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ADEKUNLE: No Easy Way Out, Govt Must Plan Carefully

Dr. Suraj Adekunle

Dr. Suraj Adekunle

Dr. Suraj Adekunle, specialises in Knowledge Management in the School of Communication, at the Lagos State University (LASU). In this interview with IKECHUWKU ONYEWUCHI, he opposes the removal of fuel subsidy and devaluation of naira, saying it would be an injustice to the common man.

How would you access the impact of government policies on economic activities since President Muhammadu Buhari assumed office?
THERE are three principal challenges which government must address if it wishes to drive the economy forward. They are corruption, security and petroleum subsidy. Corruption has severely affected the perception of Nigeria among investors.

In an environment where government is not transparent, public officials are corrupt and doing business is clouded in uncertainty; definitely, foreign investors will not want to come to the country. Economic growth would be stifled because there are no transparent procedures. Activities in many sectors wouldn’t be in the economic interest of the country; but rather in an individual’s interest. That would be against the interest of the economy and it would affect the country’s reputation.

If there is a bad perception of a product, it would not sell. Once the image and brand is wrong about a product, it would not do well among customers. Nigeria, as a state, cannot be viable economically once the perception, brand and image are seen to be very corrupt. That is why President Muhammadu Buhari feels that tackling that would resolve a lot of issues. That is why the president has been going around convincing foreign investors. Foreign partners believe in him because they feel he has done it before and has committed himself to fighting corruption.

In terms of security, there must be a measurable amount of safety for people to be able to do business in a country. If people are afraid to invest, we must assess the situation critically. For example, in Niger Delta, we have pipeline vandalism, oil theft and bunkering. We also have Boko Haram in the North. These issues scare people off because they are not certain of the fate of their businesses. Also, kidnapping and rising cases of armed robbery can lead to economic collapse. For businesses to be secured, its equipment, human capital and facilities must be secured. These boils down to the need for Nigeria to have a peaceful environment, which is what can guarantee the growth of the economy. This also has contributed to the image of the country in the international community.

Then, we have the petroleum industry, where government has gotten it wrong all along. The issues of corruption and safety, however, come to bear in the industry. Corruption has been the hallmark of the industry and we have, over time, had to contend with issues of vandalism and others.

The president has taken some steps already by reorganising the board and collapsing all the departments that had served as conduit for corruption in the past. The overhead cost of Nigeria National Petroleum Corporation (NNPC) used to be very high and President Buhari has done the right thing to commence restructuring the corporation. We also have the issue of Petroleum Industry Bill (PIB), the delay of which is costing Nigeria about $6b every year. If government could hasten up the proces of passing the Bill, it would be better for the country.

The president should work on the sustainability of whatever policy he would be putting in place and leverage on ministers, who know their onus and can be trusted to give the expected results.

What can you make of the recent remarks by former Central Bank of Nigeria (CBN) governor, Lamido Sanusi on the removal of fuel subsidy?
With all due respect to Sanusi, who has been at the helm of affairs before and knows what has happened in recent times, we must understand that the world and the economy changes; it never remains stagnant. People have been talking about removal of subsidy for a long time, but my take on the matter is that it is a right advice at the wrong time. This is because we cannot separate politics from the economy; both go hand in hand because politics drive the economy. Government, ideally, should come up with polices that would benefit the common man, because we run a democratic government, which is for, by and of the people. Whatever policies any government is making should be to the benefit of the common man.

The move would cause big time inflation. In fact, why should we devalue the Naira in the first place? The strength of Naira is very weak against the Dollar. There are many economic factors responsible for this. I would say it is another quick fix, which would not last for long and would not be sustainable. Who will benefit from this measure? We should understand the mindset of these international apparatus, like International Monetary Fund (IMF) and the World Bank. They are Breton Woods institutions with definite plans. It is their trademark prank. They offer it as a short-term measure to remedy bleeding economies, but no country has devalued their currency and has done fine.

