Revisiting The N5,000 Allowance In Lieu Of Subsidy

Revisiting The N5,000 Allowance In Lieu Of Subsidy

With plans by the Federal Government to jettison the subsidy regime in the petroleum sector in 2022, there has been so much concern across the country to the effect that it would adversely affect the poor and vulnerable the most.


Perhaps, to douse the tension and allay fears of the masses that subsidy removal would have an untoward consequences, the FG may have begun a conscious effort to reel out what may come as palliative measures to ease out any unpleasant consequences that could ensue.

Minister of Finance, Mrs. Zainab Ahmed last recently explained that the grant would go to about 40 million Nigerians that make up the poorest population of the country, adding that the final number of beneficiaries would depend on the resources available after the removal of the fuel subsidy.

Although the FG may implement the subsidy removal before June in line with the Petroleum Industry Act ,PIA, the minister hinted the move was actually set for June 2022.

“The subsidies regime in the oil, sector remains unsustainable and economically disingenuous. 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”, she said.

From indications, the government is working with the World Bank development update that the poorest 40% in Nigeria consume less than 3% of the total PMS in the country, highlighting that the rich were benefiting more from the subsidies.

Further she said; “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 four public refineries in the country, and the completion and coming on stream of the three private refineries under construction in 2022, would significantly boost contribution from the sector to our economic growth efforts”.

“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 utilising cash transfers to safeguard the welfare of poor and middle-class households”.

However, there have been many questions arising since the Minister’s revelation that the government was considering doling out five thousand naira to about 40 million Nigerians monthly for an initial period of one year from the commencement of the subsidy removal.   

Early response to the Minister’s position came from the Senate Committee on Finance, beside a groundswell of reactions from Nigerians of various shades and character.

Chairman of the Committee, Senator Solomon Olamilekan, noted while speaking to newsmen after presenting his committee’s proposals to the Appropriation Committee that the Minister’s proposal was still in the rumour mill as the government was yet to make any formal presentation to the Senate on the matter.

Speaking further, Olamilekan asserted that there is no provision of N5,000 transportation grant in the 2022 budget proposal submitted by President Muhammadu Buhari.

He, however, noted that the 2022 budget proposals presented to the National Assembly contained the provision for subsidy.

The Senator representing Lagos West in the National Assembly stated that there must be a budgetary provision for the transport allowance for 40 million poor citizens. He said: “We still believe this is news because this budget we are considering contains subsidy”.

“If we are passing a budget with the subsidy in the fiscal document, we cannot speak because that is the document that is currently before us”.

Through the ages, there have been several populist or welfarist policies aimed at alleviating pains across the lower social strata of the society in the course of several governments. Only recently, these include; the Conditional Cash Transfer with the Vice-President Yemi Osinbajo distributing N10,000 in the market; the N-Power scheme that pays N30,000 stipend to youths to enhance their skills; the school feeding project, and the Special Public Works programme well-orchestrated as capable to employ 774, 000 youths throughout the country.

We laud the efforts of the government which attempts to create social safety nets for the poor and vulnerable segments of the society. But this leaves us with a big question: How well do these initiatives filter through to the intended beneficiaries?

Again, given the benefit of hindsight we fear that such a programme would be open to inconsistency as it could be hijacked by selfish individuals at the detriment of the totality of the programme’s import where only cronies and wards can benefit.

We are averse to this cash transfer of five thousand as there is no logic in spending more in one year for that purpose than the subsidy would have gulped in the same period. Also, let the managers of the economy not sell dogs to buy monkeys as the Nigerian public court has argued that the supposed benefit would amount to a colossal loss as the expenditure would be higher than the 2021 subsidy expenses. We advocate a more sustainable long running scheme that could touch lives beyond momentary relief.

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