The governors of Nigeria’ s 36 states have agreed to support the federal government’ s plan to provide impoverished Nigerians with a N5, 000 transportation subsidy, claiming that if the fuel subsidy system continues, state governments will be unable to pay salaries in 2022.
Nasir El- Rufai, the Governor of Kaduna State, announced this on Tuesday in Abuja during the introduction of the World Bank’ s November 2021 Nigeria Development Update report.
El- Rufai bemoaned the exorbitant expense of fuel subsidies, which he believes is unjustifiable.
Governors Support ₦5, 000 Transport Allowance For 40million Nigerians
The Nigerian Governors’ Forum, he said, had met and resolved to support the Federal Government’ s transportation palliative scheme.
” This is why the Nigerian Governors’ Forum gathered and resolved to back the Federal Government’ s social contract, ” he explained. Withdraw the subsidy by February, and use the N250 billion per month that would have been lost between February and May to implement this conditional cash transfer, which would put money in Nigerians’ pockets and relieve not only the cost of transportation, but also the 2- 3 percent job inflation that is expected once the subsidy is removed. We can’ t go on like this. We can’ t go on like this.
” I don’ t want to speculate on what would happen when 35 of the 36 states are unable to pay civil workers’ salaries or even administer their governments. ” Due to a lack of funds, we will be unable to pay salaries. Some governments are already in arrears, and even oil- producing states are having difficulty paying salaries.
As a result, we support the plan to provide conditional cash transfers to the most vulnerable households for six to twelve months at a rate of N5, 000 per month. This is the viewpoint of the state government, and it is my responsibility to convey it. ”
FG Plans To Remove Fuel Subsidy
The Federal Government had previously announced plans to replace the contentious gasoline subsidy with a monthly transportation subsidy of N5, 000 for Nigeria’ s poorest citizens.
Zainab Ahmed, the Minister of Finance, Budget, and National Planning, stated this at the launch of the World Bank study.
According to the minister, around 30 to 40 million Nigerians will benefit from the transportation subsidies.
” The oil sector subsidy scheme is unsustainable and economically deceptive, ” she stated. There is still a lot of work to be done to eliminate fuel subsidies in a way that is consistent with the government’ s plans and also carries stakeholders and Nigerians along. The target date for the complete elimination of fuel subsidies is mid- 2022. We are working with our partners on methods to mitigate the possible negative impact of the subsidy removal on the most vulnerable at the bottom of the pyramid, which accounts for at least 40% of the population.
One of them is to establish a monthly transportation subsidy in the form of a N5, 000 cash transfer to between 30 and 40 million Nigerians. We plan to do this entirely through digital networks, with no physical currency transfers.
The minister went on to say that it would be based on a national registration of impoverished households, which the government intends to complete by the first quarter of 2022.
FG Spends ₦243 Billion On Subsidy Monthly- NNPC
Mele Kyari, the Nigerian National Petroleum Company Limited’ s Group Managing Director and Chief Executive Officer, bemoaned the high cost of fuel subsidies, claiming that the NNPC will soon have to invoice the Federal Government to cover subsidy expenditures in 2022.
” What we’ re dealing with is around N243 billion in subsidies per month, ” he remarked. This is the reality we are confronted with. In the year 2022, we will simply be unable to afford it. We simply lack the necessary resources.
Transport Allowance Will Cost ₦600 Billion Yearly- World Bank
W’ Bank estimates that a transportation palliative will cost N600 billion for 20 million Nigerians.
According to Marco Hernandez, the World Bank’ s Lead Economist for Nigeria, the proposed transit subsidy might cost the Federal Government N600 million to help 20 million Nigerians.
This amount, according to the World Bank, is much less than the N3 trillion expected to be spent on gasoline subsidies in a year.
The N3 trillion in recovered revenues from eliminating PMS subsidies are redirected to immediately deliver N600 billion in cash support to the people over the six months following the removal of PMS subsidies and to fund development priorities at all levels of government, he said during his presentation of the new report.
He also emphasized the high cost of fuel subsidies, which primarily benefit wealthy households, noting that Nigeria’ s poorest 40% consume less than 3% of the country’ s total PMS.
” Not only is the gasoline subsidy expensive, but it primarily helps wealthy households, ” he said.
Nigeria has the potential to strike a deal with its citizens that eliminates the subsidy and utilizes the savings to offer targeted cash transfers to low- income households, engage in job- creation programs, and strengthen the country’ s budgetary position.
” We need to explore how we can divert this financing, ” he continued. The underprivileged receive direct cash assistance from us. We estimate that covering twenty million people will cost roughly 600 billion dollars. This still leaves a significant amount of money available for national priorities like security, power sector reform, estate development funds, and rural road and industry innovation. “