Yesterday, President Bola Tinubu’s decision to eliminate petrol subsidy and implement unified forex rates drew mixed reactions. The Nigeria Labour Congress (NLC) expressed skepticism, claiming that the President’s announcement was merely a trial balloon and doubted his willingness to follow through.While the Nigeria Labour Congress (NLC) expressed doubt, several organizations including the Manufacturers Association of Nigeria (MAN), the Nigerian Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), and the Centre for the Promotion of Private Enterprise (CPPE) hailed the President’s decision. MAN applauded the proposed policy of utilizing fiscal measures to support domestic manufacturing, viewing it as a positive step for manufacturers. NACCIMA also commended the President’s economic plans, considering them to be a move in the right direction.Director General, MAN, Segun Ajayi-Kadir, in an exclusive chat with Vanguard yesterday, however, added that the president’s speech would still be subjected to critical considerations by the group soonest.
His words: “It is, therefore, highly commendable and an assurance of better days ahead to hear the President saying that his industrial policy will utilize the full range of fiscal measures to promote domestic manufacturing and lessen import dependency.
“For me, this is a positive development. It is an unmistakable indication of a far-sighted strategic choice, one that is borne out of a deep reflection on the current inclement manufacturing environment and the need to stop the drift into inglorious de-industrialization of the Nigerian economy.
“What is most gratifying is that it came from the President from day one. The issues of multiple and often times punitive taxation; conflicting and contradictory fiscal and monetary policy measures; skewed and poor management of the foreign exchange regime and the long overdue stoppage of the fuel subsidy were addressed in the President’s speech and I believe they resonate with manufacturers in particular and the business community in general.
“A marching order is needed to move the Central Bank of Nigeria, CBN, towards a unified exchange rate.
“We also expect that, in line with his promise to enable a supportive fiscal policy regime, the President will order a reversal of the unwarranted violation of the government‘s three-year excise escalation roadmap on alcoholic beverages and tobacco. As we have shown, the latest hike as contained in the 2023 Fiscal Policy Measures is not only going to ruin the affected sectors, it will be counterproductive for government revenue in the near future.”
Meanwhile, the Director General, NACCIMA, Dr. Sola Obadimu, said some of the promises made by Tinubu on the economy in his inaugural speech were good steps in the right direction.
Obadimu stated: “They are good steps in the right direction. He spoke on the need to harmonize forex rates which is also good for probity and attracting foreign investment, and for the need to make it easier for foreign firms to repatriate their money. These are all very good.”
Subsidy removal ‘ll draw Nigeria backward in 48 hrs —NLC
Reacting, President of Nigeria Labour Congress, NLC, Joe Ajaero, in terse text said “The comment on fuel subsidy removal is not well thought out, coming as an inaugural speech.
“It is going to draw the economy of the country backward by over 50 percent within the next 48 hours. Nigerians will speak in one accord at the appropriate moment.”
Decision has enormous potential benefits – CPPE
In his reaction to subsidy removal, the Chief Executive Officer of the Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, said the decision of President Tinubu to put an end to fuel subsidy had enormous potential benefits for the country.
He said: “We welcome the position of our new President Bola Tinubu on subsidy removal. Fuel subsidy removal has enormous potential benefits. First, there is the revenue effect. The removal would unlock about N7 trillion into the federation account. This would reduce fiscal deficit, and ultimately ease the burden of mounting debt.
“Second, is the investment effect. Currently, it is extremely difficult to attract private investment into our petroleum downstream sector because of the unsustainable subsidy regime and the stifling regulatory environment. The subsidy removal will eliminate the distortions and stimulate investment. We would see more private investments in petroleum refineries, petrochemicals and fertiliser plants. Post subsidy regime would also unlock investments in pipelines, storage facilities, transportation and retail outlets. We would see the export of refined petroleum products petrochemicals and fertiliser as private capital comes into the space, and quality jobs will be created.
“There is a foreign exchange effect. This would result from the import substitution as petroleum products importation progressively decline. This would conserve foreign exchange and boost our external reserves.
Increase in investment would also translate into more jobs in the petroleum downstream sector. “There must be palliatives which should be segmented into immediate, short term and medium term deliverables.
“Immediate and short-term options include wage review in public service, the introduction of subsidized public transportation schemes across the country and reduction in import duties on intermediate products for food-related production to moderate food inflation.
“In the medium to long-term, there should be accelerated efforts to upscale domestic refining capacity, driven by private investments; accelerated investments in rail transportation by the government to ease logistics of fuel distribution across the country as well as domestic freight costs.”
Also reacting, Uche Uwaleke, Professor of Capital Market and President, Capital Market Academics of Nigeria, expressed support for the removal of fuel subsidy and unification of the exchange rate by Tinubu, saying fuel subsidy was at a huge cost to the economy.
He maintained that fuel subsidies have proven to be unsustainable over time”I support the removal of the fuel subsidy due to its huge cost on the economy. Fuel subsidies have proven to be unsustainable.
“I equally support the unification of exchange rates because doing so will discourage round-tripping, bring more transparency to the foreign exchange (forex) market which supports foreign investments.
“However, in order to minimize negative impact on the livelihoods, issues of fuel subsidy and exchange rates unification which he mentioned in the speech should be handled with care. Stakeholder engagement is required,” he said. In his comments, Mr. David Adonri, Vice Chairman, Highcap Securities, said the plan, if carried out, would repair the damages caused to the economy by the twin problem.
He, however, queried Tinubu’s failure to address the rising debt burden, saying that a continuation of the borrowing spree would be detrimental to real economic growth.
He said: “President Bola Ahmed Tinubu’s inaugural speech addressed three critical pressure points on the Nigerian economy. These are insecurity that has crippled the rural economy, discontinuation of fuel subsidy and unification of the exchange rate.
“His remedial plans against these challenges can repair their damages to the economy. However, he failed to address the crippling debt burden which has fueled inflation and caused a rise in interest rate.
“His GDP growth target of a minimum of 6% per annum could be a mirage if he concentrates on secondary infrastructure development at the expense of primary infrastructure like was done under President Muhammadu Buhari.”“If he continues with President Buhari’s excessive borrowing spree, increase in GDP will just remain an inflationary growth or motion without movement,” he said.
