Subsidy Reform: Expanding Opportunities for Women’s Welfare Gains, By Victoria Ibezim-Ohaeri
Considering the key energy access issues Nigeria is facing, leading to the current efforts to redesign and implement substantial energy sector reforms, it is hoped that the government will take steps to understand and make informed choices regarding energy sector reform policy implementation and improve development outcomes for women.
There is a significant and growing body of research regarding the impact and benefit of energy subsidies and reform with regards to the poor, but there is very little information or research regarding the impact and implications of energy sector reforms on gender. Therefore, it is important to explore the impacts of fossil fuel subsidies and their reform on women, identifying how policies can best take account of how women – especially those in the lower income bracket – experience and use energy, and ensure that the opportunities for welfare gains presented by subsidy reform are realised.
Globally governments spend around US$ 550 billion every year subsidising fossil-fuels to consumers. With a high oil price, this can sometimes reach around 30 percent of government spending, more than the government spending on health and education combined. The provision of significant government subsidies to fossil-fuels has not translated to high levels of electricity access or lessened dependence on traditional biomass for domestic energy supply. For example, Nigeria spent 1.3 percent of GDP on subsidy in 2013, yet 55 percent of the population lacked access to electricity, with 68 percent relying on biomass for cooking at the same time. In 2014, the UN Gender Inequality Index (a combination of health, education and empowerment statistics) also ranked Nigeria poorly: 152 out of 187 countries.
Beginning in 2012, Nigeria joined many other countries reforming their domestic petroleum pricing system in response to the volatility of oil prices in the international market and to enhance fiscal stability. As at 2016, Brent crude oil prices have experienced a 60 percent drop, dramatically lowering to current average price of about $60 per barrel from its previous price of $112 per barrel in June 2014. Based on a petroleum products’ price modulation framework, which became operative on January 1, 2016, Nigeria’s petroleum pricing body, the Petroleum Products Pricing Regulatory Agency (PPPRA) has been able to align the domestic price of products with the prevailing costs at the international market. Since then, the PPPRA has doubly revised the pricing template for petroleum products, mainly kerosene and premium motor spirit (PMS), effectively removing subsidy on petroleum products.
How Can the Government Better Manage the Savings from Subsidies on Petroleum Products?
With the high subsidy bills typically paid on petroleum products technically eased out, the huge savings made from its elimination can help create the needed fiscal space to scale up priority spending on poverty alleviation to mitigate the impact of the reform on the welfare of lower-income groups, particularly women. This is necessary because, without adequate preparation and compensation, subsidy reform can entrench existing inequalities. As a good starting point, the Nigeria’s 2016 budget reinforced the government’s zero-subsidy policy by excluding the provision for energy subsidy on petroleum products, but instead, made a N500 billion welfare provision for extremely poor Nigerians who would be direct beneficiaries of a N5,000 monthly cash transfer. An aspect of the social intervention scheme, called N-POWER, promises to create 500,000 direct jobs for unemployed graduates. How can the Federal Government (FG) ensure that the money budgeted for welfare provision, and other additional savings from subsidy cuts are properly targeted to protect lower-income households from fuel price increases, inflation and high cost of living associated with subsidy reform? How can FG ensure that the N-POWER scheme becomes an efficient tool for poverty alleviation and for advancing its gender equality and women empowerment goals?
First, design the scheme to ensure that income benefits, either through cash-transfers, in-kind transfers, loans, or infrastructure programmes like healthcare delivery, education and employment, are clustered onto women. The previous post-subsidy safety net programme—Subsidy Reinvestment and Empowerment Programme (SURE-P) followed this pattern. SURE-P policy, among other things, expanded the age bracket for women participating in the scheme and allocated a 30 percent quota for women’s participation in every state and locality across the country. This needs to be sustained.
Other positive effects on welfare that have been attributed to introduction of modern energy sources include reduced levels of drudgery. Reducing the burden associated with collecting, preparing and using traditional fuel sources may shorten the length of the working day. Further, it can reduce the intensity of the working day by alleviating physical stress and hardship.
Second, the government can alleviate poverty by expanding women’s access to modern cooking fuels by increasing priority spending on cleaner energy fuels and products. Women’s experience of energy traditionally revolves around domestic chores, particularly cooking. In this sense, modern energy access refers to the supply of fuels and combustion technologies that are reliable, convenient and do not cause indoor air pollution. By this definition, improving modern energy access might include expanding the supply and increasing the consumption of electricity among households, as well as liquefied petroleum gas (LPG), clean cooking fuels, clean cooking stoves, advanced biomass cook stoves, and biogas systems.
