The Debt Management Office (DMO) has hailed the courage of President Bola Ahmed Tinubu in removing the controversial fuel subsidy, describing the scheme as a drain on the country’s resources.
Director-General of DMO, Patience Oniha, gave the commendation while speaking at a one-day Technical Roundtable on Economic Blueprint for President Bola Ahmed Tinubu’s Administration organised by ActionAid Nigeria.
She said subsidy removal and forex unification have enormous benefits for the economy, though the implementation comes with some pains.
Oniha said: “It is essential to recognise that the situation of the economy needed critical and urgent attention to avoid a deterioration in major economic and social indices. Thus, some of the measures that have been taken so far were not only needed but essential to propel Nigeria towards sustainable development.”
In pursuit of the policy direction, leaders must aim for a development model that leads to increased employment opportunities and higher income levels, she said.
She said while the pains from the recent government actions have led to criticism about their necessity and timing, “it is important for us to understand the impact of subsidies and exchange rates on the budget.
“Subsidies are an expenditure item in the budget, thus invariably, they contribute to the budget deficits. On the other hand, naira exchange rates used for the budgets are the official rates, which we all know are much lower than the open market rates, the effect of which is lower revenue.
“Overall, these two policy stances that were maintained over many years, contributed to persistent budget deficits which were financed by an average of 90 percent through borrowings.
“For instance, the size of the 2023 Appropriation Act (Budget), is about N21 trillion with a deficit of N11 trillion to be financed by new borrowing of over N9 trillion.”
