Cushioning Effects of Subsidy Removal at Subnational Level by Idris Miliki

287
Spread the love

Background

The 1999 Constitution of the Federal Republic of Nigeria (as amended) in chapter two provides under the fundamental objectives and directive principles of state policy that the government should be based on the ‘principles of democracy and social justice’, and declared that sovereignty belongs to the people and that the security and welfare of the people shall be the primary purpose of government. It further declared that the participation of the people in the government shall be ensured.

In chapter 16, section 2, the constitution declares that the government shall direct its policy towards ensuring the promotion of a planned and balanced economic development; that the material resources of the nation are harnessed and distributed as best as possible to serve the common good; that the economic system is not operated in such a manner as to permit the concentration of wealth or the means of production and exchange in the hands of few individuals or of a group and that suitable and adequate shelter, suitable and adequate food, reasonable minimum living wage, old age care and pensions, and unemployment, sick benefits and the welfare of the disabled are provided for all citizens.

The constitution further provides in section 17, subsection 3 that the government shall direct its policy towards ensuring that all citizens, without discrimination on any group whatsoever, have the opportunity for securing adequate means of livelihood as well as adequate opportunity to secure suitable employment; that conditions of work are just and humane, and that there are adequate facilities for leisure and for social, religious and cultural life; that the health, safety and welfare of all persons in employment are safeguarded and not endangered or abused; that there are adequate medical and health facilities for all persons: that there is equal pay for equal work without discrimination on account of sex, or on any other ground whatsoever; that children, young persons and the aged are protected against any exploitation whatsoever, and against moral and material neglect; that provision is made for public assistance in deserving cases or other conditions of need; and the evolution and promotion of family life is encouraged.

Furthermore, the constitution provides that the government shall direct its policy towards ensuring that there are equal and adequate educational opportunities for all including the promotion of Science and Technology; provision of free, compulsory and universal primary education; free secondary education; free university education and free adult literacy programme as and when practicable.

It should be noted that the constitution provides clearly in section 13 that “it shall be the duty and responsibility of all organs of government, and of all authorities and person exercising legislative, executive or judicial powers, to conform to, observe and apply the provisions of this chapter of the constitution”

Fuel Subsidy

The history of fuel subsidy in Nigeria dates back to the 1970s. In 1977 following the promulgation of the Price Control Act, fuel subsidy became institutionalised, and it became illegal to sell some products (including Premium Motor Spirit or Petrol) above the regulated price.

But subsidy payments continued to rise that it became impossible for government to pay. For example, it rose from N99 billion in 2016 to N141.6 billion in 2017 to N722 billion in 2018 and then decreased to N578 billion in 2019 and N134 billion in 2020. In 2021, the Federal Government appropriated N1.42 trillion and in 2022, it budgeted N4.3 trillion. In the 2023 budget, the government budgeted N3.6 trillion for petrol subsidy for six months period ending in June 2023.

Meanwhile, by the provisions of the Petroleum Industry Act (PIA), Petrol subsidy was expected to cease by February, 2022. 

It is clear to all that the management of the subsidy was bedevilled with corruption, mismanagement and poor capacity of the State to enforce laws. In 2022, the Federal Government had to borrow N1 trillion to finance fuel subsidy for the year. State capacity is weak, and government has been incapable of preventing smuggling across the borders.

According to the Managing Director of NNPC Limited, the daily consumption of Premium Motor Spirit increased to 103 million litres per day and at least 58 million litres were being smuggled daily. These problems generated the elite consensus on the removal of petrol subsidy such that the three leading Presidential candidates at the 2023 elections (All Progressives Congress (APC), Peoples Democratic Party (PDP) and Labour Party (LP) all promised to remove petrol subsidy.

When Asiwaju Bola Ahmed Tinubu was inaugurated on 29th May 2023, he announced the removal of the subsidy. 

Subsidy Palliatives

With the removal of the subsidy, the price of premium motor spirit or petrol increased from N185 ($0.23) to N617 ($0.78). Immediately, the price of goods and services skyrocketed in the country leading to suffering and misery.

