Lagos, July 7, 2023: The Centre for Economic Policy Analysis and Research (CEPAR) has urged the Federal Government to strengthen the non-oil sector by using fiscal and monetary policies to boost local production.
The centre said that using these two most important tools would guarantee the supply of foreign exchange and help manage the economy.
The centre said on Friday in Lagos in a communique issued after its webinar on the “Implications of Fuel Subsidy Removal and other Economic Policy Reviews”.
The communique was signed by the Director of the Centre, Prof. Ndubisi Nwokoma.
The meeting discussed the removal of fuel subsidy announced during the Presidential inauguration on May 29, 2023, the recent unification of the foreign exchange rate windows as well as the proposed hike in electricity tariffs.
It noted that the removal of fuel subsidy, unification of exchange rates and hike in electricity tariff had worsened the level of real income of the average Nigerian.
It said, “As a result of this, greater attention should be placed in bolstering the non-oil sector (manufacturing) by using the fiscal and monetary policies to help boost local production, this will guarantee the supply of foreign exchange.
“The factories should be modernised to guarantee efficiency. The government must thrive to promote exports at all levels – to enhance foreign exchange inflows.’’
The communique advocated the restructuring of the state to give greater power to the sub-national governments and the people at the grassroots.
It added that policies that would deepen democratisation should be promoted.
The communique urged the new administration to ensure that the managers of fiscal and monetary policy were purely technocrats who would provide expert advice to the challenges facing the economy.
It called for the revamping of existing refineries to create competition for the oncoming private refineries in the market.
“The revamping of the existing refineries is very important to create competition for the oncoming private refineries in the market. Otherwise, if they can’t be revamped, they should be sold.
“Investigations should also be conducted on why the refineries are not working despite huge government financial commitments over the years. Those found guilty, if any, should be brought to justice to serve as a deterrent to others,’’ the communique said.
It noted that in spite of the removal of subsidy, there is still a high level of monopoly power at play in importing Petroleum Motor Spirit (PMS).
The communique said, “It is incongruous to remove subsidy and still maintain monopoly, there should be a level playing field for private sector to import PMS which will lead to competition and greater efficiency.’’
It also suggested that the savings from subsidies should be invested in education, health and power.
The communique noted that studies showed that one per cent improvement in power supply would lead to three per cent increase in the Gross Domestic Product.
It urged the government to think of a non-oil budget for the economy where the economy would be fully diversified to guarantee industralisation.
It said that oil revenue must be seen as a wind-fall and not a core source of revenue for the government.
It advised the Nigerian Labour Congress (NLC) to be proactive and not reactionary to the implementation of policies.
It added the NLC should be actively involved in suggesting policies that would improve the welfare of the masses and not wait to react to government policies.
The communique noted that development required discipline and the government and the people must be ready to truly cut costs saying to achieve that would require the taming of the political class.
It called for an urgent review of the wages and salaries of workers of fixed income earners, noting that this group has been most affected by the chain of new economic policy under the new administration.
The communique added, “The government should embrace the latest development in the production of electric cars, solar panels and gas-powered generators as a more efficient and environmentally friendly mode of operation.
The communique noted that the exchange rate unification was long overdue stressing the need for the government to eliminate unnecessary arbitrage in the market to eliminate rent-seeking, enhance the willing-buyer, willing-seller concept in the enhancement of efficient price discovery.
It said the gap between the official rate and the parallel market rate which had persisted despite the unification of the rates was considered temporal.
“The convergence of will experience significant challenges in the long run if the shortage of supply and access is not addressed through exports and other foreign capital inflows,” it said.
The communique said that the sudden announcement on subsidy removal was considered insensitive and ill-timed as there were no palliatives and cushions provided for the population, particularly for the very low income earners.
It said, “The sole adoption of the free-market paradigm, which is based on the neo-liberalism perspective, may not be the way to go.
“The state should not shy away from its responsibility in enhancing the promotion and protection of the social, economic and political realities of the citizenry.
“The correct pricing of PMS appears still uncertain given that there is insufficient availability of data on daily demand and supply of the product. The arbitrary determination of the extent of fuel subsidies makes the entire exercise look like a “scam”, it said.
It also called on the government to immediately abandon the attempt to hike electricity tariff through the Multi-Year Tariff Order (MYTO) 2019-2023, describing it as insensitive.
It noted that the PMS subsidy removal had the potential for a few and well-connected Nigerians to enrich themselves.
