The Minister of Budget and Economic Planning, Atiku Bagudu, has said that the removal of fuel subsidy is essential for Nigeria’s growth.
Speaking via an article published in The Explainer, Volume 28, on Friday, 27th September 2024, Bagudu pointed out that discussions on fuel subsidies often neglect the fact that prices for diesel and kerosene have already been deregulated, while petrol remains relatively cheaper.
He noted that it is necessary to transition to Compressed Natural Gas as a more affordable energy source, especially for transportation.
“The President addressed the fuel subsidy issue and the debate surrounding CNG adoption. While this transition may cause temporary shocks, particularly for vulnerable groups, with the right measures in place, we can build a more competitive energy sector that will drive growth,” Bagudu stated.
He also highlighted that President Bola Tinubu’s administration is tackling these challenges through the Renewed Hope Agenda, which includes social intervention programmes aimed at easing the impact of the economic reforms.
Bagudu said the president’s strategy focuses on confronting difficult realities while establishing the foundation for long-term growth.
“Our economy is currently small. The federal budget is approximately $20 billion. When compared to countries with similar populations, such as Indonesia, with a federal budget of $213 billion, or Brazil, with $750 billion, it becomes evident that we cannot achieve our economic objectives if we continue on this path. Our revenue must be higher.
“The clearest sign of this is seen in the monthly federal allocation meetings, where we distribute less than $2 billion across the three tiers of government. Even with this, the total is only $24 billion annually, which is insufficient. State governments that depend heavily on this allocation are under severe strain,” Bagudu added.
He also highlighted Tinubu’s ambition to transform Nigeria into a $1 trillion economy, noting that achieving this requires making tough decisions.
Bagudu added, “A key focus area is managing our foreign exchange. We do not have enough foreign currency reserves, so it is essential for the Central Bank to operate independently.
“The President supports this, following the examples of other nations that have faced similar challenges. A market-based system, rather than one that selects winners and losers, will attract more revenue and help stabilise the exchange rate.”