The Emir of Kano, Alhaji Muhammadu Sanusi 11 said
yesterday that President Muhammadu Buhari should
remove the subsidy on fuel if the economy must be
saved.
“This fuel subsidy has to go,” the former Central Bank
governor declared at the All Africa Business Leaders
Award West Africa held in Lagos.
Sanusi, who spoke extensively on the state of the
economy, said the country can no longer afford the many
leakages that have battered the economy over the years.
Quoting CBN figures,he said: “in the first two quarters of
this year, this country spent over 500 billion naira on
debt servicing. At end of this year, it will be over
1trillion which is more than the amount of money
budgeted for health, education and defence combined.
“There is no room in the government’s balance sheet for
borrowing and spending. We have no option but to block
leakages and to stop non-priority expenditures.
“It is for this reason that we cannot afford to spend all
our time talking about the past. It is time to look at what
we are doing now and ask ourselves if the fiscal stance
and monetary stance are the appropriate stances for the
situation we are in.
“Does it make sense at this time for the government to
continue paying petroleum subsidy? It does not, and we
must say it.
“When you need fiscal consolidation, when you cannot
borrow, when you are not earning because oil prices are
down, you have to shut down, especially those expense
lines that have been known historically to be the sights
of those seeking rent.This fuel subsidy has to go.”
He also called for the expansion of the tax base and an
increase in VAT.
“ Our tax base has to expand, VAT have to go up. We
can’t continue having an economy where we collect tax
from oil companies, collect tax, maybe, from the
telecoms companies, and then 60, 70 per cent of the
GDP does not pay taxes. This is something that has to
be looked at.”
He expressed disgust at some of the anomalies in the
economy, saying: “we are Africa’s biggest oil producer
but the biggest export from the United Kingdom to
Nigeria is petroleum products. We don’t refine our own
crude. We don’t have a petro-chemical industry. We
burn our gas and we don’t have enough electricity.
“We produce cotton and import textiles from China. We
have a large tomato belt and we import tomato paste.
Everywhere you turn…we produce cassava, we don’t
produce starch. And what we don’t have we export. It is
so bad that we had a military government that conducted
free democratic elections in Liberia. We exported
democracy when we had a military government.”
Speaking on his personal experience as CBN governor,
he said: “The biggest challenge I had as Governor of
Central Bank was convincing politicians that there
would be a day when we will regret not saving the
money when oil price was high. That the leakages in the
oil sector could not continue; that oil was a commodity
whose price goes up and goes down and when it comes
down, if you don’t have the buffers, you are going to
suffer.
“ It is one of these moments where if you were not a
Nigerian, you would say well, I told you so. But you
can’t, because it is a very sad story. It is very obvious
and it has happened over and over again. You have high
oil prices, high oil revenues and you blow the money
away, and when oil prices crash, you don’t know how to
face the situation.
“In 2009, we had a huge crisis. Oil prices crashed from
140 dollars to less than 40 dollars. That was the time I
was coming to the Central Bank. But at that time, the
government had a number of advantages. The previous
administration had saved a lot. There were physical
buffers. The Central Bank and the Ministry of Finance
could pursue countless fiscal and monetary policies,
even though we had devaluation, even though we had
some inflations, even though we dealt with the biggest
banking crisis in our history, the economy continued to
grow and people continued to be employed.
“The situation today is different. We spent years
deceiving ourselves, calling ourselves the 21st biggest
economy in the world based on something called
rebasing. We said our debt to GDP ratio was 11 per cent
and that the ratio looked very good. Yes we had a debt to
GDP ratio of 11 per cent, but we were spending 33 per
cent of government revenue servicing debts.”
Besides,he asked the federal government to devalue the
naira and warned that Africa’s biggest economy is in
danger of a long term slump unless the government
confronts slowing growth.
“Let’s stop being in denial, we cannot artificially hold up
the currency,” he said.
He said President Muhammadu Buhari, who is against a
weakening of the naira, “needs help on the economy.”
Under current Governor Godwin Emefiele, Nigeria’s
central bank has virtually fixed the exchange rate since
March.
Rationing dollars and limiting foreign-exchange trading
have stabilized the naira, which has remained at about
198-199 per dollar since declining 8 percent in the first
quarter.
The central bank’s moves are hurting the economy, said
Sanusi, 54. It expanded 2.35 percent on an annualized
basis in the second quarter, the slowest pace since at
least 2010.
“We are depriving certain key industries of imports,” he
said. “If we have to make a choice between economic
growth and a devaluation, my recommendation is that
we protect growth.”
“The portfolio flows are gone,” he said. “Inflation is
already upon us. You have fiscal consolidation. It is time
to loosen monetary policy. Otherwise we compound an
exchange rate crisis for businesses with high borrowing
costs and declining demand.”
Some portfolio investors have withdrawn from Nigeria,
with foreign holdings of naira government bonds falling
to less than 10 percent of the total from 27 percent in
2013, according to Standard Chartered Plc. In
September, JPMorgan Chase & Co. kicked Nigeria out of
its local currency emerging markets bond indexes,
tracked by more than $200 billion of funds, saying
exchange controls made it difficult for international
investors to buy and sell naira debt.
Sanusi said ministers acted like “courtiers” under
previous administrations and shouldn’t do the same in
Buhari’s cabinet.
“I hope people will have the courage to know that loyalty
is about telling your boss the truth,” he said.
Buhari, who came to power in May, has nominated
ministers, although he hasn’t announced their portfolios
and the Senate still has to approve them all.
