By Tony Obiechina, Abuja
The Nigerian Economic Summit Group (NESG) has warned that Nigeria must not consider any policy reversal especially the return of petrol subsidy, as the government record increase in revenues.
President Bola Tinubu announced the removal of the petrol subsidy in his inauguration speech in May 2023, declaring “fuel subsidy is gone”. The move he said, is aimed to end decades-long wasteful spending, stop subsidy fraud, and redirect funds toward public infrastructure.
The subsidy removal however led to increase in fuel price, transportation cost, among others.
Speaking during an interactive session with journalists in Abuja on Friday, Joseph Ogebe, Nigerian Economic Summit Group (NESG) said that while the ongoing conflict in the Middle East, there have been clamor for a reversal in the policy, that led to the removal of fuel subsidy.
He explained that having successfully stabilized the economy and realized initial gains, the Nigerian economy is now entering the consolidation phase. This stage, he said focuses on reinforcing progress, with primary objective being to tackle the critical challenge of inflation.
Ogebe emphasized the need for the government to stay the course on the reform while ensuring that gains recorded so far are traslated down to the common Nigerians.
“Once we have secured these foundations, we will move into the final stage of acceleration.
“With the recent issue in the Middle East, we’ve heard in some context people say that we should go back to, the policy reversal. But we are saying no, that shouldn’t be thought about. We shouldn’t think about that for now. Why? We all know what happened during subsidy regime, right?
“We were actually borrowing to pay for subsidy. There was no money to spend on capital and development projects. We’re actually borrowing to pay for subsidy. So that is not where we should go now.
“If you check where we were, we were at the brink of a collapse if the reforms were not done. So we need to actually focus on the reform and make sure that we don’t get to experience serious reform fatigue by 2027,” he said.
Ogebe said that the windfall from the increase in global crude oil prices could be harnessed in terms of social protection and protection for the poor and vulnerable against the increase in prices.
He stressed that the government must ensure that increased revenues are judiciously used to enhance the welfare of citizens and not spent on recurrent expenditure.
“And basically we noticed four dimensions of effects from this crisis. The first one is on your fiscal side. So on the fiscal side, I’m happy to say that yes, it depends on our responses, we’ll see a fiscal upside because the budget windfall, we could get some windfall from what is currently happening.
“Like, you know, what we budgeted for the oil price is around 60, close to 60-70 dollars per barrel. But what we have now recently is about close to 100 dollars per barrel. So that gap alone in oil price will create a windfall.
“Also in oil production, currently in February we had about 1.4 million barrels per day, but recently we heard the Minister say that the production has gone up to about 1.8 mbpd though we’re yet to see the reports from NUPRC. But if that’s the case, right, so we’ve been able to increase production and we’ve also seen increased price. So what happens is that we expect some elements of windfall to come into the economy.
“But what we’re saying is that this windfall should be, you know, judiciously used. We should not just spend on recurrent spending. The windfall should be directed or targeted to critical sectors, critical infrastructure, and also to shore protection,” he said.
He said that the government must focus on ensuring structural transformation by empowering the key sectors of the economy including agriculture, manufacturing, power to boost production activities.
“We need to focus on expenditure efficiency. We need to focus both at the federal level and at the subnational level. We need to spend on critical projects, focus on expenditure efficiency.
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“We have to increase growth in those sectors. Agriculture should grow by six to eight percent, manufacturing about six to eight percent also. Then we cannot develop without power. Power is very critical, we are doing about five megawatts currently, but we need to move to around 7,500 or 7,000 megawatts before 2027 because this power is what we need to power your SMEs, to power your industrial sector, and also to power the manufacturing sector that we envisage that should grow by six to eight percent in the major term,” he added.
