By Clara Nwachukwu, Washington DC
Amid growing criticisms and scepticisms on modalities, the Nigerian Government is pushing ahead with the disbursement of the $800million World Bank loan to cushion the effects of fuel subsidy removal.
Indeed, the government said it opened a register of the most vulnerable in the society, who would benefit from cash transfers of N5,000 monthly per household for a period of six months.
Besides, the government said it has also approached the National Assembly to approve both the loan and the social register, to commence electronic transfers of the funds once the subsidies have been removed.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, disclosed this on Saturday at a press briefing on the sidelines of the International Monetary Fund IMF/World Bank Spring Meetings in Washington DC.
Ahmed, however, could not explain the modalities or criteria used in determining “the most vulnerable in the society,” which has been widely criticised to favour mostly the northern region at the expense of the south.
All that the Minister could say was that “This effort is led by the Ministry of Humanitarian Affairs, Disaster Management, and Social Development.”
“They developed that register with the support of the World Bank. The register has about 10 million households and that’s an equivalent of 50 million Nigerians,” she added.
while acquiring the loan first before seeking approval may seem to be jumping the gun, she said: “We needed to have this ready because when the government eventually removes the fuel subsidy, there will be an immediate transport palliative that will be provided to the most vulnerable members of our society who have been identified, registered, and now contained in our national social register.”
However, labour unions and the organised private sector (OPS) have criticised the additional borrowing, saying it is shrouded in mystery and may be another conduit for self-enrichment by government officials as have been the case with such palliatives in the past.
Whether the N5,000 cash transfer will be adequate enough, she said: “whether this is enough is an assessment that we are undertaking with the transition team. If it’s not enough, the country has to raise additional resources to be able to cover more people, extend the period or increase the amount; whichever is finally negotiated upon.”
“When the subsidy is removed, there would be additional revenue that would now accrue to the Federation account. One of the things we are working on is how to use this incremental revenue; the money belongs to the federal, state, and local governments,” she added.
We needed to have this ready because when the government eventually removes the fuel subsidy, there will be an immediate transport palliative that will be provided to the most vulnerable members of our society who have been identified, registered, and now contained in our national social register.
Debt sustainability
Regarding Nigeria’s debt sustainability, which is also a source of concern for the IMF and World Bank, Ahmed noted that the issue does not only concern Nigeria alone, but other debtor nations.
Nevertheless, she believes something will be worked out based on discussions among debtor nations, creditors, credit rating agencies and the multilateral development banks.
She continued: “Debt was one of the main things that were discussed throughout the sessions at the World Bank. It is an issue for most developing countries. Today as we speak, because of high inflation globally and the continuous quantitative easing central banks are undertaking, interest rates continue to rise.
“So, if you have taken a foreign debt, your cost of debt just rises without you doing anything. So, we all have these challenges such that what you have planned in the budget and provided for just keeps changing because interest rates keep changing.
“So, it is a global problem, there hasn’t been a specific landing, but it is a lot of consideration that globally there must be some initiatives that would improve the fiscal space of countries that have high debt burden including things like debt standstill or the freezing interest rate at some point and several options that are being discussed but there has to be an agreement on what to do.”
