The Federal Government has been urged to exercise
caution in thecall for the removal of petroleum subsidy,
and instead focus onaddressing all the economic
bottlenecks sabotagingNigeria’s common wealth. An
economist,Mr. Henry Boyo, argued that the direct
removal of subsidy will serve as a great disincentive to
the economic wellbeing of all Nigerians.
He spoke on the theme: Petroleum Pricing, Economic
Realities and the Future of the Petroleum Downstream
Sector,at the 2015 Business Clinic organised by the
Petroleum Downstream Group of the Lagos Chambers of
Commerce and Industry, LCCI.
However, Boyo’s views contradicted sharply with the
LCCI’s, which insisted on the abrupt removal of the
subsidy scheme to give way for the proper and efficient
function of the downstream sector to boost the economy.
Boyoargued that there is a correlation between
exchange rate and the pump price of petroleum product,
adding that subsidy should be removed in a manner that
is realisable. He also said the rate of corruption being
highlighted as the crux of the subsidy programme is a
function of surplus Naira.
“The means of processing dollar is a cesspool of
corruption which should be tackled …‘Save Naira, Save
Nigeria’. Once you remove the element that encourage
subsidy, the oil marketers who have benefited from the
subsidy scam would be cut off from the system,” he
cautioned. He warned the CBN Governor, Mr. Godwin
Emefele, not to submit himself to the pressure by
international investors to further devalue the Naira.
According to him, if the Naira is allowed to be further
devalued, pump price of petrol will be sold for N400 per
liter in 12 months even after subsidy removal. He said
that without subsidy the price of fuel will increase
beyond what Nigerians can accommodate.
“An economic process must be denominated on
economic principle. Eight per cent inflation rate means
50 percent drop in the purchasing power. The fact is that
the investors that are mounting pressure on CBN are not
interested in the growth of the economy. They are only
concerned about consumer demands which cannot be
superfluous when inflation is low.
“Nigerians must be aware of the collateral damage
subsidy removal of PMS, would do to the economy before
yanking it off. The reality is that every six month, the
government will have to be increase the pump price.
This is because the exchange rate is a function of excess
liquidity. This is responsible for high cost of funds, which
is responsible for high interest rate and inflation.
“It is falsehood to believe that subsidy will solve a critical
aspect of the country’s problem. To address this,
Nigerians must be willing to stop CBN from making dollar
available at the parallel market.” he said. According to
him, it is out of place to believe that Nigerians will
benefit when the price of crude oil falls, asthe pump
price cannot go down if the cost of Dollar remains high.
“By the time the CBN substitutes the Naira allocations
issued to the three tiers of the government and the
MDAs, the liquidity blot would have been so much that
interest rate will be impossible to reach. We would have
to accommodate a situation where interest rate would
revolve around 23 and 26 per cent.
“Since 2009 when the prices of Diesel and Low Pour Fuel
Oil, LPFO, were deregulated, the products have not been
sold at cheaper rates, due to the weakness of Naira
against Dollar.
“It is amazing that despite the licenses given to 20
corporate organisations, private refineries have not seen
the light of the day. This is because of the issue with the
foreign exchange that is weighing down on investment in
the sector. There is no way that the removal of subsidy
will ensure transparency in the activities of Nigerian
National Petroleum Corporation, NNPC. If the foreign
exchange issue is addressed, corruption in the system
would go.”
www.vanguardngr.com/2015/06/subsidy-focus-on-inflation-high-interest-exchange-rates/

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