Fuel subsidy removal, unified exchange rate enormous benefits to Nigeria – Muda Yusuf
Dr Muda Yusuf, Founder, Centre for the Promotion of Private Enterprise (CPPE), says the economic positions of President Bola Tinubu on fuel subsidy removal and the unification of Nigeria’s exchange rate hold enormous benefits for the country.
Yusuf, in an interview with the News Agency of Nigeria (NAN) on Monday in Lagos, made the assertion while reacting to President Tinubu’s inaugural address.
NAN reports that the president reassured Nigerians of his commitment to achieving a higher Gross Domestic Product (GDP) growth, significantly reduce unemployment, promote domestic manufacturing, and invest massively in agriculture.
He also pledged to reform the country’s security architecture, and build on the efforts of immediate past president Muhammadu Buhari on infrastructure and subsidy removal.
The CPPE founder said fuel subsidy removal would unlock about N7 trillion into the federation account which would reduce fiscal deficit, and ultimately ease the burden of mounting debt.
He noted that it was currently extremely difficult to attract private investment into the petroleum downstream sector because of the unsustainable subsidy regime and the stifling regulatory environment.
“The subsidy removal will eliminate the distortions and stimulate investment as we would see more private investments in petroleum refineries, petrochemicals and fertiliser plants,” Yusuf said.
According to him, post subsidy regime will unlock investments in pipelines, storage facilities, transportation and retail outlets.
“We will see the export of refined petroleum products petrochemicals and fertiliser, as private capital comes into the space and quality jobs will be created.
“There is a foreign exchange effect and this will result from the import substitution as petroleum products importation progressively decline and this will conserve foreign exchange and boost our external reserves.
“Increase in investment would translate into more jobs in the petroleum downstream sector while the smuggling of petroleum products across the borders will come to an end with a market pricing of refined products,” he said.
Yusuf emphasised the need to put an end to the Nigerian National Petroleum Corporation Ltd. (NNPC) monopoly in the supply of petroleum products.
This, he said, was crucial to allow for competition from private sector players which in turn gives room for subsidy removal to be sustainable.
He, however, called for palliatives which should be segmented into immediate, short term and medium term deliverables.
He said the immediate and short term options include wage review in public service, and introduction of subsidised public transportation schemes across the country.
”As well as reduction in import duties on intermediate products for food related production to moderate food inflation.
“In the medium to long term, there should be accelerated efforts to upscale domestic refining capacity, driven by private investments; accelerated investments in rail transportation by government to ease logistics of fuel distribution across the country as well as domestic freight costs,” he said.
On the decision of the president to put in place a unified exchange rate regime, Yusuf said clarity must be provided to pacify Nigerians that the move was not a devaluation proposition.
Yusuf stated that the unification must be a pricing mechanism reflective of the demand and supply fundamentals in the foreign exchange market which allows for rate adjustments as and when necessary.
“It is a model that is predictable, transparent and sustainable and is a policy regime that will reduce uncertainty, inspire the confidence of investors, minimise discretion and arbitrage in the foreign exchange allocation mechanism,” he said.
