The federal government of Nigeria has announced that it will pay N5,000 to 10 million households for six months as a make-up for the removal of the petrol subsidy in June.
Zainab Ahmed, Nigeria’s Minister of Finance, Budget, and National Planning, addressed this on the sidelines of the World Bank/International Monetary Fund spring meetings in Washington DC on Sunday.
She reiterated that $800 million had been negotiated and authorized by the Federal Executive Council, and that it is currently being considered by the parliament.
“Once the parliament approves it, we roll. We have also been doing preparatory work side by side along the approval process. And that includes the building of the social register, which will be used for the electronic transfers of the funds,” she said.
“We needed to have this ready because when the government eventually removes the fuel subsidy, there will be an immediate transport palliative that will be provided to the most vulnerable members of our society who have been identified, registered, and now contained in our national social register,” she noted.
The minister said the effort is led by the ministry of humanitarian affairs, disaster management, and social development. “They developed that register with the support of the World Bank. The register has about 10 million households, equivalent to 50 million Nigerians.”
Zainab explained that the initial design is to disburse cash transfers of N5,000 per month per household for a period of six months. “So, whether this is enough is an assessment that we are undertaking with the transition team. If it’s not enough, the country has to raise additional resources to be able to cover more people, extend the period or increase the amount; whichever is finally negotiated upon.
“When the subsidy is removed, there would be additional revenue that would now accrue to the Federation account.”
In terms of how the palliative will affect the transportation sector, she stated that it will be considered if some of the support will be sent directly to the transportation sector, but no decision has been made.
Zainab also said the subsidy removal could spike inflation but would moderate. “Anywhere in the world where you remove any kind of subsidy, it has that effect. That is why that initial fund is necessary so that you are deploying it quickly and reducing the impact on the lives of the most vulnerable people in our society.”
Speaking on debt sustainability, the minister stated that debt was one of the main topics discussed at the World Bank sessions, adding that interest rates continue to rise due to high inflation globally and the continuous quantitative easing that central banks around the world are undertaking.
“So, if you have taken a foreign debt, your debt cost rises without you doing anything. So, we all have these challenges such that what you have planned in budget and provided for just keeps changing because interest rates keep changing.”
To ease these burdens, the minister said various options were discussed including freezing interest rates at some point.
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