• The World Bank advises Nigerian policymakers to move away from national averages when formulating social protection measures after the fuel subsidy removal.
• Customizing reforms and social protection initiatives is crucial to consider the impact on different income groups and regions, as highlighted by the World Bank’s report.
• Shifting the focus to a targeted and inclusive approach is emphasized by the World Bank to address the effects of fuel subsidy removal across various socio-economic strata and geographic areas in Nigeria.

The World Bank, in its June 2023 report titled “Detox Development: Repurposing Environmentally Harmful Subsidies,” has advised Nigerian policymakers to move away from relying solely on national averages when formulating social protection measures considering fuel subsidy removal.

According to the World Bank, it is crucial to consider the impact of fossil fuel subsidy reforms on various income groups and regions.

The report emphasizes the need to customize reforms and social protection initiatives to address the specific requirements of different population segments.

The World Bank emphasizes the need for policymakers to move away from national averages and adopt a targeted and inclusive approach to address the impact of fuel subsidy removal. This approach aims to ensure that the effects are adequately addressed across various socio-economic levels and geographical regions.

A part of the report stated:

• “If policymakers focus only on national averages and use income level as the sole indicator of vulnerability, they may underestimate the vulnerability of certain groups and provide inadequate social protection for the poor.
• “For example, blanket compensation that uniformly covers a large share of the population may provide adequate compensation, on average, but is likely to fail to protect particularly vulnerable households. Commonly, the vulnerability of population groups is determined based on their income status.
• “However, other determinants of social marginalization can be even more important for instance, the exclusion of women or ethnic minorities makes livelihoods particularly vulnerable to shocks.”

More Insights

The report stated further that while in most states the poorest households consume very little kerosene, in several southern states kerosene consumption by the poorest is significantly above the average for their income group.

So, these regional differences may reflect issues such as differences in the type of employment, access to energy, and availability and affordability of alternative fuels.

The report also provided some insights based on the Goodluck Jonathan administration’s 2012 attempted removal of fuel subsidies.

According to the report, at that time, inadequate attention was paid to the needs of low-income households, resulting in public protests and fierce opposition.

How subsidy removal palliative should be structured

The World Bank report further highlights that in 2012, public protests were concentrated in urban regions such as Abuja and Lagos, where low-income households were mainly dependent on fuel, with little consideration for other parts of the country and their realities.

The position of the World Bank on how policymakers should structure subsidy removal palliatives is in line with what some industry stakeholders have said in the past.

In April 2023, energy analyst, Dan D. Kunle told Nairametrics that if the fuel subsidy should be removed, the government needs to distribute palliatives through state and local governments because they are closer to the grassroots.

According to Kunle, structuring palliatives from the federal capital, Abuja defeats the purpose as the many realities of energy access and affordability will not be considered from a national standpoint.

He emphasized that state and local governments are in a better position to understand the realities faced by Nigerians in all geopolitical zones of the country.

This solution also makes it easy for the palliatives to reach the intended members of the population instead of being siphoned by corrupt officials.