If Nigeria wants to ease the burden of inflationary pressure on its economy, the World Bank Group has recommended that it cut back on the amount of money it borrows from the Central Bank. This was announced on Thursday at an economic assessment session held at the Lagos Business School by Alex Sienaert, the World Bank’s Lead Economist for Nigeria. While complimenting the administration for its recent economic changes, Sienaert stressed the importance of maintaining these policies in order for the economy to recover from recent shocks and experience significant growth in the near future.
He remarked that lowering inflation was a major priority for the government. Some suggestions include lowering the percentage of subsidised CBN loans made to medium and large businesses and the amount of money the government borrows from the CBN. All of these factors contribute to an increase in the money supply; lowering this factor will help bring down inflation, as will following it up by replacing import restrictions with currency exchange rates. According to him, the price of petrol had dramatically risen, contributing to the stress placed on the economy.
Wages and income of around 50% of Nigerians increased by 10%
To raise spending and address the genuine concerns in the country, he said, several creative solutions would need to be developed. He added that the Federal Government plans to distribute N8,000 as palliatives after eliminating fuel subsidy, which will raise the available wages and income of around 50% of Nigerians by 10%. Seinart suggested that many Nigerians would gain from the government’s additional funding since it would save them the trouble of going without food, withdrawing a child from school, or leaving out medical care.
Furthermore, he added that another common misconception is that the sums of N5,000 or N8,000 are meaningless. For a large number of Nigerian families, that is a substantial sum of money. Most people would be surprised to learn that. According to his estimation, over half of all Nigerian households have monthly incomes of N60,000 or less. That’s a 10% increase in wages and available incomes if they give them an extra N5,000 or N8,000 per month for six months to help them out of a problem. A lot of families could benefit from it.
They hope to mitigate fuel subsidy removal with the fund.
Seinart noted that the amount of funds that the government would use for the cash transfer was not an extremely large amount of money compared to the amount it would achieve from the subsidy removal. He pointed out that the concept of N5,000 or N8,000 cash transfer to low-income families has been in the headlines for the past six months but that the cost of doing so would be comparable to the amount on the withdrawn subsidy for only about one month at the old exchange rates and fewer than two months at the new ones.
All this follows President Bola Tinubu recent declaration that the Federal Government planned to distribute N8,000 to 12 million low-income households on a monthly basis for a period of six months in order to mitigate the impact of the elimination of fuel subsidies. As a result, many low-income and vulnerable families may be able to withstand the storm without damaging decisions like withdrawing children from school, going hungry and others. This is not an excessive amount of money in comparison to what is being released.
The N8,000 is insignificant compared to the country situation.
However, some economists and labour organisations have advocated against the proposal. Mrs. Funmi Sessi, chairman of the Lagos branch of the Nigeria Labour Congress, said that the money would not benefit the typical Nigerian. She stated that looking at the money and the impact of the removal of the subsidy, which has resulted in an increase in the costs of everything on the market, she wonders what the N8,000 can achieve for a family in a month. It will be insignificant in comparison. Since then, the Federal Government has reversed course and stated that it is reconsidering the idea.