Victor Ezeja and Fakoyejo OlalekanHighlights
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Analysts believe that the borrowing of $800 million loan from World Bank for subsidy palliative was done without proper asse issues on ground and would not be properly disbursed to reach the targeted beneficiaries.
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Federal Government need to put sustainable measures on ground to resolve issues around petroleum refining and distribution in Nigeria.
Reactions have continued to trail the borrowing of $800 million by the Nigerian government from the World Bank, for disbursement to the citizens as palliatives ahead of the planned total removal of petrol subsidy in June.
Economic and financial analysts who expressed reservations about the viability of the implementation of the fuel subsidy scheme, said disbursement of the $800 million (which is about N368.4 billion in the official rate of N460.52 or N590.6 billion in the black market rate of N738.25) may likely not make any positive impact in cushioning the effect of the subsidy removal.
Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, stated that the $800 million loan the country got from the World Bank for post-petrol subsidy palliative was awaiting parliamentary approval for the Federal Government to begin disbursement.
READ ALSO: FG To Share $800 million Among 50 million Nigerians After Removal Of Fuel Subsidy
Ahmed, said the fund would be deployed to provide succour to 10 million households, who are expected to get N5,000 each for a period of six months.
The Federal Government has been tinkering with removing the subsidy on petrol due to its heavy spending on the scheme. According to data released by the Nigeria National Petroleum Company Limited (NNPCL) in January, the country spent N4.39 trillion naira ($10 billion) on petrol subsidy in 2022. The GMD of NNPCL, Mele Kolo Kyari, in February said the Federal Government is currently spending N400 billion monthly on petroleum subsidy payments. The national oil firm did not remit funds to federation accounts last year, in what observers said was due to payment of subsidies on imported fuel.
The Nigeria Extractive Industries Transparency Initiative (NEITI) recently revealed that the country spent the sum of N13.697 trillion on subsidy payments in 17 years, an amount it said would have constructed three refineries with the capacity to refine 450,000 barrels of crude per day.
Ahmed said that when the subsidy is removed there would be additional revenue to accrue to the federation account.
In a chat with Prime Business Africa, an investment analyst, Charles Abuede, said the palliative fund is the right move at the wrong time that considering Buhari’s administration will not be around to see to the implementation of the purpose of the loan.
With Buhari handing over to a new administration on 29 May, which is before the removal of fuel subsidy date, slated for the end of June, Abuede told Prime Business Africa’s correspondent that the palliative to cushion the impact of the ripple effect from the subsidy removal could become another “white elephant project.”
“Last year, FG, in its budget proposed the sum of N6.67 trillion in subsidy payment for 2023 following the plan to remove subsidy by June 2023. This translates to around N3.3 trillion in a six-month period as there will be transition to another administration by the start of June and it was a laudable move but was, however, criticized for consulting no team of experts for the impact analysis of the move.
“Driving into the election year, the FG has gone ahead to borrow from international financial institutions (World Bank) for subsidy removal palliatives to the most vulnerable households in the country,” Abuede said.
The investment analyst added: “This is likely to yield no social benefits just like we have seen in previous times when FG plans for conditional fund transfer to households but became a white elephant project.”
Abuede also stated that the loan borrowed from the World Bank further attests to the statement that Nigeria has spending problem.
He said Nigeria keeps borrowing for consumption instead of investment that will generate revenue, a decision that further increases the debt burden of the country.
“In a nutshell, the move to borrow from the World Bank will add to our debt burden and this is why it is often said that Nigeria has spending problems and not revenue as we tend to borrow for consumption instead of investment.
“So, I think the move was done without due consultation and at a time when a new administration is about to take over the helm of affairs of the country,” Abuede stated.
An economic analyst and senior lecturer at the Niger Delta University, Dr Wisdom Krokeyi, said the monetary palliative that the government intends to give the citizens is good to temporally relieve them of hardship that would be caused by the fuel subsidy removal.
He, however, expressed doubt that the fund would be appropriately distributed to the real beneficiaries because of corruption.
“Nigeria has always had a very bad history of utilizing monies that are borrowed for a positive change,” Krokei told Prime Business Africa.
“You cannot rule out the fact that corruption will not creep in into this money we are talking about. What has kept Nigeria in this state we are is because of corruption; when monies are borrowed in the name of providing and sustaining social safety net programmes, at the end of the day, you will discover that the people that have been captured, who suppose to benefit from the programme are not people that are benefiting, rather, the monies are diverted to private pockets and the level of poverty continues to grow.
“So, for this one, I am not envisaging any positive thing about it. This is because it is the same set of people that have put Nigeria into the mess it is today are the same people that are filled there, and are the ones still borrowing this money. We don’t expect any better way of managing this borrowed money from them. Except we have an administration with the right thinking people, who feel that Nigeria should move forward as the giant of Africa, and be able to open up the critical sectors so as to create the necessary development and the necessary growth we are talking about, we will not move forward.
“I join my voice with other well-meaning Nigerians to say that the money will not be properly utilized because of corruption,” he insisted.
Dr Krokei said the processes for securing the loan facility had been concluded since last year and wondered why they waited until the twilight of the current administration before making moves to set up social safety programmes.
“The administration is going to end next month and from the records, we know that this money with the documents were signed sometime in August last year. So, what delayed the process of implementing some of these social safety net programmes that they are talking about until this moment? It is at the twilight of the administration, they are now making this announcement that such money has been borrowed and therefore wants to utilize it within a short period of time, there is a doubt to it, and until we are sincere, we are not going forward.”
He said he does not oppose borrowing but should be channeled to useful ventures that will in future have regenerative effect.
“As an economist, I am not against borrowing. What I am against is the idea of borrowing and not utilising what has been borrowed to bring about the growth and development that Nigerians are yearning for. That is where the problem lies.”
Need to engage Private sector players
Beyond disbursing funds to Nigerians, to cushion the effect of the subsidy removal in the interim, the university don said the sustainable thing to do is to encourage private sector players to step in, especially in the area of boosting capacity for oil refining to have enough quantity that will meet local demands.
He noted that the country has for years been spending money on rehabilitating the existing refineries, but has nothing to show for it as the facilities have remained moribund forcing the people to rely heavily on import of refined petroleum products that brought about subsidy in the first place.
“For me, let us give room to the private sector, encourage them to come in. we have people who have licences that can even build refining facility that are even export-oriented.”
He added that it was high time the government started encouraging the setting up of modular refineries to encourage local production of petroleum products.
He said government need to encourage local oil refinery operators called “Kpo-fire” to sharpen their skills in the job and make their activities environmentally friendly, adding that such measures would not only increase volume of available refined oil domestically but also create jobs for many Nigerians, especially the youths.
“These are local people, who were able to use their knowledge to refine fuel that even vehicles are using. So, why don’t we encourage such people? When we look inward and encourage these local refiners, we may end up having availability of this product; the prices will drastically reduce; we must have ended up creating employment for our teeming youths.”
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
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