Fuel subsidy: Experts criticise govs


Some financial experts have advised he Federal Government to disregard state governors’ demand for removal of fuel subsidy.

The News Agency of Nigeria reports that the removal of the subsidy would bring untold hardship to the people.

Immediate Past President of Association of National Accountants of Nigeria, Dr Samuel Nzekwe, said the removal of fuel subsidy would lead to inflation.

Nzekwe said inflation would affect the masses more than the rich and reduce the purchasing power of the average Nigerians.

He said the cost of transportation would also increase while the cost of industrial production would go up.

“It is not really good enough to remove fuel subsidy because companies might start “downsizing” their staff due to high running cost,” he said.

A lecturer in the Department of Economics, University of Ibadan, Dr Kazeem Bello, corroborated Nzekwe’s view, stressing that removal of subsidy would cause inflation.

hrm

I guess this writer is being economical with the truth or should i say speculation. It will be nice for the writer to analyze both sides, so that people can be better informed. As a nation, we want increase in GDP, increase in fixed direct investment, reduction of import products, improve tax revenue, improve employment and those other benefits that accrue to the economy due to deregulation of downstream sector. But we're not ready to pay the price. If we want to be among the best 20 economy by 2020 (dreaming), We all know that its going to get worse before it gets better, and we all have to be prepared for it.

While i agree that initially, deregulating downstream sector will bump inflation up a bit. That is why we have CBN, to put an anticipatory measures in place to curb inflation.

Also, while increase in cost of transportation might lead to increase cost of industrial production, but it might not necessarily lead to downsizing as being touted by the killer of deregulation. Majority of companies in Nigeria today rely on the use of generator for their day-to-day operating activities, and many of them are still operating without downsizing of any kind.  

Not deregulating the downstream sector is a decision we cannot afford to make because of the spiral effect on the economy.  
- Continuous funding of subsidies in the downstream sector is a recipe for the disaster, because

1. It is a waste of money, because it is not creating any tangible jobs for the masses
2. It is not and will not encourage expected inflow of investments that can generate additional tax revenue for the country
3. It will continue to make Nigeria refined products import dependent
4. Contribution to our GDP from downstream will be minimal in comparison to its potential
5. Export opportunities from the downstream sector that can boost our current account will be diminished.
6. Continuous dependence on expatriates in this sector, when we can train our own people.
7. Subsidy funds can be utilized for other developments including; infrastructure building, education, improve downstream sector by contributing funds to build refineries or petrochemical facilities.
 
Do you think we should deregulate downstream or continue with status quo? State your reasons.