Subsidy removal earnings as pathway to nation’s economic growth

Recently the federal government announced that it saves more than N1 trillion from subsidy removal monthly. The announcement has raised a lot of questions regarding on which account the money is saved and to what use it has been put. In this report AMAKA IFEAKANDU looks at the subsidy removal earnings and the sectors of the economy the fund is expected to be deployed to boost the economic growth of the country.

The recent pronouncement by the federal government that the country has been saving about N1.65 trillion since fuel subsidy was removed on May 29, 2023, from earnings generated from removal of subsidy on premium motor spirit popularly called petrol has continued to generate controversy on where or what the government is doing with the money.

Why was subsidy removed?

The current administration under the leadership of President Ahmed Tinubu had said that the removal of subsidy on premium motor spirit (PMS) would reduce expenses and help the government to save more from revenue generated.

Since the federal government made the announcement many Nigerians are interested to know the exact account where the money is domiciled or sectors of the economy listed by government to invest such earnings to grow the nation’s economy.

Trade union view

The President of Trade Union Congress (TUC), Mr Festus Odifo, during an interview with Arise TV has asked series of questions on where the money saved since the subsidy removal is?

He said since the government announced that about N1 trillion has been saved from removal of subsidy there is no reason to continue borrowing money, adding that FG should simply deploy part of the funds on Nigerians.

“And so, we don’t expect them to go everywhere and start borrowing money. They told us they are going to save money. So where is the money that you have saved and how have they deployed this money?” he queried.

Experts comment

Some financial experts who spoke to Blueprint Newspaper on the condition of anonymous said that they doubted the possibility of the government generating such huge amount of money at this particular point in time.

Some of them also argued that such information is an evidence that government is yet to tell the public exactly what is happening in the oil sector both in local and international market.

They said if government have been saving such amount of money within a space of months, it means that the possibility of growing the nation’s economy is becoming real because well over N6 trillion must have been saved.

Commenting on the N1 trillion subsidy removal earnings generated by government, the Chief Research Officer, Investdata Consulting Ltd, Mr Ambrose Omordion said the way things are going nobody can say exactly the real price of petrol in the international market, as result it is difficult to say what amount the government saved or not.

He said that every average Nigerian believed that President Bola Ahmed Tinubu in his

inaugural speech remove subsidy by saying the subsidy is gone and nobody could say exactly what is going on in that sector, if the government has actually save money or not.

Develop critical infrastructure

In his own view he said if the federal government said it saved about N1 trillion monthly from subsidy removal, the best option is for them to invest the money to develop the critical sectors of the economy , especially in the area of infrastructural development.

He said government needs to inject the funds to develop infrastructure that will boost farming activities in the country. Omordion posited that that by the time the government reinvests the money for infrastructure development like building good roads network that will give boost to farmers distribution channels. He also said that tackling the problem of insecurity in the country, will go a long way to encourage investment and increase business activities in the country.

He said that with infrastructural development a new market will be opened, government will create jobs and have more opportunities to diversify the nation’s economy instead of depending solely on oil for foreign exchange earnings.

Need to reinvest the funds

Expressing the need for the federal government to plough back such money in major sectors that will enhance the economic activities such as infrastructure development, education, agriculture, transportation, resolving problem of insecurity, he said education is the bedrock of every economy.

From his point of view, insecurity has remains a pressing issue, affecting the agricultural, industrial, and services sectors simultaneously.

He stated that persistently high levels of insecurity have resulted in decreased national output and productivity, as many farmers have been unable to access their farmlands, disrupting supply chains and major economic activities. This has led to food shortages and inflation in various parts of the country.

Infrastructure constraints also posed significant challenges, undermining the production chain and distribution network of goods and services.

He stressed that if the government can use the money to develop the non-oil sector it will increase the nation’s forex earnings and problem of shortages in foreign exchange supply will be a thing of the past.

Allocation to three tiers of government

In his own view, Managing Director, APT Securities and Fund Ltd, Malam Garba Kurfi said part of the earnings from subsidy removal has reflected in the monthly allocation shared to the three tiers of government. He said the amount share recently rose significantly compared to less than N0.7 trillion shared in the previous months.

He said the first thing government needed to do is to use that money to bring to an end the problem of insecurity in the country.

He said most farmers have abandoned their farmland because of insecurity in different parts of the country, adding that once the government tackles insecurity issues, farmers will be willing to go back to their various farm lands to cultivate.

This, according to him will help to increase output and productivity and as well help to bring down inflation in the country as the rise in the prices of food stuff and scarcity of food in the country was as result of insecurity experienced across the country.