FG’s Plan To Take $800m Loan Will Worsen Nigeria’s Inflation Rate – Kale

A Partner and Chief Economist at KPMG Nigeria, Dr. Yemi Kale, has expressed some concern about plans by the Federal Government to get $800 million loan from the World Bank and disburse it as fuel subsidy palliatives given the potential negative effects on the nation’s economy.

The seasoned economist, who is also a former Statistician-General of the Federation, in a tweet on Tuesday noted that apart from the inflation concern, taking the loan would not only increasing the country’s public debt stock which currently had been raising serious concern amongst experts but also given the challenge in properly identifying the 10 million ‘poorest’ households the fund would be disbursed to.

The Head of Research at the professional services firm advised that rather than distributing cash to the poor as being proposed, the government could deploy the fund to issue tech-based transport vouchers to Nigerians or use it to fund the critical sectors of either education or health.

He tweeted: “Minus the obvious debt issue and the inevitable challenges with properly determining, targeting, and disbursing to the 10 million “poorest” households, this could worsen inflation. Why not more non-cash-based palliatives? E.g., tech-based transport vouchers or health/education support, etc.”

Also commenting on the nation’s April inflation rate reported by the National Bureau of Statistics (NBS) on Monday, the economic analyst said that it was clear that the inflation rate was not driven by demand but by the cost of transportation.

Kale further clarified: “Both inflation and the money supply appear to have been unaffected by MPR since September 2021. Rather, inflation has surged and the money supply is unbothered, suggesting the drivers of inflation are not demand. Seems to be more transport cost-driven. We are just increasing finance costs and squeezing growth.”

Recall that President Muhammadu Buhari had on 10th May sent a letter to the Senate, which was read during plenary by the Senate President. Sen. Ahmad Lawan, that the Red Chamber’s approval for the $800 million World Bank loan to help cushion the effect of petrol subsidy removal on poor and vulnerable Nigerians.

The request came a few days after the Federal Government announced the World Bank’s $800 million palliative targeted at 50 million vulnerable Nigerians, or 10 million households before the planned removal of the petrol subsidy.