The Federal Government’s Latest Move to Ease Petrol Subsidy Removal Impact on NigeriansIn response to the ongoing challenges resulting from the removal of petrol subsidies in Nigeria, the Federal Government has taken a significant step by seeking a fresh loan of $400 million from the World Bank. This financial injection is intended to support a conditional cash transfer program benefiting 15 million households across the country.With this additional $400 million loan, the total amount borrowed by the Federal Government from the World Bank for the cash transfer initiative will reach a staggering $1.2 billion.

Previously, an $800 million loan was secured for the same purpose.The conditional cash transfer program was first announced by President Bola Tinubu during a national address on October 1, coinciding with Nigeria’s Independence Day celebrations. The aim of the program is to alleviate the financial strain brought on by the removal of petrol subsidies, which had led to a significant increase in the cost of living for Nigerians.

President Tinubu further revealed that the government would begin disbursing a monthly allowance of N25,000 to 15 million households over three months, from October to December 2023.It’s worth noting that the former administration, led by President Muhammadu Buhari, had secured an $800 million loan from the International Bank for Reconstruction and Development (World Bank) to provide post-petroleum subsidy relief to over 50 million Nigerians.

This loan was intended to be accessed by the subsequent administration.In the wake of concerns raised about the exclusion of certain categories of workers and pensioners and the threat of nationwide strikes by organized labor, the government adjusted its plans. Initially, the government had approved a provisional allowance of N25,000 for junior federal workers over the next six months following negotiations with labor unions and other stakeholders.

However, in response to these concerns, the government increased the provisional wage award to N35,000 for all treasury-paid Federal Government workers for the same duration.To fund the N35,000 cash award for civil servants, the Tinubu administration plans to send a supplementary appropriation bill to the National Assembly, as it is considered illegal to spend money outside the government budget.Meanwhile, Nigeria has maintained its fourth position on the World Bank’s list of top 10 International Development Association (IDA) borrowers.

Despite maintaining this ranking, the country has accumulated approximately $1.3 billion in additional debt over a one-year period.It’s important to note that Nigeria’s debt profile has been a subject of concern. As of June 30, 2023, the country’s total debt, including both IDA and International Bank for Reconstruction and Development (IBRD) debt, stood at about $14.51 billion. Nigeria has the highest IDA debt in Africa.

Furthermore, the World Bank’s 2023 Annual Report reveals that Nigeria is among the top 10 countries to acquire fresh IDA loans this year. The bank has committed $1.55 billion to Nigeria in the fiscal year of 2023.

This loan is intended to strengthen systems for improved delivery of basic education and primary health services in participating states and is planned for implementation in 2024, pending approval by the World Bank Group’s board.Given the growing debt concerns, Nigeria faces challenges in maintaining its debt sustainability. The Debt Management Office has warned that the country’s projected revenue of N10 trillion for 2023 may not be sufficient to support further borrowings.

The government must focus on revenue generation and seek to reduce borrowing by encouraging private sector involvement in funding capital projects and considering the privatization or sale of government assets. This is crucial as the Federal Government nears its self-imposed debt limit of 40 percent, according to the DMO.

In summary, the Nigerian government’s decision to secure a $400 million loan from the World Bank aims to provide much-needed relief to citizens affected by the removal of petrol subsidies. However, concerns about the country’s debt levels and sustainability persist, highlighting the need for careful financial management and revenue generation strategies.

Meanwhile, Naira keep falling down to the nearest pothole

Source: PUNCH NEWS

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