Renowned economist and development consultant, Dr Boniface Chizea, has advised the federal government not to remove fuel subsidy before the multibillion dollars 650,000 barrels per day Dangote Refinery goes on stream.
Chizea, who gave the warning yesterday in an interview with Arise News channel, said the removal of subsidy would have a devastating impact on the poor Nigerians “because it would trigger inflation, as the prices of essential commodities and services would go up again.”
He stated that when Dangote Refinery becomes operational, the prices of petroleum products are expected to come down because Dangote would buy crude in naira and sell the product in naira, so the availability of the product would no more be subjected to the fluctuations of the foreign exchange and attendant high cost of importation.
Chizea said besides buying the product in foreign currency, “there is the cost for the importation, cost of demurrage, import duty payments and others,” disclosing that due to the critical importance the federal government attached to the availability of petroleum products, 30 per cent of forex is dedicated to fuel importation.
The economist noted that when Dangote Refinery starts production, the 30 per cent of forex dedicated to fuel importation would be freed for other purposes, and that might regain some values for the naira.
According to him, “Fuel price increase will affect ordinary people once you remove the subsidy, and there will be a spike in prices; the purchasing power of the people will disappear. When Dangote Refinery begins production, it will buy crude oil in naira and sell its product in naira, and that will lower the price of the product.
“But I have some concerns that things are not going on as anticipated, but we cannot talk about Dangote Refinery and talk about subsidy. There should not be a subsidy then because due to the importance government attached to petroleum products, 30 per cent of foreign exchange is dedicated to fuel importation. Dangote Refinery coming on stream will remove that demand from the table, and then we will face the issue of demand and supply to determine the prices.”
He also condemned the plan by the federal government to rehabilitate existing refineries in Port Harcourt, Warri and Kaduna, saying it is like putting money into a sinking hole and advised the government to privatise the facilities.
Chizea remarked that there were modular refineries that were supposed to have been built but they have not come up because the price of petrol was fixed despite deregulation, noting that market forces should drive prices, and when that happens, more people would invest in the sector because there would be a certainty.
On the non-oil sector, he said agriculture remains the main driver of the country’s economy, contributing 24 per cent to the GDP as against 9 per cent from the oil sector, and noted that agriculture remains the bastion of hope in terms of job creation.
He acknowledged that Information and Communication Technology (ICT) is a major non-oil contributor to the Nigerian economy, but said the sector is for the future, adding that the government should encourage children to be ICT savvy because that is the industry of the future.
The economist regretted that the major challenge facing Nigeria today is unemployed, and imagined a situation where five children of the same parents graduated from the university and are at home without jobs.
However, he gave kudos to the informal sector, saying the informal sector has buoyed the economy and remains a very significant contributor to the country’s economy.
Chizea said the government should create enabling environment for every sector of the economy to thrive and to encourage investment in the different sectors so that jobs can be created and the citizens empowered financially.