Pensioners, state workers to benefit from fuel subsidy removal – Experts

Dr Andrew Nevin, the Chief Economist, PriceWaterHouseCoopers (PwC), said this in a report on Friday from the Nairametrics Q2 2023 Economic Outlook Webinar.

Nevin who commended the Nigerian government for removing the fuel subsidy said it was hampering performance in other aspects of the Nigerian economy.

He noted that the culture of not being able to pay pensioners may be stopped when the proceeds of the fuel subsidy removal were realised.

“Those who have lost from fuel subsidy are the pensioners and the state employees, as state governments cannot pay their minimum wage.

“Those groups are going to benefit immediately from the removal of the fuel subsidy,” he said.

Nevin said that the Nigerian National Petroleum Company Ltd. had not made any transfers to the federation account since 2022 due to fuel subsidy payments of about N400 billion monthly.

He urged young Nigerians to look at the fuel subsidy removal as an opportunity to look out for the healthcare and educational sectors and get adequate training that strategically placed them for jobs globally.

Also, the Head, Economic Research/Intelligence, Coronation Merchant Bank, Chinwe Egwim, advised young Nigerians to focus on and take advantage of the opportunities in capital market dynamics.

Egwim said that the fuel subsidy removal should be able to support Nigeria’s revenue performance, even though there would be an inflationary impact from the policy, and purchasing power would be eroded in the short term.

“However, if the policy is implemented properly, the fuel subsidy removal will mean better economic performance for Nigeria."

Egwim, who highlighted the oil and gas sector as one of the credible sectors which can improve the country’s overall economic growth, urged the Tinubu administration to focus on improving its performance.

“Government must improve security, further develop local content, establish transportation networks including pipelines, and refineries and establish storage facilities to drive the sector,” she said.

Dr Yemi Kale, the Chief Economist, KPMG Nigeria, said he was excited with the public sector and public finances reforms agenda of President Bola Tinubu.

Kale, however, raised concerns about the potential negative impact of additional taxation on household expenditure and private business expansion during a fragile economic growth.

He noted that in the Nigerian economic model, household consumption expenditure and private investment were the two largest contributors to the Gross Domestic Product (GDP).

“I am not a fan of pushing up taxes, particularly in a recession and when the economy is struggling with fragile growth.

“When you increase taxes, you are squeezing the household consumption expenditure, and you are also squeezing the earnings of business thereby squeezing business expansion and so on.

“What happened in the last eight years is that the government model was public sector driven where they expanded government expenditure, expanded government investment and that’s why you have so much infrastructural development.

“But they did not expand government investment and consumption because the economy was expanding, and they were getting more revenue.

“I think the target should be to harmonise the taxes and expand the tax net using technology and a more efficient expenditure structure.

“If we were able to do this in terms of public finance, if we can reform the public sector, I think that’s when every other thing ties in properly and we will see some significant growth,” he said.

Kale advised the government that public sector reform should not just be about rationalisation but about improving the capacity of the public servants to deliver optimally.

He stated that no matter how good the President’s ideas were, an efficient public sector was necessary for proper implementation.

“If the public service does not have the capacity to do it, or the interest in doing it, then nothing will be done and that’s why you have found in many other administrations where you have very competent and knowledgeable ministers but very little is done.

“So, until such things are also fixed, where you get the public service to build their capacity and their mindset in terms of wanting these things to work, I don’t think it will work no matter how good and credible you are,” he said.