Expand school feeding, reduce health, transport fees

The International Monetary Fund (IMF) has urged the Nigerian government to expand its Social Safety Net (SSN) programme – school feeding, to provide some relief to low-income and vulnerable households.

"Countries without strong enough SSNs to provide support to the most vulnerable can expand existing programmes."

The Fund said this in a new note titled, ‘Fiscal Policy for Mitigating the Social Impact of High Energy and Food Prices’, which was released on Tuesday.

"Governments could also consider reducing education, health, or public transportation fees if they help in reaching the targeted groups and can be effectively implemented. All these imply that countries with weak SSNs must rely on a combination of measures to reach the desired target groups," the IMF said.

"When feasible, the existing most efficient SSN programs (for example, school feeding programmes) can be expanded to provide some relief to low-income and vulnerable households by increasing benefit levels and coverage as needed."

According to the IMF, alternative approaches to targeting, such as geographic, categorical, self-selection, community-based, or proxy-means testing, can be used. Ad-hoc measures, such as those introduced in response to COVID-19, can be considered. In this respect, digital tools can be leveraged, for instance for beneficiary intake and registration through online applications complemented with information on individual situations from non-standard sources, such as telecom metadata.

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"Benefits can be delivered through Government-to-Person (G2P) mobile payment platforms. During the pandemic, some governments, such as Brazil and Thailand, implemented registration processes through dedicated websites.

In Togo, the government was able to quickly identify and enroll the vulnerable with the help of biometric voter IDs and satellite and phone record data. Cash transfers through a digital G2P platform.

Nigeria used a new targeting method based on census data and high-resolution satellite imagery to map the poorest urban areas and target benefits. However, these technology-based approaches can lead to the exclusion of low-income households that may not have access to digital tools and/or may be difficult to reach through digital mechanisms," the Fund said.

The Washington D.C. based Fund said countries with fuel subsidies could consider differentiating adjustment paths of domestic prices by type of fuel based on their relative weights in the consumption of different income groups.

For example, in some countries, liquefied petroleum gas and kerosene are more important for low-income households, which use these fuels for cooking or heating, and hence could have a slower adjustment path than prices for gasoline and diesel. Once the domestic price is increased in line with the international price, countries could adopt an automatic energy pricing mechanism with smoothing that prevents sharp adjustments in fuel prices as a transition to liberalised pricing. The expansion of fuel subsidies could also impose a risk to fuel security as incomplete compensation of fuel suppliers is often associated with supply shortages.

"Countries with existing energy or food subsidies should gradually pass through international prices to retail prices while committing to eliminating subsidies over the medium term. The pace of pass-through should be carefully calibrated based on the gap between retail and international prices, the available fiscal space, and the ability to put measures in place to mitigate the impact on vulnerable households," the IMF said.