Why Expanding Women’s Access to Cleaner Energy Should Be Prioritised
First, the time taken to secure energy supplies, for example the collection of firewood, is expected to fall. Second, the time taken to execute chores may fall as a result of using more efficient fuel sources. Cooking with natural gas (LPG), for example, is more efficient and takes less time than cooking with kerosene, due to the higher heating value of the former, while electrification of water pumping may reduce the time spent by women and girls in collecting water. Finally, access to lighting reduces the need to collect lighting fuels, such as kerosene, and thus allows for other activities. Apart from time-saving benefits, the introduction of modern energy sources can lead to other important, positive outcomes for women in terms of improvements in welfare, productivity and empowerment.
In terms of welfare, there is substantive evidence showing that indoor air pollution (IAP) from biomass fuels is a cause of respiratory health problems. One estimate suggests that 4.3 million deaths were attributable to household air pollution (HAP) in 2012, from cooking with solid fuels (WHO 2014), and as a result of pneumonia (12 percent), stroke (34 percent), ischaemic heart disease (26 percent), Chronic Obstructive Pulmonary Diesease (COPD) (22 percent), and lung cancer (6 percent). Adverse health outcomes associated with IAP include asthma, bronchitis, tuberculosis, eye conditions such as cataracts, low birth weight and heart disease. Since woman and children tend to spend more time indoors than men, and because they are responsible for cooking, they are more likely to experience these effects. For example, women exposed to indoor smoke are three times as likely to suffer from COPD, such as chronic bronchitis, than women who use cleaner fuel types. Introduction of modern energy sources, which reduce the reliance on biomass, can address these adverse health consequences.
Kerosene is sometimes grouped with ‘clean’ fuels (along with LPG, natural gas and electricity) and sometimes with polluting fuels (along with coal and biomass). Research has shown that kerosene ‘may have some health consequences, not only because of poisonings and fires, but also because of exposure to emitted pollutants. Given the widespread use of kerosene lamps and stoves, these exposure sources should be much more extensively investigated’. Other positive effects on welfare that have been attributed to introduction of modern energy sources include reduced levels of drudgery. Reducing the burden associated with collecting, preparing and using traditional fuel sources may shorten the length of the working day. Further, it can reduce the intensity of the working day by alleviating physical stress and hardship.
Alternative pathways by which modernisation of energy services could lead to increased opportunity for income generating activities include increased demand for labour as a result of electrification in the local community and availability of energy to run small businesses or work at home.
On the level of productivity, one of the effects most frequently ascribed to improved access to modern energy for women relates to their ability to engage in income generating activities – in the home, in the informal sector, or in the formal sector. Two empirical studies looking at employment effects of increased electrification in South Africa and Guatemala find that electrification leads to an increase in female employment in the order of nine percentage points, and attribute this to women spending less time on domestic chores. Alternative pathways by which modernisation of energy services could lead to increased opportunity for income generating activities include increased demand for labour as a result of electrification in the local community and availability of energy to run small businesses or work at home. However, the ability to realise and profit from these potential opportunities depends upon whether women are empowered to do so and this is where the N-POWER programme can play a critical role.
Empowerment has been defined as “the ability of women to access the constituents of development—in particular health, education, earning opportunities, rights, and political participation”. Educational opportunities and outcomes have been closely linked to women’s empowerment, by enhancing their bargaining power within a household. Looking at the direct effect of modern energy access on educational outcomes, there is some anecdotal evidence suggesting that access to modern energy improves educational opportunities for girls – for example, a study in Tunisia suggested that as street lighting was introduced, parents became more likely to send girls to school as they were less concerned about security.
There is some evidence that access to modern energy sources can improve women’s empowerment, either as a result of either their direct participation in the energy sector or as a result of the increased income that they earn. A study in West Africa finds improved participation by women in decision-making as a result of their role in community level energy projects, while another study found improvement in women’s status and their participation in public and family decision-making following the introduction of women solar engineers in Bamiyan, Afghanistan. However, realising the transformative potential of modern energy access is likely to depend upon identifying and addressing the unequal relations and structural barriers that exist, and incorporating these into the design and implementation of energy policies.
In summary, as the above shows, increased access to modern energy sources can have positive effects on women, with a range of effects being identified. In particular, access can result in increased time for income generation, and improved health as a result of reduced exposure to indoor air pollution, while there is less complete evidence on the effects upon women’s empowerment. Considering the key energy access issues Nigeria is facing, leading to the current efforts to redesign and implement substantial energy sector reforms, it is hoped that the government will take steps to understand and make informed choices regarding energy sector reform policy implementation and improve development outcomes for women.
Victoria Ibezim-Ohaeri is Executive Director, Spaces for Change, Nigeria.
This article is an excerpt from the September 2016 collaborative research between Spaces for Change, Nigeria and the International Institute for Sustainable Development (IISD). This research reviews the likely impacts from fossil fuel subsidies and their reform, on gender, as well as how subsidies can be better targeted and distributed to increase gender empowerment and for the benefit of poor women in the future.