- Says what was needed was the robust and accountable implementation of relief measures
- Called for increased expenditures on health, education, and roads
Country Director, World Bank Nigeria Office, Shubham Chaudhuri, has lauded President Bola Tinubu’s reform policies.
The world bank chief enjoined President Bola Tinubu’s administration not to backtrack on the removal of subsidy on Premium Motor Spirit (PMS) while keeping the prices deregulated.
Arguing that the PMS subsidies had become unsustainable, Chaudhuri said what was needed immediately was the robust and accountable implementation of relief measures ranging from cash transfers to the provision of buses for mass transit, school feeding, and helping farmers to improve food production.
He explained that the nation was at risk of having 7.1 million more Nigerians pushed into poverty by inflation in the absence of any compensation from the government.
Chaudhuri made these calls as lead speaker at a symposium on “Economic Opportunity Pathways to Navigating Post Reform Challenges in Nigeria,” organised by the Department of Agricultural Economics, University of Ibadan and the Nigeria Institute of Social and Economic Research (NISER), held at Trenchard hall of the university, on Thursday.
He held that the ‘very costly’ PMS subsidy had to go as it primarily benefited richer households and neighbouring countries that the commodity was leaked to, while PMS subsidies reduced net FX inflow, and the nation suffered increasingly unsustainable debt dynamics.
Expressing the World Bank’s support for the ‘bold’ move of Tinubu on PMS subsidy, Chaudhuri said the steps that should be taken within the next six months should be providing relief measures for the low-income, near poor, poor especially the urban poor Nigerians.
While noting the outcry that greeted the federal government’s plan to transfer N8,000 to select households, Chaudhuri argued that such cash transfers did not just take care of consumption but also help in preventing children from dropping out of school, skipping meals as well as helping households cope in ways that preserve their investments in future.
He also called for increased expenditures on health, education, and roads.
The World Bank Country Director said, “I think the bold measure that President Bola Tinubu took was the right thing, but there is a lot more needs to be done. The immediate thing is relief measures, and we need to learn more details about how that will play out.
“Certainly, relief is needed. Cash transfers, a whole variety of other palliative measures. The key will be to deliver them, and make sure they reach communities and towns.
“It is really about making the best possible use of the revenue that will now flow to the federation account and even in a way that makes sure that ordinary people can get some relief because it has been hard with the prices.
There can be a package of things like cash transfers, help with mass transit, school feeding, and help for farmers rolled out as quickly as possible in a way that the people can see and feel that there is accountability.
“Then sustain the PMS subsidy removal and keep prices deregulated, foster fair competition, and curb any commercial malpractice so that efficiency gains are passed onto consumers.
“Nigeria can deliver a cash transfer to poor and vulnerable households as one element of a broader social compact.
”Using a robust targeting method and transparency based on digital payments
“Even what may seem like a modest cash transfer (e.g., NGN 5,000 per month or NGN 8,000 per month for six months) can make a real difference for families that are surviving on N8,000 per month or less (between 60-70 percent of Nigerians).
“Inflation pushed an estimated 4 million more Nigerians into poverty in the first 5 months of 2023.
“7.1 million additional Nigerians would be pushed into poverty by inflation in the absence of any compensation.
“Invest in a social protection system that can provide timely, targeted and temporary support to households experiencing a shock (like the increase in PMS prices due to subsidy removal). “Currently, Nigeria spends only 0.7 percent of GDP on social safety nets and 19 percent of the population covered.”
At this moment, he also called on the federal government to deepen FX policy reforms, remove FX restrictions on 43 items, and tackle inflation with the ingenuity of the Central Bank of Nigeria (CBN) identified as crucial.
On fears of Nigerians regarding transparency in the cash transfers, he said while government should be very clear, transparent, and as detailed as possible about how the funds will be used, Nigerians, the civil society, and the media should be keen on monitoring to ensure that what was announced was delivered.
With the right mix of policies, he held that Nigeria had the potential for an annual Gross Domestic Product (GDP) growth of over seven percent.
“Remove the FX restrictions for the list of 43 items. Keep actively communicating and ensuring clarity about the new FX policy with a focus on a unified, market-reflective, transparently-determined rate.
“Continue reducing subsidized CBN lending to medium and large firms. End government borrowing from the CBN. Replace import and FX restrictions with tariffs that reflect the ECOWAS Common External Tariff,” Chaudhuri said.
He called for a public sensitisation campaign on the opportunity costs of PMS subsidies and the alternate uses to which the recovered revenues can be used.
Critically, he called for engagement with critical stakeholders to build consensus.
He particularly described the disposition of the elites as crucial to lifting Nigerians out of poverty and ensuring economic progress and development for the majority of Nigerians.
Chaudhuri added, “Ultimately, it is the leadership of the country, political, business, other elites who will have a say in the way forward. So, when the package of relief measures and how they are rolled out, it will be the federal government, but the state governors will also decide whether it is actually reaching the communities. The elites have to have that consensus that this is the time for collective action.
“Everyone should pay attention and help with collective action, communicate how the government will try to help, welcome the public and tell them the way to go.
“When I talked about lessons from other countries, one lesson I did not put up there was that every country that has managed to get on this trajectory of making lives better, lifting people out of poverty, one thing in common is that the political elites and political elites dominate most noisy democracies like Nigeria, India, Indonesia are a political business, military.
And political elites everywhere are self-interested. “They care about that they become wealthier, that their children become wealthier, the difference is whether, in a particular country, the elites realize that the way they can get a bigger piece of the pie is to help the national pie grow versus squabbling over a bigger piece when the national pie is shrinking and in the process of squabbling it falls on the floor.
“In Indonesia, a lot of the elites realize that they can always get a bigger piece of the pie than other people and say, let’s allow the national pie to grow. Let’s come together on certain things. In Nigeria, that consensus isn’t there. It is still everyone trying to get a bigger piece of the pie, even if that means that that pie is not able to grow and risks falling on the ground.
“Sometimes, this is not just among the elites but also among the ordinary people. Everything is seen not in terms of the nation but in terms of geopolitical zone, region, state, senatorial district they come from.”
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