MUHAMMADU Sanusi, the Emir of Kano and former Governor of the Central Bank of Nigeria, says if there is one policy that is sure to lead Nigeria into bankruptcy, it is the fuel subsidy policy.
Despite telling Nigerians that fuel subsidy has been scrapped, President Muhammadu Buhari administration continues to pay humongous sums subsidizing petroleum products.
According to Ibe Kachikwu, Minister of State for Petroleum Resources, the federal government has spent over N1.4 trillion so far in petrol subsidies.
“What we have is not a subsidy,” Sanusi said during an interview with Punch. “The federal government guarantees Nigerians a maximum price per litre for fuel, and this is a product we import, and its price is based on unpredictable underlying commodity prices.
“So what the federal government is saying is: ‘look it does not matter what the price of oil is internationally, what the exchange rate is, what interest rate is, what shipping clearing and demurrage is, I am so rich that I will ensure you get fuel at this maximum price and I will pay the difference’.
“Meanwhile, the balance sheet of the federal government is not hedged in anyway against these risks. As a professional risk manager, I have never seen a policy that is so guaranteed to bankrupt anyone as this policy.”
Sanusi said the way the Nigerian National Petroleum Corporation (NNPC) is run, it will take an angel to run the organization in a transparent manner.
“It is not about the persons in the NNPC but about whether anyone can make a system operate honestly when there are such huge arbitrage opportunities. We need to import angels for that to happen,” he said.
“So, for me these are the issues. It is an economist’s nightmare. Sadly, the very reason this subsidy should be scrapped is probably the reason it never will be.
“For those who profiteer from it, it is just too good to be true.”
According to Sanusi, if the federal government have already spent N1.4 trillion on petrol subsidy at a time when the international price of crude oil was between low and moderate, “you can imagine how much we will pay as oil price goes up”.
“Imagine if that money had gone into the power sector or agriculture and education and health,” Sanusi said.
“So for me this government inherited a bad situation but if it continues with these programmes, the next government will also inherit a bad situation which is a shame.”