Subsidy Removal – N500bn Disbursement Plan

Subsidy Removal: Concerns and Solutions Suggested for N500bn Disbursement Plan

Key Points:

• The Africa Leadership Group (ALG) expresses concern over President Bola Tinubu’s decision to remove petroleum subsidies and distribute N500bn to 12 million homes.
• ALG proposes alternative areas for the N500bn investment to provide more effective relief.
• ALG emphasizes the importance of a fair and sustainable transition, considering immediate impacts and long-term solutions.

Concerns over Subsidy Removal

The Africa Leadership Group (ALG), a public organization that promotes good governance, has expressed serious worries about President Bola Tinubu’s quick decision to eliminate petroleum subsidies.

They fear the resulting effect on Nigerian citizens could be quite severe.

In a press release to Vanguard, signed by Lara Gureje-Oderinde, ALG’s Director of Publicity and Media Relations, ALG shares its views on the issue.

They believe that President Bola Tinubu’s plan to distribute 500 billion naira to 12 million households over six months won’t sufficiently tackle the problems created by removing the subsidy.

The removal of the petroleum subsidy, as announced by Mr. Bola Tinubu in his opening speech, has immediately influenced the prices of goods, essential services, and food.

This has led to significant concerns among millions of Nigerians, as transportation fares have risen sharply, adding to the citizens’ struggles.

Effects on Households

Households are impacted by increasing domestic fuel prices in two ways.

First, they directly face the higher prices of fuels used for cooking, heating, light, and personal transportation. Second, they indirectly experience increased prices for other goods and services as the higher fuel costs affect production costs and consumer prices.

The ALG, founded by Pastor Ituah Ighodalo, responded to the public outcry and conducted a survey to gather citizens’ opinions.

Some experts suggest that the proposed approach doesn’t sufficiently address the key issues and effects of the subsidy removal.

Proposed Solutions

In the meantime, the ALG has identified three key areas where the 500 billion naira could be used more effectively, rather than merely as incentives to 12 million households.

1. Invest in Modular Refineries (48.7% of the fund): This will create more jobs.
2. Channel to Manufacturing or Agriculture (48.1% of the fund): The focus should be on small to medium-sized businesses and small-scale farmers.
3. Subsidize Commercial Transportation (41.7% of the fund): The government could purchase and distribute new buses to states to ease the impact on transportation of people and goods.

Citizens also suggested other practical steps such as investing in healthcare and education, subsidizing electricity tariffs, transparently distributing funds to the poor, investing in areas affected by terrorism, and focusing on food security initiatives.

A Gradual Approach

ALG points out that a phased approach to removing the subsidy would have been more sensible.

This would allow citizens to plan and adjust their budgets accordingly.

The immediate effects of the removal have been harsh on many families, with some even having to abandon their cars due to the high fuel prices.

According to ALG, the survey also confirmed that the government should think about investing part of the 500 billion naira in climate-smart agriculture.

This would include pilot food production initiatives in different geopolitical zones to improve food security and reduce dependency on imports.

Prioritizing Citizen Welfare

Above all, the government must put the well-being of its citizens first.

This means considering food security and transportation.

A fair transition towards a sustainable and economically secure future can be achieved by carefully planning and implementing measures.

These measures should ease the immediate effects of the subsidy removal while also investing in long-term solutions.

Understanding who benefits from fuel price increases and the welfare impact of such increases is key to creating and gaining public support for any relief program funding.

Because of the severe impact on poor households, it is essential to quickly implement measures to protect these households.

These may include expanding existing safety net programs, improving targeting, and increasing high-priority spending that benefits the poor, such as in health, education, and infrastructure, ALG emphasized.

This table summarizes the proposed areas of investment for the 500bn fund and the percentage suggested for each area: