World Bank’s $800 million loan to Nigeria for the proposed fuel subsidy removal by June has caused anxiety in the country. Nigeria’s President, Muhammadu Buhari, has repeatedly disclosed his intention to halt fuel subsidies before the inauguration of the incoming administration on May 29, 2023. However, the implications of subsidy removal have intensified debates, with labor unions and some oil and gas industry experts disapproving of the fuel subsidy removal due to its potential to shoot up inflation.
The Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, disclosed that Nigeria secured $800 million from the World Bank to serve post-subsidy removal palliatives for the Nigerians. The post-subsidy palliative plans would be distributed to 50 million Nigerians, representing ten million households. However, stakeholders have raised concerns over the obscurity surrounding the said sum from the World Bank, wondering if the efforts will not be another wild-goose-chase.
Director of the Centre for the Promotion of Private Enterprise, Muda Yusuf, said borrowing to fund post-fuel subsidy removal palliatives is strange. The practice had been that palliatives were funded from the savings from the subsidy removal. The CEO of SD & D Capital Management, Mr. Idakolo Gbolade, said that with the state of the country’s economy, fuel subsidy removal is non-negotiable. If the said $800 loan from the World Bank is not correctly channelled, fuel subsidy removal would cause more pain to already stressed Nigerians.
The federal government must come clean on the fuel-subsidy removal plan so that the country does not embark on another wasteful journey that may leave it more strapped in debts. It is crucial for the incoming administration to explore fiscal and monetary policy options to incentivize investment in sectors that could mitigate the pains of subsidy removal. These include investors in refineries, pipelines, petrochemicals, marketing, fertilizer plants, among others, and incentives to facilitate investment in the power sector and the use of autogas.