The Federal Government announced a policy of payment of conditional cash transfer of eight thousand naira only ($10.08) monthly to twelve million poorest of the poor in the country but ordered a review after a few days because of criticism.

The critics contended that the amount is too small to make any meaningful impact on the lives of the people and that what is necessary is to provide public transportation, power and building of infrastructure. 

The Case for Social Protection

The criticism is essentially from the elite who do not understand the depth and level of poverty in the country and what needs to be done to reduce or eradicate poverty. Social protection has been acknowledged across the world as a veritable way to reduce poverty.

It is important to put back this policy on the political agenda for adoption. There is clearly a policy moment for Nigeria to implement the policy. There is convergence of policy problem, policy solution and politics. The problem is real and there is some level of outrage. The solution is clear- social protection through conditional cash transfer. The politics is right as the party in power is anchored on social democracy and has implemented the largest social investment programme in Africa. But elite mindset and poor strategic communication is militating against its adoption. 

It is important to point out that part of the opposition to the adoption of the policy arises from implementation failures in the past. There is a register of the poor in the country that was used to disburse the conditional cash transfer in the past. But the method of compiling the register is not known to majority of citizens and those on the register are not known. 

What Government Can Do

– The State Government should immediately set up a process for increasing the minimum wage.* The current minimum wage of thirty thousand naira is not a living wage. 

– The State Government should continue with the social investment programme but ensure transparency and accountability. The register of the poor should be made open for public scrutiny. The payment process should be transparent. The Conditional Cash Transfer should be supported with training on agriculture and entrepreneurship to graduate the recipients out of poverty. This has been done by development partners and CSOs in Nigeria and past programmes of the government. The idea of social protection is noble and a veritable way to reduce poverty. The challenge has been corruption, capacity and poor targeting in the programme which can be corrected. 

– The State Government should partner with Development Partners and CSOs working on Social Protection. There is sufficient experience across Nigeria to learn from in the implementation of social protection measures in Nigeria, Kogi State Government should key into it.

– The Kogi State Government should revive transport sector, particular the confluence transport, the water transport system in Kogi State. 

We also call on the review and update the Social Register to enable government identify the real person that can be classify has been poor.

Committee must be put in place, with the people of proven integrity that cut across the spectrum of the society.

The workers’ salary must be reviewed as soon as possible, all outstanding payment due to workers must be paid without further delay. Such as, Percentage Salaries, Leave Bonus, Promotion and all other outstanding dues to workers and pensioners in the State.

The proposed Five (5) Billion Naira to be given to State by Federal Government should be properly utilized by government and monitor by Civil Society Organizations (CSOs) to encourage Transparency and Accountability

Conclusion

It is well recognised that the security and welfare of the people shall be the primary purpose of government. But for a variety of reasons, governments serve purposes that are inimical to citizens and society. The challenges in Nigeria is huge. Nigeria hosts the largest number of poor people in the world.

The fuel subsidy removed by President Bola Ahmed Tinubu on 29th May 2023 has increased suffering and misery. But there are clear policy prescriptions that can alleviate the suffering of the poor and vulnerable through social protection and palliatives.

The Kogi State Government should adopt a comprehensive agenda for the State; implement a comprehensive social protection programme for the poor and vulnerable; adopt a procedure for filtering policy ideas and consider setting up a State think tank; increase the minimum wage; continue with the social investment programme but ensure transparency and accountability and partner with development partners and reputable Civil Society Organizations (CSOs) in the State working on social protection. 

References:

Dr. Otive Igbuzor (2023)    –    Petrol Subsidy Removal and Palliative


– Idris Miliki Abdul
Executive Director, Conscience for Human Rights and Conflict Resolution (CHRCR)

Being a paper presented at the KONGONET Town Hall Meeting on Kogi State Palliative Plans to Cushion the Effects of Fuel Subsidy Removal on Thursday 24th August, 2023


Spread the love