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N5,000 post-subsidy plan a misplaced priority

By Igho Akeregha, Dennis Mernyi, Abuja and Olusegun Olanrewaju
The Federal Government’s announcement that it will commence payment of N5,000 stipends to about 40 million poorest Nigerians early next year has continued to receive knocks from financial experts.

The Finance and National Planning, Mrs Zainab Ahmed, on Tuesday said the government will replace subsidy by next year with N5, 000 to about 40 million Nigerians.

The plan if implemented will gulp a whopping N230 billion monthly to individual Nigerians.

But yesterday some economists and other financial experts are of different views that the plan is a misplacement of priority, arguing that such money could be used to build factories, production industries, transportation facilities as well as modular refineries to enhance crude oil refining locally.

Reacting, a Chartered Accountant and Managing Partner of Nongoamin Ter and Co, Nongoamin Joshua, who faulted the plan stated that the policy will rather worsen the inflation rate with little or no positive impact on the economy.

Besides, he queried the procedure used to arrive at the data or the requisite to share N5, 000 to 40 million people.

“It is not a wise economic sense more so that the amount cannot cushion the effect of the hardship Nigerians are going to face when petrol litre will go for N340 after the removal of subsidy, except government have a different motive.

“Even if you are talking of subsidy palliative, it will not help. They should think of something else, he stated.

Joshua also said, “There will be more money in circulation and inflation will go higher which is not healthy for any economy, not to talk of our fragile economy.

“Take, for instance, the sharing of traders’ money and other palliative measures during covid 19 pandemic, how many Nigerians benefited, and what economic impact did it make to the system, he queried.

“How are you going to arrive at the 40 million people in the first place and how would you identify them as the poorest Nigerians. Is our government admitting invariably that there is such massive poverty in the country?

“What can N5, 000 buy in the wake that when the market forces will adjust to the fact that such a huge amount of money, about N230 billion is going to be in circulation every month. Even at present, N5, 000 cannot even buy 12.5kg cylinder of cooking gas or 25 kg of rice anywhere in our markets”, he said.

Joshua rather preferred that the money be used to develop agriculture value chain, like the building of agro-based capacity industries as well as procurement of agricultural products processing machinery, the impact will be more felt and the economy will blossom.

“It is not a wise economic policy except the government has a different motive. Even if you talking of subsidy palliative, it will not help. They should think of something else”, he noted.

In his view, Prof H.E Oaikhenan of the Department of Economics, University of Benin, said the policy is not well thought out. He observed that the government is trying to throw money at problems without really addressing the fundamentals of the problem.

“When you give N5, 000 to 40 million Nigerians that is a lot of money that will be injected into the economy without the necessary goods and services to back it up thereby leading to further inflation in the economy.”

Oaikhenan argued that it is a self-defeating policy, adding, “I thought the government should have addressed some fundamentals and challenges of the economy such as weak infrastructure and activities that make the production of goods and services impossible, address the problem of insecurity so that farmers can go back to farms thereby boosting agricultural production than just throwing money at people.”

Also reacting, a lecturer in the Department of Economics, Nile University, Abuja, Dr Ahmed Adamu, noted that the plan to yank off petroleum subsidy is not an appropriate policy at the moment because it will promote a high level of poverty in the country.

He said, “This is the time the government is supposed to be supporting people in terms of social investment in form of petroleum subsidy. If the government goes ahead with the N5, 000 disbursements, that brings it to about N2.4 trillion every year, that is enough to pay for the petroleum subsidy that every Nigerian will benefit from.

“It is not only 40 million people that need the subsidy, if the government wants to subsidize then it should be up to 130 million people,” Adamu said.

He added, “If you are removing subsidy, then you are breeding a big monster in the name of inflation. What they will end up doing will be an effort to stabilize inflation and you cannot be sure that when you give people money to buy petrol, they will end up using the money to buy garri and food.

“If you look at the policy inconsistencies of this government, you will understand where they are coming from. They said they were removing subsidy when petrol was N87 now it is N162 and they are still talking about the removal of fuel subsidy so when are going to have a once and for all removal of the subsidy?”

He carpeted the administration stressing that the administration has failed to safeguard the naira that made the importation of refined petroleum products more expensive.

A former PPMC official in Lagos, Abubakar Ibrahim, said the removal of subsidy from petrol price was long expected.

He said, “The government spends a lot to sustain the subsidy regime mainly because the value of the naira, concerning the dollar, which is used to import petrol, declines every day.

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“On the other hand, the monthly share of federation funds allocation to the states declines as well as in the face of legitimate demands from people for public utilities. Agreed, the anticipated action will affect the prices of many items and make life unbearable for Nigerians.

“But, the truth is, Nigeria cannot support the subsidy regime any longer. I don’t know of any country that subsidises the price of petrol other than ours. Yes, in some countries, like Angola (N112), Iran (N25) and Algeria (N136), you’ll say that prices of litres of petrol there are cheaper than ours.

“But these are petrol refining countries and Nigeria is an importer. So, until we have leaders who are concerned about developing Nigeria and Nigerians, who are conscious of the fact that the price of petrol is intrinsically related to the prices of other goods and services, and, invariably, the quality of life of the people and revamp our refineries, the subsidy regime cannot be sustained.”

Also, a lecturer in the Department of Business Administration, Kogi State University, Ayangba, Dr Juwon Johnson Orugun, pointed out that the effect of subsidy removal on fuel prices would be too cantankerous for the Nigerian economy and the polity.

“Politically, it could derail any and every gimmick of the APC to retain power as the backlash will be too defining. It could herald the beginning of the silent revolution, the kind of ‘Arab Spring’ that swept through the Middle East, the spontaneity of which will confound even the most profound predictors, as it will pitch the poor against the rich, the haves against the have-nots.”

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