FG pursuing wrong economic policies -Sanusi •Laments suspension of NERC Board

http://www.tribune.com.ng/index.php/front-page-news/8950-fg-pursuing-wrong-economic-policies-sanusi-laments-suspension-of-nerc-board

Written by Leon Usigbe, Abuja
Thursday, 29 July 2010

CENTRAL Bank of Nigeria (CBN) Governor, Mallam Sanusi Lamido, says the Federal Government is not pursuing the right economic policies and, therefore, no amount of reform in the banking sector could revive the economy.

He also observed that the about N500 billion yearly subsidy on petroleum was discouraging investments in refineries apart from piling up debts for future generations of Nigerians to pay.

The apex bank’s boss, who made the assertion in an interview with State House correspondents just before the commencement of the Federal Executive Council (FEC) meeting in Abuja, on Wednesday, also regretted the suspension of the Board of the Nigerian Electricity Regulatory Commission (NERC), which, he said, had left the power sector without a regulatory body.

According to him, “we are spending N500 billion subsidies on petroleum products and nobody will invest in refineries if they believe that their business model is predicated on government subsidy. We are borrowing N500 billion on subsidies every year, we are borrowing money and we are leaving future generation to pay the debt and the benefits of these subsidies are far outweighed by the long-term cost to the economy.”

Sanusi, who spoke of efforts to recapitalise the banks and improve their balance sheets, pointed out that the capital market was recovering as government was making progress with reforms.

However, he observed that “the reality is that the government is not pursuing the right economic policies and nothing in the banking reform will fix the economy, unless you fix policy and I say this as an adviser to the government.”

He added that “what is happening is that there is a difference between the real sector and the financial sector of the economy. We are doing what we need to do on the banking system and the banking system is stabilising and with the Asset Management Corporation (AMCON) and once we recapitalise the banks it will improve the balance sheets of bank and the banks will be back up.

“The capital market, as you can see, has been recovering and the government continues to make progress as far as the reforms are concerned. Having said that, the financial system does not live in isolation, you have got to fix the issues of the economy and the CBN is not responsible for that.

“You have an economy in which you do not have power. If you don’t have electricity you cannot attract investors; you cannot improve production. We don’t have power, because the reforms that ought to have carried out in four years have not been done. We keep talking and talking and talking and we have not yet created the right environment and we don’t even have a regulator for power,” Sanusi noted.

Speaking specifically on power, he regretted that the NERC Board, which was suspended last year, was yet to be reactivated thereby denying the power sector of a regulatory agency.

“There is a regulatory agency, NERC, but the commission has been suspended for how many years? It’s not functioning. And how can you have a sector like power when you don’t have a regulator? It has been suspended for how many years?” he wondered.

He also advocated the deregulation of electricity as he noted that the current tariff charged in the country was too low and unsustainable.

“I am saying we have got to have a regulator; we have got to have good input for gas pricing. It will encourage investments, deregulate electricity prices, this N7 is a myth because nobody gets power at that price. Ghana is paying N22. If we increase it to N22 and you increase gas prices, investments will come into power. We have not done. That is the issue,” he declared.