The Organized Private Sector of Nigeria, OPSN, Tuesday gave three prerequisites for a rancour- free total removal of the subsidy and save the country from any form of economic disruption and industrial disharmony of a hasty subsidy removal that could sound the death-knell of many businesses.
OPSN which comprises of Manufacturers Association of Nigeria, MAN, Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA, Nigeria Employers’ Consultative Association, NECA, Nigeria Association of Small Scale Industries, NASSI, and Nigeria Association of Small and Medium Enterprises, NASME, at a briefing in Lagos, also expressed concerns over Nigeria’s rising debt profile.
At the briefing on “The State of the Nigerian Economy and a Call for Urgent Action”, Chairman of OPSN, and President of NECA, Mr Taiwo Adeniyi, among others, said “the controversy being generated by fuel subsidy is getting to a crescendo and it will be important to guide Government and other stakeholders.
“While there are proponents and opponents of the fuel subsidy regime, three things are undisputable: The fuel-subsidy regime seems fraught with corruption with few petroleum importers benefiting. The subsidy payment is a huge leakage from the revenue portfolio of the nation and there is need to address it urgently in order to free up needed funds for development. Nigerians should not suffer for a product that their nation is endowed with and neither should they suffer for the inefficiencies in Government.
“It is no gainsaying that the current subsidy regime is not sustainable, with the subsidy payment hovering around N150billion monthly and around N2trillion annually. With the removal of subsidy, the funds that would be saved could help address the wide infrastructural deficits and other gap in the country.
“While it is desirable to remove the fuel subsidy, it is also important for Government to take step to address the socio-economic issues that would arise.
While we support the removal of the fuel subsidy, we urge that Government should first, as a matter of boosting Nigerians and other Stakeholders confidence and demonstrating its goodwill, address the following as a prerequisite to the total removal of the subsidy:
(a) The resuscitation of the four refineries that millions of Dollars had been invested in their Turn Around Maintenance (TAM), or outright sale of the refineries to private investors to enhance their sustainability.
(b) Specific relieves to address the anticipated drastic reduction in the citizen’s disposable income and standard of living. It is expected that an increase in fuel price will have a direct and immediate consequence on transportation and costs of food stuff, amongst others. The touted N5,000 monthly stipend to 40 million ‘poorest of the poor’ will most likely aggravate tempers. A more sustainable, well-thought-out relieve should be proposed.
(c) Specific relief to workers and organized businesses not only to reduce the immediate effects of the increase but reliefs that will ensure and enhance the capacity of businesses to remain sustainable and continue to provide jobs.
“While we note the short-term hardship that the removal of subsidy will cause the generality of Nigerians, it is important to state that the long-term benefits far outweigh the short-term pains, as the current beneficiaries of the subsidy are not the Nigerian masses.
“We urge that Government should urgently initiate a deepened engagement with critical Stakeholders including Employers and Organized Labour with the view of arriving at a more realistic strategy to cushion the effects of the subsidy removal on workers, employers and the generality of Nigerians.
Past efforts at providing palliatives have proved to be cosmetic, shallow and unsustainable. We state that fuel subsidy removal based on the argument of international oil prices and other parameters without considering the context of those climes will be unrealistic within the context of our environment. The nation cannot afford any form of economic disruption and industrial disharmony as this could sound the death-knell of many organizations.”
Mr Adeniyi also expressed the concerns of the OPSN over the nation’s rising debt profile, saying “at the last count, the nation’s public debt stock hovers around N33.107 trillion with potential to increase further amid shortage of revenue to fund the N16.39 trillion 2022 National Budget. This is not only worrisome but also calls for caution.
“Though argument have been canvassed in favour of the imperative to borrow, we are, however, concerned at the current rate of indebtedness of the nation. We are worried that with reduction in Dollar revenue, the exchange rate of the Naira against the Dollar may not improve any time soon, which will further put pressure on the Real sector.
We recognize the challenges in revenue generation as partly due to low crude oil production and the inability to leverage on the higher prices of crude oil, it is, nevertheless imperative for Government to urgently address the issues of diversification of the nation’s sources of revenue and the deliberate capturing of more taxable individuals and organization into the tax net, as a long term solution to revenue shortages.
“While the pressure on revenue continues in the short term, we vehemently oppose any attempt to further burden organized businesses in the guise of new taxes or levies at the three-tiers of Government.
Doing so will be counterproductive as this could further stifle the already burdened businesses, most of whom currently operate at less than 50 percent capacity utilization. It will also further lead to an upsurge in unemployment rate with its attendant socio-economic consequences.
Lamenting the state of the economy, he said “the exchange rate has remained unstable with the Naira exchanging at N410 at official rate and about N575 at the parallel market, the unemployment rate remained uncomfortably high and prices of foods and other commodities going out of the reach of average Nigerians.
There was an upward review of growth forecast for Nigeria by International Monetary Fund (IMF) and World Bank. The new growth projections are 2.6 percent and 2.4 percent respectively from 2.5 percent and 1.8 percent earlier forecasted. On the global front, the IMF lowered its 2021 global GDP forecast by 0.1 percent to 5.9 percent, reflecting the downgrades to advanced economy and low-income developing countries as Covid-19 Vaccine access and policy support continues to determine the pace of economic recovery.
The implication of this on Nigeria is that, Global supply shortage could disrupt supply of imported raw materials coupled with currency pressure. It is also expected that imported inflation will remain elevated.
“While we commend the efforts of the Central Bank of Nigeria, CBN, to stabilize the Naira, we urge for a deepened Institutional engagement with the OPSN to enable the CBN maximize and leverage the operational knowledge and competence inherent in the OPSN. With greater collaboration between Government and its Agencies and Organized businesses, we believe, strongly, that the Nigerian economy can still undergo an economic renaissance that will not only position it to maximally benefit from the African Continental Free Trade Area, AfCFTA, Agreement, but will also place it among the world’s top economies in the shortest of time. It should be stated that the myriads of challenges ranging from widening deficits, poor crude oil production, rising fuel subsidy and unending foreign exchange challenges are not insurmountable. With focused commitment and dedication by all Stakeholders, much can be achieved.”