Fuel subsidy removal, exchange rate unification eluded past Nigerian presidents – Economist

RIGHT from the time of the structural adjustment programme of Ibrahim Badamasi Babangida, quite a number of past Nigerian Presidents avoided not to remove the petrol subsidy and unify the exchange rate as the policies are not “very easy to implement.”

A finance expert and development economist, Kelvin Emmanuel, made this point at The ICIR Twitter space on Wednesday, August 2.

Emmanuel, a guest speaker at the virtual event, shared insights on the theme, ‘Impact of Tinubu’s economic policies on Nigerians.’

He highlighted a number of problems the reforms present and probable solutions to help ameliorate the sufferings on Nigerians.

The incumbent president, Bola Tinubu, had done away with petrol subsidy and unified the exchange rate, but the decisions have sparked a surge in the pump price of petrol to about N620 and depreciated the naira to above N800 to the dollar.

The resultant effects are the current hike in transportation fare, increasing foodstuff prices, rising cost of living and other reverberating consequences.

Speaking at The ICIR Twitter space, Emmanuel said, “First of all, I will say that these policies are not very easy to implement. The policy implementation has eluded quite a number of Nigerian presidents, right from the time of IBB with the Structural Adjustment Programme.

“They are the two most powerful demons that have hunted Nigerians for decades.”

Lauding the political will behind the introduction of the reforms, he however, expressed concerns on some of the plans the government have to cushion the effects on the masses.

The concerns border on infrastructure, fiscal and monetary policy structure, inflation, gas supply, access to funds, and other defects in the Nigerian political and economy environments.

He said to tackle the problems, the government needed to remove the fuel subsidy and unify the multiple foreign exchange rate regime.

“The reality is that the government is not doing enough for public infrastructure.

“Check out what is in the budget. 4.9 per cent goes to health, 4.9 per cent to education, but 32.4 per cent goes to petrol subsidy, and it keeps rising because the most significant determinant of the price of petrol is the exchange rate and price of crude oil,” Emmanuel point out.

He argued that there was no how the government could have built with the inherent structure as there was no way to fund the budget since it has to use the money to pay for subsidies.

“I understand that it is not easy because Nigerians are not use to floating petrol prices but I tell you, looking at the budget, all the metrics, this is the right thing to do,” the economist maintained.

Also, fielding a question from how best the government would have handled the implementation of the reforms without hurting the masses, he replied that “there were no easy solutions to the problems.”

“The fact is that the former president didn’t have a plan for this president to remove fuel subsidy and exchange rate,” he added.

He, however, picked holes in some of the new administration’s planned interventions.

He pointed out that the government’s decision to provide 3,000 compressed natural gas (CNG) busses as palliatives to cushion the effect of the petrol subsidy removal might be impossible to achieve.

“You cannot provide CNG busses without CNG stations. It is like saying you want to provide buses without filling stations,” he said, adding that there are currently few or no CNG stations functioning in Nigeria.

“You need infrastructure for CNG, and to create that, you need to go back to the Nigeria gas infrastructure company, a subsidiary of NNPC, deregulate gas price, build high transmission pipes, fund it,” among other requirements, Emmanuel explained.

There is a problem also with the supply of gas around Nigeria, he pointed out, stressing that gas pipelines infrastructure are not evenly provided around the country as the north seems to be at a disadvantage.

He noted that gas distribution has been a major challenge in the power sector as there exists a moribund transmission infrastructure, besides the lack of financial muscles by power distribution companies.

This makes it difficult why the loads the Generation Companies (GenCos) supply to the Transmission Company of Nigeria (TCN) are not adequately taken, and loads from TCN are fully taken by Distribution Companies (DisCos), he explained.

He further noted that if the government could solve the problem of electricity supply, the impact of the fuel subsidy removal and foreign exchange unification would be reduced.

“If you solve power, the demand for petrol to power generators is also going to be reduced,” he said.

Speaking on agriculture and why the immediate past administration should have provided a head start for its successor, he said irrigation clusters and mechanisation should have helped ensure all-year-round farming, not seasonal farming.

“This is really required to slow down inflation because there is a supply-side problem,” Emmanuel said.

Emmanuel also touched on the planned intervention of the government to give out N75 billion to 75 businesses as part of solving the problem of the twin reforms, but said it wasn’t for him a welcome development.

He believes that the long-term solution to the problems is bringing down inflation.

“When you bring down inflation, the MPR (monetary policy rate) comes down. And when the MPR comes down, it is cheaper for companies to borrow,” he said.

Emmanuel also suggested that to address the shortfall in the forex market, the apex bank could compel companies to bring back their dollars to the originating banks and not use third parties to divert funds to foreign accounts.

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