The Emir of Kano, Muhammadu Sanusi II, has disclosed that concerns over Boko Haram suicide attacks prevented former President Goodluck Jonathan from completely removing fuel subsidy in 2012.
Sanusi, who was the Governor of the Central Bank of Nigeria (CBN) at the time and one of the strongest advocates for subsidy removal, said the policy was widely misunderstood and poorly communicated.
Speaking on Tuesday at the Oxford Global Think Tank Leadership Conference, themed “Better Leader for a Better Nigeria,” Sanusi explained that what Nigeria called a fuel subsidy was essentially a “naked hedge,” where the Federal Government guaranteed a fixed fuel price regardless of fluctuations in global oil prices, exchange rates or interest rates.
According to him, the arrangement forced the government to borrow heavily to sustain fuel pricing, eventually borrowing not only to pay subsidies but also to service the interest on those loans.
He said, “We moved from using revenues to pay subsidies, to borrowing money to pay subsidies, and then borrowing money to pay interest on the borrowed money.
“We had become bankrupt. Anyone who takes a naked hedge ends up bankrupt, especially with a commodity whose price you cannot control.
“If Nigerians had allowed the Jonathan government to remove the subsidy in 2011, there would have been pain, but it would have been nothing compared to what we are facing today,” he said.
“The government compromised and did 50 percent, not 100 percent, because of Boko Haram. The fear was that if a suicide bomber targeted protesters and killed hundreds of people, the issue would escalate beyond subsidy.”
Sanusi, however, acknowledged Jonathan’s resolve to pursue the reforms despite the risks.
“I have to give President Jonathan credit. He was determined to do it,” he said.