President Bola Ahmed Tinubu, yesterday, kick-started the long, tortuous journey towards pulling the economy from the woods,
declaring that the days of fuel subsidy are gone and hinting at the need for a “thorough house cleaning” in the monetary policy.• You can’t remove fuel subsidy through mere announcement, says professor of energy economics• NLC, TUC, NECA: New President must engage labour before removing subsidy• Unified exchange will increase investment, capital inflow
With no cabinet to explain the subsidy removal pathway, there are concerns that without context to subsidy removal, chaos would thrive as marketers hoard products. Just a few hours before the inaugural speech of the president, motorists could go to fuel stations and fill their tanks but the reverse was the reality, a few hours after the speech that hinted at subsidy removal.
Energy expert and former legal lead at Shell, Ameh Madaki, said the sudden announcement by Tinubu would create a chain reaction and lead to suffering of millions of Nigerians in the short to medium-term. A professor of energy economics at the University of Ibadan and Director of the Centre for Petroleum, Energy Economics and Law , Adeola Adenikinju, said the move shows Tinubu’s readiness to tackle Nigeria’s economic challenges.
“Our neighbors have higher fuel prices and lower inflation and poverty rates. Across Nigeria, fuel prices are much higher than the official prices. Yet, there is no data to show that inflation rates are higher in those areas. Government needs to support mass transport systems and implement effective cash transfers to vulnerable households to mitigate the initial pain of fuel price adjustment. In the long term, the Nigerian economy would be better for it,” he said.
The Central Bank of Nigeria , three years ago, pledged to work towards achieving and harmonising the extremely-divergent foreign exchange rate. But it remained at the level of promise with investors citing the rigidity of the market and wide arbitrage as major disincentives. An economist, Prof Ken Ife, lauded the President for demonstrating the courage to embark on some “housecleaning” to achieve price stability, noting: “Obviously, he dropped the hint on arbitrage. Arbitrage is a part of the things that will come under the category of cleaning up because it means that some people may be profiteering from the present system.
The Chief Executive Officer of Dairy Hills Limited, Kelvin Emmanuel also lauded the President’s foresightedness, saying collapsing all the forex intermediation windows at the Central Bank by allowing the banks to determine rates through a float would bring back foreign direct investors, export proceeds without rebates and higher diaspora remittances.
Yusuf maintained that it is a policy regime that would reduce uncertainty and inspire the confidence of investors and minimize discretion and arbitrage in the foreign exchange allocation mechanism. “This will positively affect the investment space. Currently, it is extremely difficult to attract private investment into our petroleum downstream sector because of the unsustainable subsidy regime and the stifling regulatory environment. The subsidy removal will eliminate the distortions and stimulate investment,” he said.
The Nigeria Labour Congress and the Trade Union Congress , in their reactions, said until he engages the labour movement, their position on subsidy remained unchanged. “The civil service has not recruited for many years now, why doesn’t he say he wants to create some number of jobs in the public sector to energise the sector and create a conducive environment for the informal economy to thrive and boom, where a lot of people will have the opportunity to engage themselves, that will reduce crime and criminality,” he said while speaking on the proposed Omnibus Jobs and Prosperity Bill.
The Rights group recalled that Justice Riman, had in the suit marked FHC/AWK/CS/58/2023, made an order restraining Usman Alkali from further parading himself as the Inspector General of Police of the Federal Republic of Nigeria or exercising any form of command or control over the Nigeria Police Force.
The DAWN Commission helmsman said the bitter truth about why the subsidy must go is that Nigeria could not continue to subsidize fuel subsidy with up to $9.6 billion yearly.
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