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IMF: Why We Asked Nigeria To Remove Fuel Subsidy
And what’s the reason why we counsel against such generalised subsidies is very simple. It tends to be highly regressive, meaning the benefits of such you know, fuel subsidies tend to accrue to the rich and segments to reach out to people and the poor people.
The International Monetary Fund (IMF) has explained why it advised Nigeria to remove fuel subsidies, adding that the subsidy regime was robbing the poor for the rich.
The Director of the African Department of the Fund, Mr. Abebe Selassie, provided insights into the organisation’s position, at the ongoing Spring Meetings of the IMF and World Bank in Washington DC. According to him, the Fund had provided robust content and how the poor could benefit from the policy in the provision of social safety nets.
His words: “Subsidies are about resource allocation internally within Nigeria. So Nigerians, the people of Nigeria pay for these subsidies.
“And what’s the reason why we counsel against such generalised subsidies is very simple. It tends to be highly regressive, meaning the benefits of such you know, fuel subsidies tend to accrue to the rich and segments to reach out to people and the poor people.
“So it’s people that are driving these large cars, with big houses are wanting to see subsidised fuel. They’re the ones benefiting relative to the poor and vulnerable in Nigeria.
“So you know, not only people paying for the subsidies Nigeria, it’s the poorest segments of society that actually are losing out and resources could instead, of course, be used to improve conditions for poorer people instead of accruing to rich people.
“That’s why subsidy reform is important. We applaud the government for the steps government took to reduce the extent of subsidies. I think as oil prices have become volatile, the level of subsidy has also moved up and down. “But I think you know, the direction of travel, I think, to remove the subsidies and use the resources to provide social protection for the most vulnerable households.”
Mr. Selassie revealed that the IMF has provided the sum of $58 billion to African countries since the outbreak of the COVID-19 pandemic and pledged it would do more.
The IMF chief cautioned African countries against commercial loans for the purposes of refinancing because of the current rate hike in most economies.
He advised that instead, countries South of the Sahara that have debt service challenges should look inward for domestic resource mobilization, which would be easier to deal with. The Director criticised the practice of discriminatory tax exemption to some companies and not extended to others.
These special favours to some companies, he observed reduce the effectiveness of governments to optimise tax revenue..
Positive developments in Africa
“Mr. Abebe said that after four challenging years and multiple shocks, Sub-Saharan Africa’s economy appears to be on the mend.
“We expect economic growth to rise to 3.8 per cent in 2024, from 3.4 per cent last year. After peaking at almost 10 per cent in late 2022, inflation has nearly halved to around 6 per cent in the early part of the year thanks to decisive action by central banks.
“This includes slower food price increases, a positive development for a region where the cost of crises has been acute in recent years. In addition, fiscal consolidation efforts are starting to pay off, with the median public debt stabilizing at around 60 per cent of GDP, halting a 10-year upward trend.
“And with global financial conditions easing, a few countries have been able to return to international markets, ending a two-year hiatus. These are encouraging signs.”
The Missing Chief said, however, “ the region is not out of the woods yet. Far too many countries still face a funding squeeze.
What’s heart breaking about Africa- IMF MD
Also, IMF Managing Director, Mr. Kristalina Georgieva, described as “heart-breaking”, the situation in which African countries spend large amounts of their revenue on debt servicing.
Her words, “African countries spend on average, 12 percent of their revenue on on debt servicing. This is more than double from the Las decade. They were at 5 percent a decade ago.
“What is heartbreaking is that in some countries, the debt payments is up to 20 per cent of revenues.
“What does that mean? It means that what could have gone to education, health, for investments in infrastructure and jobs is being sucked away by debt servicing. The ground for public capital to come in.
“We know that part of the reason is that interest rates are quite high. So what does it translate into for authorities in Sub-Sahara Africa?
“First, we see that those who have worked on public finances, to clean clean the ground for private capital to come in are doing better.
“When you have a tax/revenue of 26 per cent like Cote d-Ivoire, you can bear the debt burden. When you 12 per cent to GDP you cannot.”
The MD said that the IMF’ major peg of interaction with member countries in the region was focusing on the mobilisation of domestic resources, improving public spending and mobilising local savings with which to achieve growth prospects.
She added that African countries must keep their eyes on inflation because that problem remains unsolved.
Ms. Georgieva noted that Africa was blessed with huge potential, with huge a youth population that was earger to work and that its leaders should allow Africa’s resources to work for Africans.
A prosecution witness, Captain Ezekiel Bala-Agaba, testified in a Lagos Federal High Court on Thursday, that he personally delivered $15 million in cash to former NIMASA DG, Patrick Akpobolokemi.
The witness, Bala-Agaba, a former Executive Director of Maritime Safety, Shipping Development and Marine Operations at NIMASA, made the disclosure while testifying before Justice Ayokunle Faji of the Federal High Court in Lagos.
Captain Agaba, who appeared as the 15th prosecution witness, told the court that funds meant for pipeline surveillance were withdrawn from NIMASA’s accounts, converted into dollars, and handed over to Dr Akpobolokemi.
