Key questions this article answers:

  1. The government plans to give 12 million households ₦8,000 for six months. Is this necessary? 

  2. Will the ₦8,000 be sufficient to cushion the impact of the fuel subsidy removal and support consumer spending?

On July 13, President Tinubu announced plans (which are now under review) to disburse ₦8,000 to 12 million households (60 million persons) in six months to cushion the impact of Nigeria’s recent petrol subsidy removal.

He has since reconsidered the programme due to criticisms, such as how the government will disburse ₦8,000 to poor Nigerians. But it’s worth noting that a government’s consideration for cash transfers after subsidy removal is basic. Countries undertake painful reforms such as removing subsidies and typically offer short-term social safety nets. These often include cash transfers, giving food items or adopting other indirect price smoothening mechanisms like tax rebates to food imports to soften the blow to their citizens.

In Egypt, for instance, after the government removed its fossil fuel subsidies in 2014, particularly diesel, it provided cash benefits to poor households and only allowed for minimal increases in transportation.

Social safety nets always seem like the right thing to do in the short term because it temporarily relieves consumers who begin to battle with higher prices that filter into food, transportation, and overall living costs.

In today’s article, we’ll assess if ₦8,000 will be sufficient for the poorest households and answer whether it can help boost consumer spending in Nigeria.