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19September2017

Take away the fuel subsidy, but give us Bolsa Familia


The harsh reality of a deregulated petroleum regime is that it will hurt the poorest in the land especially in the short to medium term.  The abolition of the subsidy would increase gasoline prices to between N150 and N180 a litre. This could stoke inflation, weaken disposable income and further aggravate economic inequalities. In Nigeria, food accounts for 52% of household spending, 45% live below the poverty line, and the World Bank puts the country’s Gini Index at 0.43 (Gini index is a measure of income inequality where 0 represents perfect equality in a society, while an index of 1 implies perfect inequality). Nigeria lacks the most basic social welfare niceties even to those genuinely deserving of it and the removal of the petroleum subsidy which has helped provide cheap fossil fuels will be hotly contested. Removing the fuel subsidy will save the country about N1.8 trillion annually for the next five years and reformers will help their case by pushing for good causes to channel these savings into.

We highly admire the good works of the “Bolsa Familia”, a conditional cash-transfer programme (CCT) which goes to 13m families in Brazil (about one in four) as long as the children stay in school and get medical check-ups. Bolsa Familia, according to its most recent progress report, published in March, helped drop rural poverty by 15 points between 2003 and 2008. It has also won high praise from ever sceptical bodies like the World Bank whose former President described it as a “model of effective social policy” and has been exported to places like the United States. New York’s Opportunity NYC is partly based on it. Bolsa Familia has also come cheap, costing the Brazilian government only about 0.4% of GDP in contrast to our unwieldy fuel subsidy which is costing us about 3% of GDP. Nigeria can therefore benefit from replicating this model .

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