OVAT: No Devaluation, Just Partial Fuel Subsidy Removal
A Lecturer in the Department of Economics, University of Calabar Dr. Okey Ovat rejects naira devaluation, but calls for partial removal of fuel subsidy. TINA TODO, Calabar reports.
Can you share your thoughts on naira devaluation and removal of fuel subsidy?
DEVALUATION, essentially is the official reduction in the value of the national currency and the extent of this reduction is to promote export. In our on case, export becomes cheaper in the international market, whereby, we expect more. So, many counties will be interested in our export and we will export more and have some surplus in our own balance of payment. But it is only good for a country that is productive.
Nigeria is import dependent; we import virtually everything. Nigerians seem to assume that anything imported is the best. We import everything up to frozen chicken, and so if we now devalue the naira and the country is not very productive, the essence of devaluation, which is to boost the economy, will not achieve such. We are not productive, we depend solely on oil. We don’t produce anything.
The economy is not diversifying. Even before independence, agriculture was the mainstream of the economy, but with the advent of oil, agriculture has long been forgotten and we are import dependent. Everything that comes from abroad, we feel it is the best in Nigeria, so devaluation will not solve our problem. We are putting all our eggs in one basket and when that basket crashes, that is the end so there is need for diversification of the economy.
Then on removal of fuel subsidy, it depends on how it is done. We have heard so many cases of corruption leading to fuel subsidy removal. The subsidy was meant to reduce the suffering of Nigerians, but some people were just taking advantage of that. Oil magnates were taking advantage of that, claiming huge sums of money from the government without actually importing the fuel. They were busy enriching themselves at the expense of Nigerians.
You know that government has some welfare responsibility for each citizenry. That was why, in the first instance, this fuel subsidy was advocated. If the pump price of petroleum product is subsidized, the ordinary Nigerian will pay less. In a democratic government the people elect their leaders hoping that they will protect their interests in various capacities. For these reasons, the government will have to maximize their welfare and one of the ways of doing that is subsidy. Subsidy can be given to the oil sector and agricultural sector.
If, for example, the pump price were to be N100 and the government now said out of this N100 let the people pay N50 then the balance of N50 will be paid by government. The fuel, which will ordinarily be bought for N100 is now subsidized for citizens; but the way subsidy is now practiced in Nigeria, leaves much to be desired.
If subsidy is removed, the price of petroleum products could then be determined through the law of demand and supply. Money that was formerly taken away by those corrupt looters will now be used to provide infrastructural facilities like good roads; electricity for the populace and these will also improve their wellbeing. But above all, government still has some responsibilities.
In view of what we call inclusive growth, Nigeria is today the largest economy in Africa. Economically it is said that when there is growth, poverty is expected to decrease but it is not so in Nigeria; as the economy is growing, so also is poverty. Such growth is called inclusive growth.
Thank God we have a new government that is against corruption, which has zero tolerance for corruption. If this exercise would be carried out judicially, I am sure it will be good for Nigerians. If the government can put checks and balances in place to check fuel import; and if the government can also make sure that the refineries are working, if the refineries are working then there is no point importing because it is through this importation that huge sums are stolen. Such money could be used to provide infrastructure for Nigerians. I will suggest that subsidy should not be removed totally so that the masses could also be taken care of.