There have been a lot of controversies about subsidy. Tam David-West, for instance, believes that subsidy is not real, that it is just a way of siphoning money. My take is that, if government has promised change and that it would bring the dividends of democracy to the people, if it increases the price of fuel, all prices would go up. Opposition politicians would use it against the president, and the entire country would boil as there would be strike and Nigeria Labour Congress (NLC) would come out against the policy. This is because we live in a society where most people are literate, but are not educated. They don’t understand politics nor have a larger view of the economy.

Another way to look at it is to understand the root cause of subsidy. It was caused by inefficient supply of the product in the country, which resulted from increased appetite for fuel, obsolete equipment, inefficient refineries, pipeline vandalism and corruption. All of these can be traced back to the challenges of corruption and safety. Government says it wants to satisfy local consumption. If the refineries here work and government can monitor what is produced every day, there is no point importing fuel. And with these, the issue of subsidy would not arise.

How would you suggest that government tackles the challenge associated with subsidy payments?
Subsidy can only be solved if corruption is tackled, security of pipelines is guaranteed and we revamp local refineries to meet fuel needs in the country.
A key concept in economics and government is planning — short and long term plans. We have always had quick-fix solutions for our problems in Nigeria. We always want a quick way out. But government is saying that the financial burden that the removal of subsidy would create would be much more than what was in place. Remember that Dangote has started building a refinery, which is said to be one of the biggest in Africa. Other people have been given the same license. What I suggest is that government should engage in either build and transfer or go into public private partnership arrangement for the emergence of more refineries.

Also, government needs to take its hands off the downstream sector of the petroleum industry. It should just dictate the policies in the sector. Ghana and many other countries have that. The measure would create jobs and would be business-driven. Government should also leave distribution of products to private companies. This would promote efficiency.

For instance, we must ask, how long has the Kaduna refinery been operating? What maintenance has been done? If we compare the facility with other modern refineries outside the country, are they going to be on the same platform? No. I agree that government cannot do everything. So, they should hold on a bit and systematically hand over to private individuals, by making sure that they promote private hands taking over the industry, deregulate the downstream sector and empower people with the capacity either with funds or policies to run refineries within the country. They must give a timeline for that. If they remove subsidy, they are going to put the whole burden on the masses and, expectedly, the people are going to groan, and a lot of misconceptions would creep in.

Government should take responsibility by gradually easing off. It is about commitment and the political will. Many private refineries were given licenses to operate, but they didn’t go to work because the will power is not there. Once government transfers the refineries and embarks on PPP, sets a deadline, it must work with that template. In fact, we have state governments that are building airports. Why don’t they engage in refinery projects? Venezuela is an oil producing country like Nigeria and they have done so well with the product.

Some people have called for the devaluation of the Naira as a way of solving the economic crisis in the country, what is your view on this?
The move would cause big time inflation. In fact, why should we devalue the Naira in the first place? The strength of Naira is very weak against the Dollar. There are many economic factors responsible for this. I would say it is another quick fix, which would not last for long and would not be sustainable. Who will benefit from this measure? We should understand the mindset of these international apparatus, like International Monetary Fund (IMF) and the World Bank. They are Breton Woods institutions with definite plans. It is their trademark prank. They offer it as a short-term measure to remedy bleeding economies, but no country has devalued their currency and has done fine.

Rather, let’s see how we can diversify the economy and become an exporting country. Let’s look for where we have a competitive advantage over others and become a player in the global economy. Let’s go back to agriculture and human capacity building. Let’s embrace Information Communication Technologies (ICTs). Let’s plug capital flight and encourage local manufacturing. We have no business-importing toothpick. Things that can be produced in Nigeria shouldn’t be imported. Once Nigeria imports less and exports more, the Naira would be strengthened.

The interest, plans, philosophy and methods of the IMF and World Bank have not changed. They appear to be offering suggestions that might fix an ailing economy, but a thinking country would know that it would lose at the end of the day. They have the interest of the western world and not developing countries. Once we address the right issues, subsidy would die a natural death and there would be no need to devalue the Naira. Devaluation of the currency is the weakest policy any thinking government can adopt. It is a quick fix that does not have a sustainable effect.



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