Peter Obi, the presidential candidate of the Labour Party for the 2023 general election, has said if elected, his administration would undertake a holistic revamp of Africa’s biggest economy, part of which would be to remove a controversial fuel subsidy and liberalise the economy to give the private sector a greater role.
Obi, while unveiling his economic agenda at the private sector economic forum organised by Lagos Chamber of Commerce and Industry, described the fuel subsidy as an “organised crime” that his administration would deal with decisively.
“Subsidy is an organised crime; 50 percent of it is corruption, so it must be removed, after which we will focus on supporting the private sector’s participation in local refining and invest the subsidy funds in more critical sectors like health and education,” he said.
Nigeria could spend up to N6.72 trillion next year if it keeps the expensive fuel subsidy in place, Finance Minister Zainab Ahmed said in July, a 68 percent jump from this year’s fuel subsidy budget of N4 trillion.
The country’s oil and gas revenue, which came in at N1.23 trillion between January and April, was way below a projected N3.12 trillion, as the subsidy bill and low oil production took a toll on the finances of the cash-strapped government.
It is however unclear how Obi will negotiate the removal of the petrol subsidy when he is running under a party whose members have fought past administrations when they tried to abolish the practice.
He also promised to diversify the government’s income source to reduce an over-reliance on petrodollars and grow tax revenues by boosting the economy.
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“China finances its budget through taxes. Of the $4 trillion earmarked for 2022, over N3 trillion will come from taxes. We will ensure we grow the economy because the more robust your economy and the more you earn from taxes,” Obi said.
To grow the economy and create jobs in a country with the second highest unemployment rate in Africa after Namibia, his government “will listen to the private sector on a daily basis. My government will be private sector led and not government-led.”
Obi will also overhaul the entire security apparatus by introducing multi-level policing and equipping security personnel with modern gadgets in an effort to curb insecurity, which has fanned inflation and discouraged private investments.
On his solution to the erratic power supply in Nigeria, he said his administration would liberalise transmission, create an avenue for a dedicated gas supply and ensure that generation to transmission is properly done.
“We will go beyond removing power from the exclusive list. The first thing I would do is to liberalise transmission, it is critical if you must solve the power problem,” he said. “I would make sure that there is dedicated gas supply and will ensure that transmission and supply are properly aligned.”
The former governor of Anambra State also said he would move Nigeria from a consumption nation to a productive one, citing the example of how Vietnam – which has a third of Nigeria’s land size and half of its population – made over $400 billion in exports last year compared to Nigeria’s $47 billion as one way the latter is not being efficiently run.
“If we deal with the fiscal recklessness we are suffering from as a nation, we can improve productivity and reduce poverty,” he said.
Obi accuses government of rampant oil theft
He also accused people in the government for being responsible for the massive oil theft that has blocked Nigeria from benefitting from the boom in oil prices and deprived Africa’s largest economy of the much-needed petrodollars.
“People in the government are the ones stealing oil. Nobody here can steal oil,” he said.
“There’s no way under my watch that we will not find a solution to oil theft,” said Obi, who estimated that Nigeria has lost about $5 billion in the months of July and August alone to oil theft and other challenges affecting oil production.
Nigeria’s oil production fell to a three decade-low of below 1 million barrels daily in August, according to data from the Nigerian Upstream Petroleum Regulatory Commission.
That has seen the country lose its position as Africa’s largest oil producer and is now behind Angola and Libya.
Government officials estimate that over 400,000 barrels of crude oil are lost to oil theft daily. The county’s chief of naval staff, however, disputes those figures, leaving Nigerians playing a guessing game of how much crude is actually lost to theft.
Between January and July, the Nigerian National Petroleum Company Limited (NNPC) said the country lost an average of 437,000 barrels of oil a day to criminal entities and individuals who illicitly tap pipelines onshore and offshore in the Niger Delta region.
The stolen oil was worth more than $10 billion at the average oil price in that period, according to the NNPC’s calculations, nearly three times what the federal government earned between January and April, when debt service costs surpassed revenues by 18 percent.
In the meantime, the low oil production and attendant loss of revenues has starved the country of dollars and caused the exchange rate to depreciate sharply. Although the naira exchanges officially for N421 per dollar, it trades much weaker at the more accessible parallel market at around N700 per dollar.
The collapsing naira is making imports more expensive and has pushed up inflation to a 17-year high of 20 percent in August, with several businesses shutting down as a result.
