On The Removal Of PMS Subsidy And The Transport Palliative -By Abdulwahab Lukman

On Tuesday, at the launch of the World Bank Development Update in Abuja, Nigerians were greeted with one of the most contentious, though long expected in some quarters, news of the removal of fuel subsidy. In recent times, fuel subsidy removal has become a gaming tool for political maneuvers, where those in power propose its removal, citing economic unsustainability and corruption, while those in opposition often assume insincere populist stance of continual subsidy payment.

Even more complicated was the proposition, when it was announced alongside the fuel subsidy removal that a sum of ₦5000 will be given out as transportation palliative to between 30 and 40 million Nigerians monthly after the subsidy removal, to “cushion the effects of the removal”.

One might wonder, what nation introduces a policy as unfriendly as fuel subsidy removal, at a time when it is grappling to be on its feet from the shock of the COVID-19 pandemic and perverse insecurity situation in the North West which have both led to humongous inflation levels?

But then, what sensible government allows the persistence of an inefficient arrangement of subsidy payment of which, the intended outcome is thwarted and sabotaged by oil marketers, who increase their profit margins by smuggling subsidized petroleum products to neighboring countries and for which it incurs huge logistics cost?

The bitter truth remains that, the government must remove fuel subsidy. But where is the FG getting it wrong? The yearly subsidy paid by the FG is put at ₦3 trillion; if the government disburses ₦5000 to 40 million Nigerians monthly as transport palliative to “cushion the effects of the removal”, it will be spending ₦2.4 trillion in a year not to mention the accompanying huge logistics cost. That is to say, the FG will be saving ₦3 trillion to spend ₦2.4 trillion (real savings will just be ₦600 billion). This is nothing but a purblind policy.

Another major issue of concern as regards the disbursement of the transport palliative, centers on the basis on which the 40 million Nigerians will be selected, ensuring that the beneficiaries end up being the right people. In the words of a pundit, “one of the biggest problem with our social investment programmes is that we do not have a systematic methodology on how beneficiaries are selected”. The very many COVID-19 palliatives rolled out by the FG can say it all. Moreso, one does not need to be an Economist to know that the ₦5000 palliative will do nothing in cushioning the effects of the subsidy removal.

The FG should instead, utilize the subsidy fund and the expected remittance it hopes to receive from the NNPC, as a result of the Petroleum Act of 2021, which aims to bring to life the reactivation of four public refineries and the opening of three private ones, to invest in key infrastructural and capital projects that will drive other sectors, leading to sustainable economic growth. For instance, the much appreciated mega Lagos-Ibadan rail project was completed with a total cost of about $2 billion (that’s roughly ₦1 trillion) according to the Minister of Transportation, Rotimi Amaechi, in a television interview with Channels TV. This is an amount less than the proposed yearly total for the ₦5000 transport palliative (₦2.4 trillion). The purblindness of this palliative policy can just be clearly seen!

What we really need are policies, in form of key infrastructural investments such as in the transportation and power sectors, that will provide enabling environment for entrepreneural initiatives to thrive, which will consequently lead to sustainable economic growth and not yet “another talakawa policy” in the words of a veteran columnist.

Abdulwahab Lukman is a student of Economics at the Ahmadu Bello University, Zaria.(abdulwahablukman02@gmail.com).