According to him, the money was taken to a Bureau de Change, which converted it into $15 million before the cash was delivered to the NIMASA office on Burma Road, Apapa, Lagos.
He said he subsequently took the money to the office of the then Director-General.
“The money was sent to a Bureau de Change, which later brought the dollar equivalent to our office at Burma Road, Apapa, Lagos. I asked my Personal Assistant, Ekene Nwakuche, to carry the bag and follow me to the Director-General’s office,” he told the court.
The witness explained that he collected the bag from his aide before entering the office.
“When we got to the door of the Director-General’s office, I collected the bag from him and asked him to wait outside. I then personally delivered the sum of $15 million to the Director-General.”
The witness was initially a defendant in the case but later opted to testify for the prosecution.
While being led in evidence by prosecuting counsel, Suleiman Suleiman, he explained the chain of command within NIMASA and how financial approvals were processed in the agency.
According to him, the Director-General is the overall head of the agency and issues instructions to directors, who then implement policies in line with the NIMASA Act.
He told the court that he chaired the agency’s Intelligence Committee, which was responsible for certain security-related operations.
“As chairman of the committee, I oversaw its activities and reported directly to the Director-General, Dr. Patrick Akpobolokemi,” he said.
During the proceedings, the witness was also shown a document containing a letter from Access Bank to the Economic and Financial Crimes Commission (EFCC) detailing transactions in NIMASA’s accounts between 2013 and 2015.
When asked how much money he took to the former Director-General, Agaba replied: “$15 million.”
After listening to the testimony, Justice Faji adjourned the matter until April 22 and 23 for cross-examination of the witness.
The EFCC had in December 2015 arraigned Dr. Akpobolokemi and seven others before the court on a 30-count charge bordering on conspiracy, fraudulent conversion of funds and money laundering.
Those charged alongside the former NIMASA boss include, Warredi Enisuoh, Governor Juan, Ugo Frederick, Timi Alari, as well as Alkenzo Limited and Penniel Engineering Services Limited.
They pleaded not guilty to the offences.
The anti-graft agency alleged that the defendants conspired to divert funds running into over N1.15 billion under the guise of providing security intelligence in Nigeria’s maritime domain.
According to the EFCC, the NIMASA Intelligence Committee allegedly received N1,153,000,000 between December 2013 and July 2015.
Investigations further revealed that several companies contracted to execute the intelligence operations were either unregistered or lacked the capacity to perform the services, while some were allegedly linked to the defendants.
The prosecution also alleged that the defendants nominated or owned many of the companies used to execute the contracts.
One of the charges stated that the defendants conspired to commit offences punishable under the Money Laundering (Prohibition) Act, 2012.
The Central Bank of Nigeria (CBN) has issued a directive to all financial institutions to immediately restrict certain banking services for large-ticket borrowers with non-performing loans (NPLs).
This move is aimed at strengthening credit discipline and protecting the stability of the Nigerian financial system following a rise in the industry’s NPL ratio to approximately 7%, exceeding the regulatory 5% threshold.
This order is specifically targeted at large-ticket obligors.
The CBN issued the directive in a circular to banks on Monday.
The latest instruction comes almost a week after the CBN asked financial institutions to stress test.
It is uncertain if the two directives are connected or what may have triggered the loan-related instruction, but the apex bank said it furthers its mandate to protect Nigeria’s financial system.
“In furtherance of its mandate to promote a sound financial system, protect depositors, and enhance prudential compliance within the banking sector, the Central Bank of Nigeria (CBN) hereby directs all banks to restrict non-performing large ticket obligors, whose activities pose systemic risk to the financial system, from accessing specified banking services,” the circular reads in part.
“Any large-ticket obligor with a non-performing facility recorded in the CRMS and/or any licensed private credit bureau shall not be granted additional credit facilities. For the purpose of this restriction, credit facilities include loans and other forms of direct credit.
“In addition, such obligors shall not be granted banking facilities or contingent liabilities such as bankers’ confirmations, letters of credit, performance bonds, or advance payment guarantees.”
Babajide Kolade-Otitoju, the Director of News at TVC News, recently stated that Oyo State Governor Seyi Makinde would likely have defected from the People’s Democratic Party (PDP) if he was still serving his first term.
Otitoju stated this on Friday on TVC’s ‘Breakfast Show’.
He described the National Convention of the Peoples Democratic Party, PDP, in Ibadan last November as a mere waste of time.
“People must show good judgment at a critical phase. What was the point of having that convention? Two courts told you not to go ahead but you went ahead.
“I may not be a fan of former Senate President Bukola Saraki but if he says something that makes sense, I will be the first to admit it. He made sense when he said let’s go for caretaker. What’s the point of not listening to him?
“Later you will be shouting that the ruling party is behind your crisis, meanwhile you are the architect of your own misfortunes. You created this problem.
“If Makinde were in his first term, he would have fled like the dancing governor because his second term would have been in danger,” Otitoju said.
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