Nigeria plans to replace fuel subsidies with US$5.8 billion in cash subsidies

Starting in July, the government will provide up to 40 million people with 5,000 naira (US$12.20) per month.

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Nigeria is planning to provide cash subsidies to the poor, which may cost the government 2.4 trillion naira ($5.8 billion) a year to replace fuel subsidies.

Starting in July, when the fuel subsidy ends, the government will provide up to 40 million people with 5,000 Naira per month. The new petroleum law forced the government to allow market forces to determine the price of gasoline. Finance Minister Zainab Ahmed said on Thursday that the cash transfer will take place within 6 to 12 months.

At that time, Nigerians will vote for at least 30 successors to the governor and president Muhammadu Buhari (Muhammadu Buhari).

The Eurasian Group stated in a report to clients on Thursday that cutting fuel support will support the ruling party’s long-term policy goal, which is to release revenue, while allowing the party to strengthen support for poor Nigerians before the 2023 poll. “Voters who are most likely to benefit from transportation subsidies are more likely to vote for Buhari’s party, and they benefit the least from the current gasoline subsidies,” the Eurasian Group said.

Cheta Nwanze, chief partner of SBM Intelligence, said that the cash support program helped poor people from Togo to India, but in a country with few bank accounts, this process could lead to corruption.

Ahmed said last week that the government will use biometric verification codes, national ID cards and bank account numbers to ensure that payments are made to legitimate payees. It is working with the World Bank to design and fund the program.

Nigeria wants to eliminate fuel subsidies because the country’s budget can no longer bear the financial burden. According to data from the International Monetary Fund, subsidies will make this year’s budget gap reach 6.3% of economic output.

Ahmed said these subsidies currently cost the government about 250 billion naira per month. The International Monetary Fund recommends that West African countries eliminate subsidies and implement “targeted social assistance programs” to cushion the negative impact of subsidies cuts on the poor.

The most populous country in Africa has the most abject poverty in the world, that is, people who leave for $1.90 a day. Therefore, the monthly subsidy will significantly increase the income of these people.

Nevertheless, the annual cost of 2.4 trillion naira may become a huge burden, and President Buhari’s successor may be burdened with the decision to extend or end it.

This West African country has no good record of making politically difficult decisions. For decades, it has been working hard to end fuel subsidies. If oil prices remain at current prices, it is expected to spend 3 trillion naira in the next 12 months. In addition, it has been unable to end electricity subsidies.

Nwanze said these payments are unsustainable because they are just another consumer subsidy without any productivity.

“I prefer to use such grants for small businesses so that they can expand their scale and reduce our fairly high unemployment rate.”

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