Chief Economist and Senior Partner at SPM Professionals, Paul Alaje has stated that according to research, Nigeria as a nation is still paying fuel subsidy, contrary to the claims of president Bola Tinubu, during his inauguration
Alaje said this in an interview with ARISE NEWS on Monday, while citing the need for a comprehensive approach to address subsidy issues and revenue generation challenges facing the nation.
While stating the fundamental supply chain issues, he mentioned the ongoing subsidy payments and emphasised the need for a holistic strategy, stressing that mere palliatives would not suffice.
“We still have fundamental supply chain issues and reports and research also reveal that we are still paying subsidy even today and the good news is to those in government especially the federal, state and local governments; their revenues have since increased. Imagine if the government announces minimum wage to be not less than a hundred thousand, which I think is the least we should be looking at as a nation, most of the states that think they have money, by the time they pay back that money, we may be back to square zero where we started from. So, when we advise or make assertions to economic issues, we are saying that we need to think holistically so that we don’t just look for the easy way out in the case of subsidy.
“When you look at the revenue as at the time the president was coming in, the revenue of the country was really low, coupled with the fact that we had huge debt service, not to pay back the debt but to service it, the amount we were spending; about 6.6 trillion for a full year for subsidy, when you put all of these together, in the light of what we were generating as revenue, it was clear that removing subsidy from the government, was the easiest thing to do to improve the book. Coming from Lagos to Abuja, there were queues everywhere in different filling stations because of acute shortage of the same PMS that we thought had been liberalised.”
Alaje underscored the missed opportunities under the previous administration, lamenting the lack of effective management of the economy. He highlighted that if the ongoing oil theft in the Niger Delta region had been ended, there would be significant revenue increment.
“At first when President Tinubu mentioned that if subsidy had not been removed at that time, Nigeria could have been bankrupt, here is the issue, when you look at what we have been paying in subsidy and if you add that to our debt service, you will see that Nigeria, we have nothing else to pay. No thanks to the previous administration because of the management of the economy that we have. The question now is if we have president Tinubu in office, what were the options on the table? The options at that time were to end the ongoing oil theft in the Niger Delta region. If we had done that, we would have increased our revenue significantly from what is coming from that region. Again, there are other revenue windows that the government would have adopted which of course were not done at that particular point.
“So, if we want to go with the situation of things, without making extra effort regarding oil and non-oil exports that could have generated more revenue for us or more income for the country, then I think the president may have a point. But in a case where we have these opportunities and we have not maximised them, then the question will be what is the cost? In economics, when we talk of subsidy, it is not trillions of naira. That’s not the cost. The true cost of subsidy is if you say that you have not removed subsidy, what will it have cost us in the real sense? Also, what is the cost on the people of Nigeria?”
The Economist, while proposing solutions, further called on the government to end Niger Delta oil theft, while stressing the need for greater collaboration with the private sector and with foreign organisations to promote production and innovation, particularly by introducing electric vehicles into the country.
“There are a number of things that should have been done that have not been done, number one is to end oil theft in the Niger Delta region. That will boost our foreign reserves. I started with that because the subsidy is gone and marketers are hoping to renew their licenses, the fuel is not even in most places where we need to buy. Another factor influencing this is the exchange rate. Because we don’t refine PMS, I have heard of Port Harcourt refinery, Dangote refinery, I know some efforts are being put in place, I know some productions are coming up but when you look at that in the light of our needs and consumption, you will know that we are still far off from where we should be today. So, we need to resolve issues around the sector. If labour and the federal government truly want to solve the problem, we need to have electric buses all over our country.”
“Nigerian economy needs a holistic review. If you are running a reform, it should not be for only a few sectors. There is a need for a holistic review. We can provide some palliatives but will it solve the problem? No. For me, I think the government should look at how to support the private sector to look at production or partner with some foreign organization for us to look at how we can make electric vehicles available in Nigeria.
“As for revenue concerns, for me I think Nigeria has the capacity to generate up to 40 trillion-naira revenue without further removing subsidy or adjusting the exchange rate. The question is are we ready to generate it. There are a lot of leakages within our system and the challenge is that we seem not to have the capacity to block those leakages.”
Chioma Kalu
Follow us on:
