The political economics of subsidy withdrawal, announced six weeks ago by the new government of President Bola Ahmed Tinubu on its very first day, continues to stare the government right back in the face, as a massive hike—nearly 300%—in the pump price of petrol ignites corresponding increases in the cost of just about everything else. It will take a while before the full impacts of this policy on jobs, businesses and households are identified and quantified. For now, however, two things are clear.
The first is that there is little room for impulsive decisions in a nation where well more than half of its over 200 million strong population are dirt poor. By President Tinubu’s own admission, the fateful phrase “fuel subsidy is gone” was not even in his prepared inaugural speech, but that he himself “felt it was expedient to stop the subsidy on the first day”. That this admission will come not to Nigerians at home, but in far-away France is instructive in its own right about what publics matter the most to the government.
But the point is that a hurried decision about a complex economic policy issue such as this without much background preparation for what to do next has so far left in its wake far-reaching consequences than the government probably bargained for. We commend the stoic resilience—borne out of hope and goodwill for the government—with which millions of Nigerians are braving consequences of that hurried decision, even this early into its implementation.
Nigerian media are awash with stories about employees who have to give up their jobs altogether; about those who now spend week nights where they work; and about employers and employees in the small and medium enterprises sector who have to choose between job cuts or salary cuts, as all grapple with skyrocketing cost of transportation and its impacts on everything else. Still, more evidence of the consequences of subsidy withdrawal is at hand at the World Bank, which together with the International Monetary Fund (IMF) have, perhaps, been the loudest cheerleaders for this policy in Nigeria.
While still cheering the government’s action in its latest edition of the Nigerian Development Update (NDU), the World Bank nevertheless makes clear that 7.1 million Nigerians risk being plunged into extreme poverty by the end of this year, if urgent steps were not taken by the government. This is rising from the over 4 million Nigerians already pushed into that zone during the first half of the year alone by January’s ruinous naira redesign policy and the early effects of the subsidy removal.
It is also clear the government has little or no idea around what policy measures—palliatives—would help cushion the effects of subsidy removal on Nigerians. First, the government did not announce any palliative measures along with the removal, as is the global best practice for such policies. Second, the President’s letter to the National Assembly requesting the appropriation of N500 billion for “palliatives”, after six grueling weeks, did not provide details of what the measures would be, or how they would be distributed among the target population of the poor across the country.
The absence of details on the government’s N500 billion palliative proposal is also instructive because even the National Assembly’s core business of scrutiny and oversight on such matters require specific details about what the government will do with money and who will gain from it if appropriated. Details matter for transparency and accountability in governance.
Third, the government was supposedly engaging with labour to work out acceptable palliative measures for Nigerians. Yet, both the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) have publicly condemned the government’s other palliative proposals, including that of an $800 million loan from the World Bank to be used for cash transfers of N8,000 each to 12 million households in the country over six months.
The government hopes the transfers will “expand coverage of shock responsive safety net support for all vulnerable Nigerians and the cost of meeting basic needs”, ultimately benefitting 60 million Nigerians, in the government’s own estimations. But both NLC and TLC have dismissed them as “laughable” and an “economic waste” given the reach and depth of poverty in Nigeria today.
Clearly for this government, then, palliative measures for subsidy removal are an afterthought. That cannot be. As the government prepares to oversee the disbursement of nearly $1.5 billion dollars (N1.2 trillion) from the two plans combined, the government needs to get the specific details of the palliatives clear and communicate them to Nigerians soon enough. After all, this is a country where even the most well-intentioned public money soon finds itself in private pockets.
Moreover, as the World Bank’s NDU report says, subsidy removal without clear palliatives will mean that “the poor and economically insecure households will face an equivalent income loss of N5,700 per month, and without compensation, an additional 7.1 million people will be pushed into poverty” before this year runs out. We find that scenario unacceptable. Palliative measures for fuel subsidy removal cannot be an afterthought. Palliative policy is part of the moral foundation that binds the citizen to the state in good, or in tough times. The government must get it right quickly, and tell Nigerians about it.