Subsidy Removal is Long Overdue – Sanusi
A Former governor of the Central Bank of Nigeria, and former Emir of Kano State, Sanusi Lamido Sanusi, has said that the removal of fuel subsidy, albeit accompanied by economic hardship, was long overdue.
Sanusi while speaking at the Distinguished Lecture Series of the Nigerian Institute of International Affairs (NIIA) themed “Resetting the Nigerian Economy for a Brighter Future”, said as far back as 2011, he, alongside his team, had advocated for the removal of fuel subsidy because it was not sustainable.
Sanusi explained “It took 11 years. And, you know, the subsidies we have are not subsidies. Even the structure of the fuel subsidy in Nigeria was the worst possible structure for any government’s balance sheet. In finance, it is called a naked edge.”
“What the Federal government said was, we will fix the price of petrol. This is a product whose price we do not control. It was a commodity traded on the international market. So the government said, the price of petrol is 70 naira per litre. It doesn’t matter when the whole price is $50 or $100 or $150, Nigerians will not pay more than 70 Naira per litre.”
“And every time the price of oil moved up, every time the exchange rates moved, every time the interest rates moved, the difference went straight to the government’s balance sheet for 200 million Nigerians. And the government itself had no backup. If the product is supposed to be sold for 200 Naira and you sell it for 70 Naira, there is a 130 Naira margin per liter to be made. It was an unsustainable module,” he said.
He further explained the loopholes in the module saying that “in economics, when the price goes up, quantity demanded should fall, but in Nigeria, because of the hedge, the price goes up, people come in because the arbitrage opportunities are expanded and all that money was going to scams and to fraud.”
The Former CBN governor said while people are complaining and asking why the economists in the country are silent, they, the economists, are not to blame.
He said Nigerians need to understand the premises of politics, saying that at the end of the day, the decisions of the economy are taken by politicians because an economy is run on the basis of the ideological orientation of those who control the state.
“If the state is a rentier state where the people in control see it as an avenue to make money for themselves and their families, they are never going to run an economy in a manner that encourages production and growth, Sanusi stated.
“If it is run by people who are thinking long-term and of the legacy they will leave behind for their children and the future of the country, they will run different sets of different policies.
“I think every economist knows that multiple exchange rates are a problem, but as long as politicians are able to give themselves a dollar at 400 Naira and sell at 700 Naira, they are not ready to listen to the economists,”he said.
He pointed out that while understanding the premises of politics is vital, it is also crucial to note the governance of the economy is paramount.
The Former Emir of Kano State also hammered on the importance of economics to be brought into public discourse, not as a research or a discipline.
According to him, Nigerians need to have some appreciation across the board of the importance of the economy, stressing that the economy is everything but people don’t understand.
The former CBN governor added that, if the people do not understand how the economy ought to be run, they will accept whatever politics is being played with the economy.
