Rethinking Nigeria’s Palliative System

A palliative for all is a palliative for the low income earners and the vulnerable

– Moses Umoru

After the Inauguration of new government administration in Nigeria, President Bola Ahmed Tinubu, made no delay removing fuel subsidy. He also unified the exchange rates.

These policies has brought about increase in the prices of food items, transportation and general living costs. Products and services have been reviewed by up to 300%. And also, the June Consumer price Index (CPI) figure is not a reflection of the current reality.

The Federal and State governments have both announced various Palliatives targeted at those with low income in the country. The aim of which is to cushion the effects of these policies on the common Nigerians. One of such palliatives is the conditional cash transfer of Eight thousand naira to over 12million Nigerians.

Expert Opinion by Moses Umoru

Moses Umoru, an Economic analyst and the DG of the French Chamber in Nigeria, has asked the government to rethink the palliative strategy being targeted at low income earners.

“From a micro-economic perspective, a palliative system being targeted at the poor is counterproductive. A palliative for all will better benefit the low income earners and the vulnerable. In a situation of rising cost, the middle class and rich will always adjust their expenses. This will possibly mean sacking the house cleaner and cook to save cost, using the driver part-time and reducing salaries, reducing support to vulnerable people within their community, etc.  A possible 25,000 naira salary for the cleaner will be lost for 8,000 naira palliative in this case.”

Moses Umoru,
DG, Franco-Nigeria Chamber of Commerce

Moses also pointed out that “a palliative for all is a palliative for the low income earners and the and vulnerable”. The government should consider subsidizing food production by funding farmers while reducing the cost of the produce. Reduction in the price of flours for bread, rice, etc. will be a great strategy. Also, transportation subsidy already been discussed is a welcome idea.  

According to various statistics, over 45% of personal income/salary is spent on food items. Sometimes, it gets up to 55%. Subsidizing food items therefore will generally help cushion the effects of these good policies on the lives of the rich and middle class. This will invariably tickles down to people with low income considering the flow of income.

Furthermore, for these policies to work effectively and benefit the lower class, the rich and middle class must play a fundamental role in supporting the system. Since the rich and middle class own most businesses, in an inflationary period, there is increased pressure to layoff staff in order to reduce the cost. But if there is policy to reduce tax (PAYE and other company tax), the effects of the subsidy removal will be reduced, thus eliminating the need for staff layoff.

Conclusion

In conclusion, rethinking the palliative system in Nigeria is crucial to ensure the well-being of the lower class and vulnerable during times of economic change. By carefully considering the micro-economic aspects, the government can make informed decisions that positively impact all segments of society. Ultimately, a comprehensive and inclusive palliative system will lead to greater prosperity for the nation as a whole.