ANOTHER adjustment of the naira is imminent and unless fuel subsidy is removed, the impact of the currency adjustment would be more painful for the economy, the managing director and chief executive of Financial Derivatives Company, Bismarck Rewane has said.
Speaking on “Evolution of Foreign Exchange Market in Nigeria and the Way Forward” at seminar for finance journalists organized by the Central Bank of Nigeria in Calabar, Cross River State, Rewane said if the country does not deal with the fiscal spending on subsidy, any move on currency restructuring will be wrong.
“Currency adjustment will happen, depending on when they take away the subsidies; the adjustment required will be minimal and become the equilibrium. What is required is the exchange rate determining mechanism which allows for a floating currency with interventions to create stability.
“If the oil price drops below the present value, the adjustment impact is going to be more. The problem of currency adjustment is not unique to Nigeria; all the oil producing countries are all facing the same thing so let us not wallow in it. Whether we like it or not I can assure you that they will get rid of petrol subsidy. Not because of the pricing but because it is a system is wrong.”
Noting that subsidy fuels corruption, Bismarck said the 40 million liters consumption figure could not be right but rather points out that subsidy paid for petrol is either imported and exported to neighboring countries or subsidy is paid on fuel not imported.
“In 2002, total subsidy paid in this country was N200 million, by 2012 it had gone to N2 trillion, does this mean that we now have 20 times more vehicles in Nigeria, no. We are talking about 40 million liters of petrol a day. Is it that we are driving on top of one another? The true figure should not be more than 10 to 15 million liters.
The FDC chief executive also stressed the need to increase productivity in the country saying
“We must recognize that Nigeria has 2.6 per cent of the world population and produces 0.7 per cent of the world output. We can only desire and lay a claim to a higher quality of life if we can produce more.
“The diversification of the economic activity does not mean diversification of export revenue. We can produce all the Nollywood movies in the world and produce all the D’banj records in the world but if nobody buys it and pays dollars for it, you will have domestic balance but will not have external balance”, he stressed.