The Nigerian government intends to replace gasoline subsidies with cash handouts to the poor, which may cost the government ₦2.4 trillion a year ($5.8 billion).
After fuel subsidies are phased out in July, the government will begin handing out ₦5,000 a month to up to 40 million Nigerians.
For the first time, the price of gasoline will be determined by the market rather than the government, according to new legislation. Finance Minister Zainab Ahmed said Thursday that the cash transfers would take place over six to 12 months.
At least 30 state governors and a successor to President Muhammadu Buhari will be elected at that time.
Nigeria’s governing party’s long-term policy aims of freeing up income and gaining support from the poor would be supported by cutting gasoline subsidies.
On Thursday, Eurasia Group stated to clients:
“The category of voters who are most likely to benefit from the transport grant are more likely to vote for Buhari’s party, and they also benefit the least from the current gasoline subsidies”
According to Cheta Nwanze, a lead partner with SBM Intelligence, the procedure of distributing cash assistance in a country where few people have bank accounts might lead to corruption.
Ahmed stated last week that the government would use biometric verification numbers, national identification cards, and bank account information to ensure that payments get to the appropriate beneficiaries. The proposal is being designed and funded by the World Bank.
For fiscal reasons, Nigeria has decided to abolish gasoline subsidies, which have weighed down the country’s budget for years. According to the International Monetary Fund, this year’s budget deficit will be 6.3 percent of economic production.
About ₦250 billion a month is presently spent on subsidies, Ahmed added. According to the International Monetary Fund (IMF), a “well-targeted social assistance strategy” should be implemented in West Africa to mitigate the effects of lowering subsidies on the poor.
As the most populated nation in Africa, the continent is home to the world’s biggest number of people who live on less than $1.90 each day. Because of the grant’s regularity, it would provide a big financial boost to these individuals.
President Muhammadu Buhari’s successor may have to decide whether or not to prolong or terminate the 2.4 trillion naira-a-year expense.
When it comes to tough political issues, the West African country has a poor track record. Over the next year, assuming oil prices continue at present levels, the government expects to spend ₦3 trillion on gasoline subsidies. As a result, it has not been able to eliminate subsidies for power.
It’s not sustainable since it’s just another consumption subsidy that doesn’t do anything, according to Nwanze.
“I would have preferred such grants go to small businesses so they can expand and put a dent in our rather high unemployment rate.”