Victor EzejaDr Paul Alaje, Chief Economist and Senior Partner at SPM Professionals said that though Nigerian states are currently receiving more funds in monthly allocations due to petrol subsidy removal, the country might become bankrupt if they decide to implement a new minimum wage.
Recall that President Bola Tinubu had upon assumption of office, announced the removal of subsidies on Premium Motor Spirit (PMS), also known as petrol, which triggered high cost of the product and general cost of things across the country.
The subsidy removal, according to analysts, led to increase in monthly allocations to states.
Alaje, who appeared on Arise News TV’s breakfast programme, Morning Show, said there are indications that payments for petrol subsidy is still being made by the Nigerian government 11 months after the removal was announced by President Tinubu.
While speaking during a panel session at the World Economic Forum in Riyadh, Saudi Arabia on Sunday, President, Tinubu, asserted that the removal of subsidy saved Nigeria from bankruptcy as the payments had hitherto, drained the country’s resources. The Federal government spent over N6 trillion on subsidy payments between 2022 and the first half of 2023 when it was removed.
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Alaje, who admitted that the removal of petrol subsidy was necessary to avert the financial crisis, warned that without adequate measures, the country might be losing due to consequent runaway inflation, exchange rate instability and other economic challenges.
He said the implementation of the national minimum wage is critical for addressing the welfare of workers amid the high costs of things. He, however, pointed out that it will lead to high inflation because it will increase the money supply in the economy which means “solving a problem and creating another one.”
Speaking on the need to increase revenue, the economic expert said the government needs to curb oil theft to the barrest minimum.
He said there are still fundamental issues of supply chain disruption which is also responsible for the current scarcity.
He stressed the need for the government to do a holistic review of its economic policies so far and ensure that the implementation of one, does not have a negative effect on other areas of the economy.
“Nigerian economy needs a holistic review, if you are running a reform, it is not for a few sectors, there is a need for a holistic. We can provide some palliatives, but will it solve the problem, the answer is no,” Alaje stated.
He called on the government to support private sector operators to boost production.
He also emphasised the need for the goverment to look into how to generate more revenues from other sources such as the mining sector, instead of reliance on only oil.
Speaking on addressing energy costs accentuated by the removal of petrol subsidy, the economic expert advised the government to refocus its direction towards partnering with foreign firms to produce electric vehicles for use in Nigeria. According to him, production of Compressed Natural Gas (CNG) vehicles as an alternative to petrol for saving costs, is currently having a challenge.
Victor Ezeja is a passionate journalist with six years of experience writing on economy, politics and energy. He holds a Masters degree in Mass Communication.
