Nigeria has expressed the certainty of its plans to remove fuel subsidies by middle of next year and substitute it with cash transfer of N5,000 monthly to about 40 percent of the population considered the poorest in the country.
According to the Minister of Finance and budget, Zainab Ahmed, the N5,000 cash willbe transfered monthly to between 30-40 million Nigerains who make up the poorest of the population as transport grants in lieu of the subsidy.
Ahmed, who spoke on Tuesday at the launch of the World Bank Nigeria Development Update (NDU), said the final number of beneficiaries 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.
“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 potential negative impact of the removal of the subsidies on the most vulnerable at the bottom 40% of the population.
“One of such measures would be to institute a monthly transport subsidy in the form of cash transfer of N5,000 to between 30 – 40 million deserving Nigerians,” Ahmed said.
The World Bank in the development update had said the poorest 40 percent in Nigeria consume less than 3 percent 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 3 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,” the minister said.
Last week, the International Monetary Fund (IMF) had urged Nigeria to do away with the gasoline subsidies and move to a market based pricing mechanism by early next year in accordance with the recently passed Petroleum Industry Act (PIA).
The fund also advocated the removal of what it termed “regressive fuel and electricity subsidies is a near-term priority, combined with adequate compensatory measures for the poor. The mission stressed the need to fully remove fuel subsidies and move to a market-based pricing mechanism in early 2022 as stipulated in the 2021 Petroleum Industry Act.”