As inflation pushes 15m more Nigerians into poverty
Inflation projected to reach 15.5% by end of 2022
By Udeme Akpan, Emmanuel Elebeke & Fortune Eromosele
AWKA—Governor of Anambra State, Prof. Chukwuma Soludo, has kicked against retention of fuel subsidy in Nigeria.
This was even as the Nigerian National Petroleum Corporation, NNPC, Limited said payments for petrol subsidy cost the Federation Account N1.217 trillion in the first five months of 2022.
However, Soludo, noted that fuel subsidy should be charged from the federal government and not subnational states.
He also argued that the subsidy ought to have been removed ‘like yesterday,’ adding that its non-removal could cause the Central Bank of Nigeria, CBN to spill money.
Soludo, who made his intentions known at the launch of the Nigeria Development Update, NDU, by the World Bank group in Abuja yesterday, emphasised that the solutions to Nigeria’s problems were obvious and not far-fetched.
Specifically, he said: “Federal government decides that it wants to subsidise Premium Motor Spirit, PMS, why do you have to charge it from the subnational states? You should charge it from the revenue of the federal government.
“We need to have this conversation, the politics, and structure of the government and so on. We cannot do the same thing over and over again and expect the same result; it’s not going to happen. We’ve had this analysis for a decade, the same analysis and conclusions of what to do.
“Remove this subsidy like yesterday, this ought to have been removed like yesterday. If we continue with the subsidy, Central Bank will continue to spill money. The solutions are pretty obvious. What we need to do is to be committed to it.”
The report noted that the war in Ukraine added to Nigeria’s woes, as inflationary pressures have increased, with inflation projected to reach 15.5 percent by the end of 2022.
“Increased inflationary pressures following the Ukraine war are expected to push even more Nigerians into poverty.
”Before the war, higher inflation pushed an estimated eight million more Nigerians into poverty between 2020 and 2021. In 2021, inflation averaged 17 per cent, undermining Nigeria’s economic recovery by eroding the purchasing power of the most vulnerable households.
“We project that the added inflationary pressure emanating from the war in Ukraine could push as many as one million more Nigerians into poverty, on top of the six million already projected before the war.
”Overall, the ‘inflation shock’ is estimated to result in about 15 million more Nigerians living in poverty between 2020 and 2022.
“The added inflationary pressure from the war in Ukraine could push as many as one million additional Nigerians into poverty in 2022. Even before the war, inflation in 2022-then projected at 13.5 percent was predicted to push around six million Nigerians into poverty in 2022.
“With the war, the higher rate of inflation-projected at 15.5 percent-could push approximately seven million Nigerians into poverty, an additional one million people. The CBN’s inflation target of 6-9 percent, which was not achieved in previous years, remains unlikely to be met in 2022.
“The increase in May 2022 in the policy rate by the CBN is an adequate measure. Still, it has occurred in a context in which FX management and development finance at subsidized rates have reduced the effectiveness of monetary policy.
“Moreover, financing of the fiscal deficit and trade restrictions by the Central Bank continue fuelling inflationary pressures. Inflation in Nigeria will thus remain among the highest in Sub-Saharan Africa in 2022,” the report stated.
However, in its May 2022 report to the Federation Accounts Allocation Committee, FAAC, the Nigerian National Petroleum Corporation (NNPC) Limited disclosed that payments for petrol subsidy cost the Federation Account N1.217 trillion in the first five months of 2022.
The Corporation showed that N271 billion was deducted from its expected remittance for the month, bringing to the total deductions for the year to N1.217 trillion for petrol subsidy.
NNPC said it would further deduct N874.5 billion from its expected remittance in June.
It stated in the report: “The value shortfall on the importation of Premium Motor Spirit, PMS, otherwise known as petrol recovered from April 2022 proceeds is N271,125,127.487.58, while the outstanding balance carried forward is N371 billion.
“The estimated value shortfall of N874,503,649.643.98 billion (consisting of arrears of N37I billion plus estimated April 2022 value shortfall of N503,313,767,828.14 is to be recovered from May 2022 proceeds due for sharing in the June 2022 FAAC meeting,” the NNPC document said.
A breakdown of the deductions so far this year showed that in January N270.83 billion was deducted, February N210.38 billion, March 219.78 billion, April N245.77 billion and May 271 billion.
The monthly data for the year for actual petrol subsidy cost showed that N143.72 billion was incurred in January, N253 billion in February, N152 billion in March and N642 billion in April bringing the total for the first four months to N1.190 trillion.
This means that in 2022, the Federation Account has not received any proceeds from the export and domestic sales of Federation crude oil.
In 2021, N1.573 trillion was deducted by the NNPC from its revenue contribution to the Federation Account for petrol subsidy which it carries in its books as PMS value shortfall or under recovery.
The Federal Government had earlier in the year received approval from the National Assembly to spend N4 trillion on petrol subsidy in 2022.