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Palliatives For Nigerians: Way Forward -By Mr. Iretioluwa Oniyide & Prof. Babs Onabanjo

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Now that there is a raging debate about palliatives as a tool to cushion the adverse impact of the removal of petroleum subsidy on the generality of Nigerians, particularly the low-income earners of Nigeria’s society, there is need to think outside the box and examine some cutting-edge tools and concepts to get Nigeria out of this unfortunate circumstance.

One of these cutting-edge tools is Universal Basic Income (UBI).  UBI is a regular cash payment to all members of a community without a work requirement or other conditions. A universal, unconditional, individual, regular cash payment.

For the avoidance of doubt subsidy in itself is not a bad idea from an economic standpoint.  It has only been abused in Nigeria over the years.  Subsidy is a very popular tool all over the world to address socio economic problems.

Before we continue with this piece, it is important to briefly discuss the concept of subsidies.  What is a subsidy?

“A subsidy is a benefit given to an individual, business, or institution, usually by the government. It can be direct (such as cash payments) or indirect (such as tax breaks). The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public, given to promote a social good or an economic policy.” Important issues to pay attention to, based on this definition include the following:
• A subsidy is a direct or indirect payment to individuals or firms, usually in the form of a cash payment from the government.
• In economic theory, subsidies can be used to offset market failures and externalities to achieve greater economic efficiency.
• Those that do not like subsidies point to problems with calculating optimal subsidies, overcoming unseen costs, and preventing political incentives from making subsidies more burdensome than they are beneficial.
• Subsidy can also become super burdensome because of the emergence of rent seekers who end up becoming so powerful that the overall benefits to the society is obliterated, rendering the subsidy to become a major burden on the economy.  This is what we have had in Nigeria for that past 30 to 40 years with our petroleum subsidy.

Furthermore, advocates of free market economy do not like subsidy largely because of the following reasons:
1. Subsidy unnecessarily distorts the market and creates inefficiencies in the economy
2. Subsidy mis-allocates resources from more productive uses to less productive uses
3. Government spending on subsidy is never as effective as government projects them to be.
4. The cost and unintended consequences of applying the subsidy are usually not worth it and finally;
5. The act of subsidizing promotes corrupt political process.Let us now go back to the issue of using UBI as a tool to use for the palliatives being proposed by the President Bola Ahmed Tinubu (PBAT) administration to ease the pains of Nigerians because of ending petroleum subsidy in Nigeria. UBI as we have previously mentioned, is a regular cash payment to all members of a community or society (in this case Nigeria) without a work requirement or other conditions.  In other words, a universal, unconditional, individual regular cash payment.

UBI is necessary now in Nigeria because of; the perennial growth of income and wealth inequalities, the precariousness of our labor market, and the persistence of abject poverty in the land.
The basic characteristics of UBI are periodic, it is a recurrent payment usually every month. By making cash payment, it is possible for Nigerians to convert their benefits quickly into whatever they may desire. Universal – it is paid to all and not targeted to a specific section of the population. Individual – it is paid on an individual basis not based on household, and finally unconditional – it involves no work requirement or penalties, it is accessible to those that are working and to those that are not working, voluntarily or involuntarily. It is important to note that UBI will be received independently of any other income.

What is next to be considered are the following: funding source, the amount of payment, the period of payments, and the policy package that will come with the implementation of UBI.  We will need to determine what percentage of our current GDP will on an aggregate basis be committed to UBI. This can range from 5% to 7% of our GDP. Models can be developed that will reveal the optimum aggregate percentage of our GDP that we will commit.  We strongly suggest that the government should consider N25,000 per month.

UBI can be funded in many ways. It can be funded with proceeds from the following: income tax, a wealth tax, a consumption tax, financial transaction taxes, and most recently carbon taxes.  A combination of these can also be a source of funding for UBI.  In the case of Nigeria, the removal of petroleum subsidy has resulted in a huge monthly savings. The proceeds of the savings can be used to fund the UBI.

The next step will be to determine the amount of periodic payment and the duration of the payment. Is it going to be for six months or a year? We strongly urge the government to consider making this payment for a year.  One year will be enough time for the government to conceive and implement medium to long term programs that will set the economy on a path of consistent growth, result in good paying jobs, and increase economic aggregate income.
Finally, there is need to need to determine the policy package. The government must consider the supply side in their interventions to address the potential inflationary impact of UBI.  These interventions must include food security, energy security, effective and efficient transportation systems.

Nigeria must embark on rapid agricultural development that will adequately address the issue of food security. The government must quickly increase the production of staple foods – grains, vegetables, peppers, and cheap protein sources.

There is need to increase the production of beef by going down the value chain.  Chicken must be cheap and affordable for the average Nigerian. Production of grains such as maize and sorghum must be increased so that it is widely available for animal feed production.

