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End of Artificially Low PMS Prices: Time for Social Safety Nets to Step Up

True to the “Subsidy is gone” announcement of May 29, 2023, Premium Motor Spirit (PMS) prices in Nigeria now range from N855 to N1,400 per litre, more than 4 times the N197 per litre in May last year. The price increase is attributed to an official price review by the NNPC and rising uncertainties, exacerbating the endemic PMS scarcity and resulting in tortuous petrol queues in Nigeria’s major cities. While the adjustment is expected to reduce the annual subsidy spending, consumers are estimated to lose about N5trn-N14.6trn to the government. The resulting income squeeze, increased transportation and logistics costs, and heightened inflation risks deepen the ongoing cost-of-living crisis.

It is now critical to ensure that savings from subsidy removal are directed toward social programs that alleviate this burden. Targeted welfare initiatives, subsidized public transportation, and investments in essential infrastructure are essential to boosting the purchasing power of the most vulnerable. Without these measures, the economic strain will persist, increasing the risk of social unrest and constraining long-term growth prospects. The government must prioritize redistributive policies to ensure the benefits of fiscal adjustments are shared with the groups hardest hit by rising costs.

Education disparities in Nigeria – Addressing the human capital gap 

India has become a model for economic growth among emerging markets, averaging at least 7% annual real GDP growth over the past 30 years, and is expected to become the world’s third-largest economy by 2027 based on its GDP size. A critical factor in this success is India’s emphasis on education. India’s Human Development Index (HDI), which considers life expectancy, education, and gross national income per capita, increased to 0.644 in 2022 from 0.586 in 2014. In comparison, Nigeria’s HDI in 2022 was 0.548. As Nigeria aims to replicate India’s economic success, the importance of quality education cannot be overstated. According to UNICEF, approximately 18.3 million children in Nigeria are not in school. The dire condition of Nigeria’s education sector raises concerns about its future as it struggles to develop a substantial, skilled labor force, which is essential for economic transformation and sustained growth.

In this latest edition of FDC Prism, the Think Tank in-depthly analyzes these recent economic shifts, shedding light on what lies ahead for Nigeria in the coming weeks.

Enjoy your read!