An economic expert and the Chief Executive Officer of CFG Advisory, Mr. Tilewa Adebajo, has called on the federal government to put an end to the wasteful spending on petrol and electricity subsidies.
According to him, subsidy payments are detrimental to the nation’s economy and no longer sustainable.
Adebajo also called for the privatisation of the Transmission Company of Nigeria (TCN) to make the agency more efficient in its mandate in the Nigerian power sector.
Fielding questions on, ‘The Morning Show,’ a flagship programme of Arise News Channel, THISDAY’s sister broadcast station, recently,
Adebajo described subsidy payment as one of the biggest political problems facing Nigeria.
He argued that even those in the current federal government were the ones that protested against the removal of petrol subsidy by the past administration.
He also made reference to the recent declaration by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, that the corporation would no longer sustain its remittances into the Federation’s Account due to subsidy payments, noting that one of the key structural reforms needed to be made by the government was the removal of subsidy.
Adebajo said: “The subsidy issue in Nigeria is one of the biggest political problems we have had. Unfortunately, the problem has been politicised, because if you remember clearly, the same set of people who are in government today were the one who were protesting against subsidy removal by the last government.
“But obviously, we can see that the subsidy is not sustainable. You saw the NNPC GMD complaining about the rising prices of fuel and how that is going to impact subsidies.
“The NNPC itself has said it can no longer sustain its remittances into the Federation Account because it has to pay for these subsidies, and the higher the petroleum prices go up, the more the NNPC would have to put aside for subsidies and the less that is going to not only the federal government but the state governments.
“So, we are getting ourselves into this vicious cycle and it’s clear that one of the reforms, one of the key structural reforms we need to make is removal of the subsidy.
“And to re-enforce this, I think the President’s economic management team has also made that recommendation for subsidy because it’s clearly, it’s no longer sustainable.”
He said similar reform where the subsidy regime would no longer be in place should apply in the nation’s power sector, to enable the distribution companies make the necessary investments for efficient service delivery.
He pointed out that the country spends about $2 billion annually to subside electricity, adding that most of the subsidy does not benefit the poor, maintaining that eighty per cent of that subsidy went to rich people that can afford to pay electricity tariffs.
Adebajo further said: “So, that needs to be scrapped and the power sector reforms need to be put in place so that the distribution companies can make the necessary investment to make the grid more efficient.
“Subsidies are detrimental to the economy and we have a situation whereby government is spending 90 per cent of its revenues to service debts. Clearly, we are into a debt trap and a vicious cycle that is no longer sustainable.
“So, it’s important that the government drops this subsidy so that it can have significant revenue to be able to fund its operations on a day-to-day basis. Because it is clear that the government is finding it difficult to right-size.
“So, that for me, is a no-brainer, it’s not something that we should talk about and it’s important that we ginger up the political will to get that done.”
He, however, called for the federal government to privatise the TCN to make it more efficient and capable of transmitting electricity generated to the distribution companies.
He blamed the TCN, not the generation companies, as the main cause of the problem in the country’s power sector, explaining that, “the fact is that we cannot distribute the power we are generating into the grid because the grid will collapse. So, it’s important that that aspect of the power sector is actually privatised for efficiencies and opportunities.”
The CFG boss equally urged the Presidential Muhammadu Buhari-led federal government to use the remaining two years of its administration to complete the key infrastructure projects under construction such as rail, roads and bridges.
“The only thing this administration should do is, let them complete the rail projects -the Lagos-Ibadan-Abuja Rail Line. Let them complete the Second Niger Bridge; let them complete all the massive road rehabilitation projects -The Lagos-Ibadan, Benin, Enugu-Port Harcourt, Abuja-Kano-Kaduna Projects.
“These projects, let them concession the airports. If they can complete these projects and the Second Niger Bridge, I think that would be okay for the next two years. And I think, that time, you can give them a pass mark,” he said.
Adebajo stated that over the next two years, according to projections, another 11 million people were expected to go into poverty and that by the time the current government would be leaving office, over 100 million Nigerians were expected to be in poverty.
He, therefore, advised that it was important that the Buhari government complete those infrastructure projects to catalyse job creation and prevent the unemployment upsurge.
He added that the economic legacy that the current going was going to leave behind was going to be nothing to write home about if 100 million Nigerians fell into poverty in the next two years.
