…7.1m poor Nigerians to lose N5, 000 monthly
The World Bank says Nigeria’s government will save a total of N11 trillion from the recent petrol subsidy removal policy.
However, the financial body said more people would be pushed into poverty in Nigeria if the government does not provide palliatives to alleviate the effect of the recently implemented reforms.
In its latest report, Nigeria Development Update (NDU), released on Tuesday, the Bretton Woods institution said over four million people were pushed into poverty between January and May 2023.
The bank, in the report, titled: ‘Seizing the Opportunity’, said it was important for the country to implement a comprehensive reform package that encompasses a range of complementary measures, including a new social compact to protect the poor and most vulnerable, to maximise the collective impact on growth, job creation, and poverty reduction.
Since the assumption of the new administration, critical fiscal reforms have been initiated to address macroeconomic imbalances.
The World Bank believes this could be a window of opportunity that could have a transformative impact on the lives of millions of Nigerians and establish a solid foundation for sustainable and inclusive growth.
“The removal of the petrol subsidy and foreign exchange (FX) management reforms are crucial measures to begin to rebuild fiscal space and restore macroeconomic stability, and the opportunity should be seized to take further, necessary policy reform steps,” the report reads.
The global lender said the recent reforms would have a more direct effect on the poor and vulnerable. The bank, however, suggested that while policies are being implemented, measures should be put in place to lessen the effect on the poor.
According to the bank, in the immediate-term, the removal of the petrol subsidy caused an increase in prices, adversely affecting poor and economically insecure Nigerian households.
“Petrol prices appear to have almost tripled following the subsidy removal. The poor and economically insecure households, who directly purchase and use petrol as well as those that indirectly consume petrol, are adversely affected by the price increase. Among the poor and economically insecure, 38 percent own a motorcycle and 23 percent own a generator that depends on petrol. Much more use petrol-dependent transportation.
“The poor and economically insecure households will face an equivalent income loss of N5, 700 per month, and without compensation, an additional 7.1 million people will be pushed into poverty”, the report reads.
According to the World Bank, many newly poor and economically insecure households will likely resort to consequential coping mechanisms, such as “not sending children to school, or not going to the health facilities to seek preventative healthcare or cutting back on nutritious dietary choices.”
The firm, therefore, suggested that “compensating transfers will be essential to help shield the most vulnerable Nigerian households from the initial price impacts of the subsidy reform, as without compensation, many households could be pushed into poverty by higher petrol prices and have to resort to coping mechanisms with long-term adverse consequences”.
World Bank country director for Nigeria, Shubham Chaudhuri, said the current move by the government to implement the long-anticipated reforms and efforts to harmonise the multiple FX windows,” are timely and crucial to set Nigeria on the path of economic growth”.
According to Chaudhuri, these reforms should be accompanied by compensatory actions to mitigate the short-term impact on the poor.
