Fuel subsidy will kill Nigeria’s economy – AfDB President tells Tinubu
Fuel subsidy is killing Nigeria’s economy, so the place to start addressing economic challenges facing Nigeria is, to remove inefficient fuel subsidies, President African Development Bank Group( AfDB) Dr. Adewumi Adesina told Nigeria’s president elect, Asiwaju Bola Ahmed Tinubu.
Adesina stated this on Saturday in Abuja at the inauguration lecture for Nigeria’s new president. He said Nigeria’s fuel subsidies benefits the rich, not the poor, fueling their and government’s endless fleets of cars at the expense of the poor.
According to him, estimates showed that the poorest 40% of the population consume just 3% of petrol.
“Fuel subsidies are killing the Nigerian economy, costing Nigeria $10 billion alone in 2022. That means Nigeria is borrowing what it does not have.
“Rather, support should be given to private sector refineries and modular refineries to allow for efficiency and competitiveness to drive down fuel pump prices.
“The newly commissioned Dangote Refinery by President Buhari – the largest single train petroleum refinery in the world, as well as its Petrochemical Complex, will revolutionize Nigeria’s economy”, he claimed.
Adesina admonished Nigeria’s new president to review cost of governance which he described as too high that must be drastically reduced to free up more resources for development. Nigeria he said, was spending very little on development.
“Today, Nigeria is ranked among countries with the lowest human development index in the world, with a rank of 167 among 174 countries globally, according to the World Bank 2022 Public expenditure review report. To meet Nigeria’s massive infrastructure needs, according to the report, will require $3 trillion by 2050, at the current rate, it would take Nigeria 300 years to provide its minimum level of infrastructure needed for development. All living Nigerians today, and many generations to come, will be long gone by then”!
“We must change this. Nigeria must rely more on the private sector for infrastructure development, to reduce fiscal burdens on the government.
To Bola Ahmed Tinubu, the AfDB pleaded, “hope that you will rise above party lines and forge a compelling force to move the nation forward, with inclusiveness, fairness, equity, and justice”, he said.
He wants president elect billed to be sworn in on Monday 29 May, 2023 to start addressing with immediate effect macroeconomic and fiscal stability.
“Unless the economy is revived and fiscal challenges addressed boldly, resources to develop will not be there. No bird can fly if its wings are tied. Nigeria currently faces huge fiscal deficits, estimated at 6% of GDP.
“This has been due to huge federal and state government expenditures, lower receipts due to dwindling revenues from export of crude oil, vandalism of pipelines and illegal bunkering of crude oil”.
“Quoting from the Debt Management Office data, Nigeria now spends 96% of its revenue servicing debt, with the debt-to-revenue ratio rising from 83.2 percent in 2021 to 96.3 percent by 2022.
“Some will argue that the debt to GDP ratio at 34% is still low compared to other countries in Africa, which is correct; but no one pays their debt using GDP. Debt is paid using revenue, and Nigeria’s revenues have been declining. Nigeria earns revenue now to service debt not to grow”, said AfDB President.
Much can be done to raise tax revenue, as the tax-to-GDP ratio is still low. This must include improving tax collection, tax administration, moving from tax exemption to tax redemption, ensuring that multinational companies pay appropriate royalties and taxes, and that leakages in tax collection are closed” .
“However, simply raising taxes is not enough, as many question the value of paying taxes, hence the high level of tax avoidance. Many citizens provide their own electricity, sink boreholes to get access to water, and repair roads in their towns and neighborhoods.
These are essentially high implicit taxes. Nigerians therefore pay the highest ‘implicit tax rates’ in the world. Governments need to assure effective social contracts by delivering quality public services.
It is not the amount collected, it is how it is spent, and what is delivered. Nations that grow better run effective governments that assure social contracts with their citizens”, he said.