W'Bank Wants FG to Replace Oil Subsidy with Cash Transfer Programme

22 Apr 2013

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World Bank office

By Kunle Aderinokun

The World Bank has urged the Federal Government to establish a cash transfer programme, designed to channel monies that would have gone into subsidising  fuel, to the poor that constitute majority of the population.

The bank's Chief Economist for Africa, Mr. Chanta Devarajan, who gave this advice during the roundtable  discussion of chief economists council at the 2013 Spring Meetings of the International Monetary Fund/World Bank in Washington DC, US, lamented that 60 per cent of the $30 billion that Nigeria realised from oil went to the few rich while the remaining 40 per cent are left for the majority poor to scramble for.

Devarajan said: "The problem with oil  subsidy is that lion's share goes to the non-poor, as much as 60 percent goes to the rich where as 40 prevent goes to the rest of Nigerians, so it is to an effective way of helping the poor and you can replace that with the cash transfer that is targeted at the poor, and save a lot of money. That is what other countries like Brazil which replaced all omits subsidies with his familiar programme like the cash transfer programme."

He however clarified  that he was not calling for outright removal of subsidy but was strongly pushing for more efficient way of helping the poor.

Asked to expatiate on the cash transfer programme, the chief economist explained: "Brazil has a conditional cash transfer programme that has had tremendous impact on poverty which is declining rapidly and inequality has fallen in that country. They had the highest inequality in the world but it now come down substantially and they spent 0.75 percent of GDP.

"How it works is that every family gets a certain amount of money conditional on two things, that they send their children to school and that they take their new borns to the clinic on regular basis. So when they go to the hospital, they get a receipt and they show that and then they get the cash transfer."

Devarajan described as unacceptable the situation in which Nigeria could not translate oil revenues into benefits for the poor.

According to him, "Nigeria earns something like $30 billion in oil revenues but still has a poverty rate of about 60 per cent and that is unacceptable in my view. Then you go back and say how do you do that and I think it has got to do with infrastructure deficits which hurts the poor. You know that the non-poor has their own generators and things like that but the poor are suffering, education and health system is not delivering desirable outcomes."

However saying the  underlying factor was the problem of governance, Devarajan  stated that: "To make infrastructure work, you need to build trust in the public that if you raise electricity prices for instance that they will get better electricity."  He added: "You have to get thrust in the public that if you reduce energy like the fuel subsidies, that the government will actually use that money wisely, or may be even transfer it to the poor in terms of cash transfers."

Devarajan however  pointed out that one thing was  for the World Bank to advise, another was for the Federal Government to  take the advice, especially when  Nigerians supported it.
"We can only advise them but it is the Nigerian people, the government will only do things if they see that a majority of the Nigerian will support them. So it is up to you to raise your voice to amplify it through the media."

Tags: Nigeria, Featured, Business, World Bank

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