Ambah: Why Fuel Subsidy Must Be Removed

The Managing Director/Chief Executive Officer, FSDH Merchant Bank, Mrs. Hamda Ambah, in this interview urges Nigerians to support the federal government in taking some difficult decision which would be beneficial to the country later. Obinna Chima brings

In your outlook on the Nigerian economy, you expressed optimism that the economy will grow in 2019. Few days ago the Nigeria Governors’ Forum warned about the likelihood of another recession. What are those factors driving your optimism?

One of such is the current level of crude oil prices. The price at which the budget was benchmarked for crude oil is much lower than where it is right now. Love him or hate him, Donald Trump continues to do things that seem to cause support for the oil market. You may be aware of the exception that had been made to embargo on Iranian oil, he seems to have withdrawn those exceptions and we all saw what happened to oil price during that time. So, there are some opportunistic developments. I don’t think you can plan on those long-term, but you can exploit them while they exist. Apart from that, you have seen some problems going on in the United Kingdom with regards to the fracking market. So, we have to as a nation take our opportunities where we find them. There are also certain things that we are hopeful that in this new dispensation and with the government not needing further re-election, we hope that we would be able to address certain issues that we as a nation must address to make progress. We believe that in the course of this year, at some point, the issue of oil subsidy, has to be addressed. I am a believer in the fact that capitalism must have a human face and that any government that must care for its people must think of the less well-off in the society. So, I have no problem with people who need assistance being assisted, but I have a problem with the assistance that is equally given to billionaires in the country and the poorest men on the streets, which is exactly what we are doing with our current fuel subsidy regime. If you think about it, a lot of people tell you that in this official pump price, there are limited places where you can get them and one of such places is Lagos. Those of us in Lagos and the South-west states are even privileged to even get petrol at the pump price. So, that price we are claiming is too high, most people in other states have been paying it for years. So, the question is, is it really appropriate for the government to be subsidising a select few of us in this part of the country? Even if you are going to say some people in this part of the country also needs it, should the government be subsidising some officials and even people like me and some of my colleagues? I understand the concern of the populace when there is the talk of removing fuel subsidy and I think that is where we need the media to get the right message out in terms of enlightenment. I was recently invited to present a paper to the major oil marketers association. You might be aware that FSDH had the privilege to be appointed as the local adviser to the federal government for the last Eurobond and there have been debate around government’s borrowing. I made them to know that, as an individual when you borrow for investment, there is no problem, it is when you borrow to finance consumption that is a problem. And I think as it is for human beings, so it is for countries. If a country is borrowing to finance development, that is a good thing. But if you are borrowing to finance consumption, then there is a problem. If you look at the figures for subsidy, which I think we have a new way of referring to as we now call it under-recovery, the amount in 2018, was roughly equal the figure we have for what was raised in a bond issuance by the federal government. If we issued a bond and we are trying to raise money to develop our economy, it is a good thing. But it would be a pity when we have almost an equal amount of money just going into oil subsidy. We then realised that if we don’t have oil subsidy, almost twice of what was raised would be available to finance development. But I think it is about the way the message is carried out. So, if we explain to people that by removing fuel subsidy, it means we would have better transportation, better education for our children and better medical care. So, if we are able to support the government in making this difficult decision and hold them accountable to deliver the required infrastructure and ultimately it would be better for all of us. So, we believe that in the short-term there would be growth and as we continue to grapple with some of these issues, the growth would get better.

But do we have reasons to worry about the concerns that were raised by the governors’ forum with regards to the likelihood of another recession?

I think in any forecast, there is always a possibility of a downside. But I think the beauty of a discipline like economics, which is different from most other disciplines is that the behaviour of people and what people believe would happen, would often determine what actually happens. So, if all of us believe that there is going to be a recession and we behave in a way that supports that believe, there would be a recession, regardless of what happens. So, when you ask if there is a possibility of recession, my response is that there would always be that possibility and our collective behaviour can influence it. I am not suggesting that things would be easy. Things are not easy anywhere and particularly not in Nigeria. But I am saying that there are opportunities that we can exploit to keep this fragile growth going, until such a time that it can be ramped up and really get us back to that seven per cent, were it used to be. And it is about all of us, as a nation, collectively doing those things that would make that happen. When we get a critical mass behind the right ideas, then everything would be possible. Guess what, in spite of the global slowdown, some countries are still doing well. Meanwhile, there are countries whose growth in terms of percentage are far less than our, but because where they had attained in the past was so high, even the little growth, the effect of it is much better than what we have here. It is basically for us to move this country away from being known as that country that is perennially identified as having great potential, to a country that has realised some of its famous potential.

Some state governments have expressed concern that they might not be able to implement the new minimum wage. What advise do you have for those who are unwilling to implement this policy and how best do you think they can enhance their IGR to meet this obligation?

When we talk about Internally Generated Revenue (IGR), I think we need to ask what a state government needs to improve IGR. And I think one of the things that can be low hanging fruit is for people to create a conducive atmosphere that would allow employment in their states. If we go on with a situation where it is only government, that then refuses to pay salary, then we would continue to have problem. We all agree that many, if not most of our state governments have been indebted to their employees for months. But it was interesting for me to know that a state like Borno, where there is so much upheaval, the governor is not owing. What did he do differently? If we understand that human beings deserve a living wage, we would know that N30,000 is not too much for a human being who gets up in the morning and takes public transport to work. So, maybe we should turn the issue on its head that if we accept that this must be paid, a forward-looking state administrator would look at ways to ensure that they pay.

If you are to advise the incoming administration, what areas will you want the government to focus on?

If you think about it, when the Investors’ and Exporters window was introduced, you would