It is very important that government address and remove market inefficiencies in the country’s food production and distribution. Agricultural Extension Services need to be moved into a robust process that will lead to an increase in agricultural production.  There is need to embark on effective capacity building of micro farmers in the areas of good agricultural practices and good agricultural collections practices that will reduce post-harvest losses.  The process of getting farm produce to the table of Nigerians must be efficient in the sense of addressing the unfair activities of the players in the distribution and marketing of farm produce.

As the country proceed on this path and the vision of the President, there is need to conduct a needs analysis of rural roads and the transportation modes to get produce from the farm to the tables of Nigerians.  Government must repair the rural roads and get them to a point where the roads are designed to take on the weight of vehicles moving produce from the farms to the cities.  One approach will be to examine the possibility of locating processing plants near the farms.  Perhaps government should revisit with more vigor and determination the Staple Crop Processing Zones initiative of former Minister of Agriculture, Dr. Akinwunmi Adesina, and ruthlessly implement it.

The International Energy Agency (IEA) defines Energy Security “as the uninterrupted availability of energy sources at an affordable price” Availability and affordability are the most important aspects of energy security. Implicit in this energy security definition are two attributes; long-term energy security which will address the timely investments for adequate energy supply that is aligned with Nigeria’s economic development aspirations. The other is short-term energy security which concentrates on the ability of our energy systems to quickly react to sudden fluctuations in Nigeria’s energy supply equilibrium.  Fellow Nigerians, we have neither of these.

It is imperative the perennial energy crisis is addressed. Nigeria must have 24/7 uninterrupted electricity supply. The absence of 24/7 power supply is killing the economy. This has been responsible for the country’s 8-hour economy which is not desirable at all.  Addressing the country’s short-term energy security must include the rehabilitation and modernization of all existing refineries and building more to address Nigeria’s energy needs.  There are refineries in boxes all over the world that can be put in place quickly on a plug and play basis.  Nigeria is more a gas producing country than a crude oil producing country.  Let us take advantage of this important natural resource to grow the economy. Initiatives such as Compressed Natural Gas (CNG) powered transit buses and cars need to be implemented quickly.

Mr. President has proposed some CNG initiative already.  More can still be implemented in addition to his proposal.

Let’s expand it to include conversion centers for cars and other gasoline powered vehicles. We strongly urge the government to quickly upgrade existing gridlines so that the gridlines are ready to adequately absorb high electricity volume from injection stations. Perhaps, the country should stop grid build out and move to a decentralized off grid power distribution network that will cover rural areas.  Government should encourage with incentive 24/7 renewable energy systems for Nigerian households, particularly, rural communities.  Government must establish large solar farms as part of the country’s energy security basket.

The long-term energy security plans must be aligned with the economic goal of a year-on-year growth of 8% in the next 10 years. There is need to set a goal of producing 150,000 MW of power in the next 60 months. It is time to have 24/7 stable and conditioned power supply in Nigeria.

Nigeria as a matter of urgency must provide efficient transportation systems for its citizens nation-wide. The country must phase out low occupancy vehicles (LOV) as mode of transportation and replace them with high occupancy vehicles (HOV) in rural and urban communities.  There is need to look at mass-transit buses that will move 200-300 passengers at a time. Urban rail network needs to be implemented.  Nigeria has the population to support this, what boggles the mind is why some of our major cities still do not have rail networks to move people and goods efficiently and cheaply.  It is unconscionable that cities such as Kano, Kaduna, Ibadan, Ile Ife, Port Harcourt, Aba, Enugu and Benin City still do not have a semblance of modern, effective, efficient and cheap transit systems in place.  Lagos has been able to do some important things in the area of transportation systems but more needs to be done. So, Gov. Sanwo-olu and team Lagos, please get cracking. A lot can be done in 4 years. 14 passenger minibuses are often referred to as “MASS TRANSIT”. What is mass about a 14-seater minibus?

Our objective with this piece is to awaken our fellow Nigerians’ consciousness, particularly those that are in positions of authority, and have the responsibility to make some of the measures we have discussed here happen. President Tinubu has provided a pathway through his courage in terms of policies he has implemented thus far. Let all hands be on deck so that the country can move forward and meet the aspirations of Nigerians.  Nigeria’s economy needs to be growing at 8% year on year for the next 10 years. The country has the capacity to do this. What we need now is the determination, commitment, and dedication to implement the measures discussed in this writeup. As late great Martin Luther King once said, “There is a fierce Urgency of Now” Nigerians, particularly the youth can no longer wait.

Government must act now. God Bless Nigeria and her people.

Iretioluwa Oniyide – Abuja -Social and economic analyst and Prof. Babs Onabanjo – Social Entrepreneur and President & CEO: A D King Foundation, Inc USA.

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