Renowned economists and labour leaders, who gathered at the 2015 Active Citizen Discourse for oil and gas industry stakeholders organised by Junior Chamber International (JCI) Lagos City have differed on the best approach to tackle the controversial issue of fuel subsidy in the country.
While the President of the Nigeria Labour Congress (NLC), Comrade Ayuba Wabba in his analysis insisted that provision of subsidy is a major function of the government that should not be ignored, the Managing Director of Economic Associate, Dr. Ayo Teriba argued that he was not convenient with the definitions and calculations of subsidy in the country and wondered why the refineries are not working to meet local demand.
Also a renowned economist, Mr. Henry Boyo said subsidy should be made to disappear naturally by allowing more Dollars to chase the naira at the foreign exchange market.
Boyo advocated that innovative approaches have to be taken to reduce the burden of subsidy until it disappears naturally from Nigeria's economic system.
In his lead presentation, Wabba argued that subsidy in any economic system cannot be ignored but added that in the Nigerian context, subsidy has been used to do a lot of havoc to the economy.
Wabba insisted that the economic havoc would continue if the downstream is deregulated and left at the control of the marketers.
He said allowing market forces to determine the price means that the government would continue to subject itself hook, line and sinker to economic policies of the multinational agencies which will always advance their selfish interests.
They will always give reason Nigeria should continue to import, they will always give reasons we need to deregulate so that they can have more money. First oil is very strategic, even to our security, marketers will one day come together and say that they will sell petrol at N200 per litre but what will you do. Like the case of kerosene and diesel, DPK has been fully deregulated but you go to some places they sell at N200 per litre, he said.
Why should this be so? Why should citizens continue to carry the burden? What is the essence of government? It is welfare and well-being of the people and therefore why should it be so in our system? I gave an example here to capture all OPEC countries’ cost elements, the second issues is that the cost element caused by the free fall of our Naira. If our Naira was very strong, like N1 to a dollar, what will be the cost of fuel in Nigeria?, Wabba said.
Teriba however said for the fuel subsidy crisis to be resolved, petrol has to be refined locally to meet the domestic need of Nigerians, adding that the government needs to encourage capital inflow as this determines value of exchange rate.
I am still concerned that 22 years down memory lane we are still here arguing about removal or retention of fuel subsidy. Such discussion is a waste of time a when solutions can actually be proferred, Teriba said.
On his part, Boyo posited that the fuel could be sold at cheaper prices in the country on the basis of an appreciable exchange rate as this has a significant correlation with the price of crude oil.
Boyo noted that Naira’s weak exchange rate to the Dollar is a major bane on subsidy regime, adding that this has been complicated by the negative impact of Nigeria’s faulty monetary framework on revitalisation of the real sector.
“Banks attempts to increase credit capacity in the economy resulting to excess liquidity putting too much cash in the economy, more cash more problems has over the years resulted into weaker Naira, lower purchasing power and inefficient borrowing system both in terms of international debt funding and domestic borrowing,” Boyo said.
Boyo explained that subsidy can be allowed to disappear naturally if relatively more dollars are made to chase existing Naira in Nigerian banks and dollar certificates are issued to the three tiers of government and MDAs.
With inflation at almost 10 per cent and cost of funds at over 22 percent to the real sector ansd a weaker Naira, clearly the CBN's liquidity forecasting and programming have failed as monetary strategy to induce price stability, Boyo argued.
The Secretary General of Trade Union Congress (TUC), Comrade Musa Lawal noted that the subsidy issue if not nipped in the bud could create more problems for every individual in the country in the nearest future.
He noted that inasmuch as an average Nigerian continues to produce electricity for his or her household, there cannot be communal coexistence.
As long as our mind is not of communal basis and we think individually, we will never be able to develop this country. Because we think as long as I have solved my own problem others can go to hell. No country survives by individualisation,” he said.
We should think that whatever happens to that man that his children cannot go to school today will be a threat to my children tomorrow. We must think together. If we remove subsidy we turn more people into armed robbers at the end of the day we are killing them and killing our population. My suggestion is this, I don’t want to talk in educational terms, I want to talk in simple terms, as long as your neighbor cannot feed at least three times daily but you can feed seven times, you are not save. Even beyond subsidy, are we having a country? Are we having a nation? I cry not for people but for our future generation, Musa explained.
In her comments, the Chapter President of JCI Lagos City, Kehinde Adedeji said the topic was chosen because "We did a whole lot of reading and we looked at the one that was most pivotal on people’s mind and being the fuel subsidy issue, the fuel crises actually elicited this particular topic and we looked at why are we having a persistent fuel scarcity and what we expect of the new government.
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