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“We haven’t saved a thing!” – Sanusi says it’s time to remove fuel subsidy totally

by Lekan Olanrewaju

The governor of the Central Bank of Nigeria, professor Lamido Sanusi has advocated for the full removal of subsidy on petroleum products, saying that the current system is not feasible, and could possibly lead the country to go broke. In a new interview with Reuters, he delivered something of a “prophecy of doom”, stating that a drop in all prices could result in big problems for the country.

“There will be a very bad day and a lot of gnashing of teeth if the oil price crashes and we haven’t saved a thing,” he said

“Our major concern is a major decline in the price of oil or (domestic) output would lead to a massive depreciation of the currency, a collapse in reserves and a huge growth in deficits and some of the states outside of the oil-producing region might find actually themselves in a situation where are not able to pay salaries,” he said.

“I am trained to think in terms of ‘what if’ and that’s the mindset I bring to my job. What happens if oil prices go to $50 a barrel? It’s happened before.”

He also said the government should not exceed the N880 billion earmarked for subsidies in the 2012 budget.

“I would simply like to see that the government does not pay a penny more than that, no matter what happens,” he said.

He went on to say that the CBN was comfortable with the current monetary stance. The 2012 budget  assumes an oil price of $72 per barrel, any earnings over which are saved into the country’s excess crude account. However, according to the governor, the difference does not necessarily mean an increase in the planned level of spending.

“So I don’t think the headline numbers alone would justify a change in monetary stance from where we are today,” he said.

He also spoke on the rate increases which took place in 2011 and pushed the benchmark borrowing rate to 12 percent.

“We front-loaded most of the tightening. We met seven times last year and tightened six times out of seven.”

“We’ve done most of the work ahead of the fuel subsidy removal. Now it’s about waiting to see that tightening moving through the system which is what we’re seeing.”

The first attempt by the government to remove a petrol subsidy resulted in widespread protests and a week-long national strike that brought the economy to a standstill.

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