With the procurement of the $800 million grant from the World Bank, the Federal Government appears to have secured an anchorage to market the fuel subsidy removal by June 2023. The loan (about N368.2 billion or N596 billion at black market rate) from the Washington-based lender is to provide post-petroleum subsidy palliatives for 50 million Nigerians ahead of the government’s planned fuel subsidy removal in June this year.

 
Upbeat was Minister of Finance, Budget and National Planning, Zainab Ahmed, at the weekly Federal Executive Council Meeting, announcing the loan procurement. “The first tranche of funding ($800 million) from the Washington-based lender will enable us to give cash transfers to the most vulnerable in our society that have now been registered in a national social register,” the minister said, adding that “the palliatives will be targeting 50 million vulnerable Nigerians or 10 million household.”
  
She also said that engagements were ongoing with the newly established Presidential Transition Council (PTC) and the incoming administration to drive the palliative programme, which includes the need for buses among various considerations.
  
While governance is a continuum and government exists mainly for the welfare and security of the citizenry, President Muhammadu Buhari-led administration should be reminded that since May 29, 2015, more than N2 trillion has been spent on Social Investment Programme (SIP), yet, an estimated 133 million Nigerians, according to statistics, have sunk into multidimensional poverty, just as another 24.2 million people face acute food insecurity.
  
Thus, economists and fiscal policy experts have justifiably questioned the effectiveness of the new $800 million loan in reducing the harsh effect of the planned subsidy removal. They contend that the borrowed $800 million, if utilised as planned by the Finance Ministry, would neither be enough to get the poor out of poverty nor cushion the impact of petrol deregulation symbolised by the subsidy removal.
   
Already, the government is expected to spend $53 million on hiring staffers, office administration, committee overheads and other logistics such as training and workshops out of the $800 million secured from the World Bank to mitigate the effects of petrol subsidy removal on vulnerable Nigerians.
  
Nigeria will, by the agreement, pay 0.5 per cent as a yearly maximum commitment charge rate on un-withdrawn financing balance with the Association while 0.75 per cent share will be paid as a service charge on all withdrawn credit balances yearly. The concessional facility attracts an interest of 1.25 per cent yearly on the withdrawn credit balance on the loan valued with January 15 and July 15 serving as payment dates each year.
  
Indeed, experience of Nigerians with palliatives managed by the government officials is unpalatable. Crises and national show of shame that rocked the disbursement of the COVID-19 palliatives are still fresh in the memory of Nigerians.  
 
The verdict of the civic advocacy group, BudgIT on the COVID-19 palliative saga was damning. In its report of April 21, 2021, the organisation wrote: “Per our finding, the continuous mismanagement of palliatives items and funds earmarked for the COVID-19 response has created a wider gap between the rich and the poor where the vulnerable and marginalised are denied access to the palliative items that rightly belong to them.”
  
Similar verdict of failure is attached to the conditional cash transfer programme, actively promoted during the 2019 general elections by Vice President Yemi Osinbajo, as the impact of the programme to meaningfully move Nigerians living in poverty to a better living could not be measured realistically till date.
  
Of course, fuel subsidy removal is long due. But what economists find inexcusable is obtaining a loan ($800 million) to finance consumption. Taking a loan to fund consumption is not only bad economics, it is even much worse if you are funding the refining of a product you produce as the government is doing with crude oil.
  
With regards to the current loan, the projection is that Nigeria’s debt stock of $103.1billion will spike further. In addition, the sinking fund for refinancing and servicing of the debt stock will spike from 29 per cent scheduled in 2023 Appropriation Act to 43.8 per cent for 2024 financial year.
  
Also, it is projected that the price of petrol may rise by as much as 401 per cent if marketers are importing and 297 per cent if the Dangote refinery starts functioning before June 2023.
 
A recent Nigerian Extractive Industry Transparency Initiative (NEITI) report submitted to the House of Representatives ad hoc committee investigating the fuel subsidy regime from 2013 to 2022, showed that fuel subsidy has jumped from N316.7 billion in 2015 to well over N2.565 trillion in 2023.
 
For the 2023 budget, the Buhari administration provided N3.6 trillion for subsidy from January to June when it is expected to be removed. But Nigeria has struggled with rising budget deficits driven mainly by rising fuel subsidy figures. President Buhari, while presenting the 2023 budget to the National Assembly last year, said that the subsidy regime must cease for the country’s economy to blossom. He warned that the subsidy regime must stop to save the nation’s economy from avoidable bleedings on a yearly basis. 
 
The government was, however, clever to fix the terminal date of the subsidy regime for June 2023, a month after it would have handed over to another administration. It is in this context that the outgoing administration is advised to halt the process of disbursing any fund as palliatives for the removal of fuel subsidy. That responsibility is better left for the incoming government scheduled to be sworn in on May 29, 2023.
   
The argument of founder/CEO of the Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf is germane. He said, “The whole idea of palliatives should be left for the new administration to handle. If we say it is the new administration that will remove the subsidy, let them come on board with their own framework for removing the subsidy.
 
“There is no way the new administration will come on May 29 and announce subsidy removal. It is not possible. They have to sit down, look at the numbers for the palliatives and all of that, and also engage as a new administration. This is not something you do in a week or two, you need some time to be able to do them and lay down how you want to transit from the current policy regime that you met.
 
“They should just allow the new administration to handle the matter. I hear they have already got the money, I don’t think it is proper for them to disburse it. How many more weeks do they have, why the rush?”
  
On a final note, it is important for the government to provide adequate information on the domestic refinery capacity. Billions of naira have been expended on the turnaround maintenance of the refineries with little or no result. When is Dangote Refinery coming on board? How true is the claim that Nigeria is subsidising fuel consumption in other neighbouring countries? What is the daily consumption rate of Nigerians? Is there any possibility of a fixed rate for the dollar? Updating Nigerians on all these issues will make a realistic decision on fuel subsidy removal attainable.