through.

While some Nigerians have maintained that the money is better invested in infrastructure as there is no dependable data system to carry out a transparent, impactful process, others fear that if the initiative is carried out, supporters and party members of the All Progressives Congress (APC) would be the major beneficiaries.

Given the outrage that followed the scheme, with many citizens criticising the plan as not sustainable, the President, in a statement on Tuesday night, signed by Special Adviser on Special Duties, Communications and Strategy, Dele Alake, said Tinubu has directed that the whole gamut of the palliative package of government be unveiled to Nigerians.

“That the N8,000 conditional cash transfer programme envisaged to bring succour to most vulnerable households be reviewed immediately. This is in deference to the views expressed by Nigerians against it.”

While commending the president for having a listening ear, some Nigerians have urged him to tell the public how he plans to change the attitude of government officials to reflect the times, starting from the presidency.

They maintained that a cost cutting wind must sweep through every nook and cranny of government, and all governments at all levels must champion the squeeze.

A columnist, Ugo Egbujo, said the public want to see the sacrifices that the government and the leaders have made to champion the austerity measures.

“So far, the government hasn’t shown any visible signs of austerity, N70 billion to NASS, N30 billion to the Judiciary, the usual long list of appointments everywhere, nothing to suggest the government is willing to take its own medicine.

“The removal of subsidy is the easy bit. The government must see and remove the log with its own eyes. Right now it’s so hypocritical. If the government doesn’t embrace manifest frugality, it might lose all moral authority to continue on this painful but necessary path.”

Speaking with The Guardian, the Executive Director of the Civil Society Legislative Advocacy Centre, Auwal Rafsanjani, said the need of Nigerians is not tokenism and meager monthly stipend, but relief through infrastructure in the transportation, electricity, food production, and health care sectors.

Auwal Musa Rafsanjani

He added that sharing of money would result in having funds that would not be accounted for, arguing that there were no frameworks on how the indigent individuals would be identified; hence, the mechanism for sharing the fund had not been put in place.

“I think what Nigerians are looking for is relief in the area of transportation facilities. Nigerians are looking for relief in the area where potential services like electricity are stable, places where they can invest in food productions, areas where they can get relief in terms of healthcare.

“There are no frameworks on how to identify the vulnerable. Also, the mechanism for sharing the money is also not in place.”

Acting National Publicity Secretary of the Youth Party, Ayodele Adio, said conditional cash transfers to the poor was a public policy intervention that was popularised by President Lula of Brazil when he came to office in 2002.

According to him, the policy in Brazil succeeded because, first, it has a clear goal of reducing hunger, breaking the generational cycle of poverty by mandating beneficiaries to keep their children in school, and driving consumption by increasing the purchasing power of poor citizens.

Adio added that the President set up an independent ministry and staffed it with non-partisan experts who have veritable skills and competencies, who will collect relevant data, by working with local councils and building a central register of beneficiaries that are traceable and verifiable.

He lamented that the current administration could not boast of having in place any of the key success factors stated above, saying that without this thoroughness and meticulousness, the exercise is bound to fail, and those funds will mostly end up in the pockets of corrupt government officials and their cronies.

“For what it’s worth, the Buhari administration spent close to N500 billion on various kinds of palliatives and yet poverty and unemployment surged. And so while I have nothing against a sensible intervention for the most vulnerable Nigerians, the plan to distribute N8,000 to 12 million households is not only poorly thought out, it is grossly inadequate to deal with the scale of the myriad of issues confronting this country.”

According to him, the best way to cushion the hardship the people are dealing with is to define clearly what the chief issues are.

“In my opinion, it is inflation – particularly food inflation, which has been triggered by the removal of petrol subsidies. Another issue is high unemployment and low wages.

“For food inflation, because households expend over 65 per cent of their income on food alone, there should be direct intervention that improves the production of food (support farmers with irrigation, fertilisers, and improved security), and reduces the cost of food transportation (by either providing mass transportation that moves food from farmlands to markets and within the city or proving energy subsidies for food transporters).”

Adio also urged the government to reduce the cost of borrowing for small businesses and set up an intervention fund that not only keeps small businesses in operation, but also one that helps them to improve productivity over time.

He said if the cost of borrowing remains high in the current harsh economic environment, more businesses will close and poverty and unemployment would worsen.

“The government needs to target job creation by supporting private sector led industrialisation efforts in the six geo-political zones. For instance, no government agency should be buying foreign vehicles when Innoson Motors has a manufacturing plant in the South East. Hence a state-led effort to expand production, distribution and export of Innoson motors can be a major driver of economic activity in the southeast with the potential of creating massive employment opportunities. The same can be done with agro-processing in the north.”

Associate Professor of Political Science, Lead City University, Ibadan, Tunde Oseni, said that the idea of the palliative itself is not bad, but experience has shown that it’s difficult to make a success of a conditional cash transfer.

He identified inflation pressure on the amount proposed and the potential of those involved in the distribution of the money to be transparent and accountable, as issues that could hinder the intentions of the policy.

“Once you remove the subsidy, you expect naturally that prices would go up, whether as a result of market forces or as a result of the need to balance things up on the part of commodity sellers, particularly in the transportation sector as well as the consumable sector.”

“The amount that is going to be given to those who need it and who must be seen to be needing it must be substantial, maybe like what an average worker receives as minimum wage, that will be a better way of giving them what in other countries is called cost of living crisis bail out.

“Maybe like N30,000 and you can do that for six month or one year, but it must be transparent. One of the ways to maintain transparency and accountability is to decentralise the process. We have 774 Local Councils; the government at that level should manage the fund.”

Oseni, however, stated that the government doesn’t need to borrow money for the bailout, saying the country could get the money for palliative for the Internal Generated Revenue (IGR).

“There is a need for fiscal discipline on the government’s part. The policy needs to be robust and comprehensive to address inflationary pressure on the amount being proposed and address the corruption in the way it will be distributed.”

National Coordinator, Education Rights Campaign (ERC), Hassan Soweto, described the idea of 8,000 palliative as ridiculous and an insult to Nigeria’s collective intelligence.

“Besides, it is not only inadequate; there is likelihood that it will end up like the COVID-19 palliatives, which were hoarded by politicians.

“There is no other way to cushion the hardship. The government should admit it has failed and reverse the policy of subsidy removal, which is causing the fuel hike.

Instead the government should go after the subsidy thieves through their immediate arrest, trial and seizure of assets. Also, all refineries should be repaired and new ones built. Finally, the oil and gas sector should be placed under public ownership and workers democratic control and management.”