Sanusi Questions FG's Continued Borrowing Post-Subsidy Removal

Muhammadu Sanusi II, the Emir of Kano, has voiced significant concerns regarding the Federal Government's persistent borrowing activities, especially in the aftermath of the petrol subsidy's removal. The former governor of the Central Bank of Nigeria (CBN) cautioned that a deficiency in fiscal discipline might negate the positive outcomes anticipated from the nation's recent economic adjustments.

Sanusi, a long-time critic of the fuel subsidy regime, reiterated his stance that it was an unsustainable policy. He also previously highlighted the issue of Nigeria's dependence on foreign refineries while domestic ones were not fully operational.

"As an oil-producing nation, we cannot continue to support foreign refineries when our own facilities are not functioning," he stated.

He acknowledged recent positive developments within the oil sector, noting Nigeria's progress in transitioning from substantial import reliance towards domestic refining and subsequent export activities.

"The presence of our own domestic refinery now means we are no longer importing petroleum products; we are even exporting to Europe. This is beneficial for the economy," he remarked.

While endorsing the policy direction, the former CBN governor raised questions about the timing and order of implementing these reforms, specifically the abolition of subsidies and the liberalisation of the foreign exchange market.

He contended that introducing such measures within a loose monetary framework exacerbated the sharp decline in the value of the Naira.

"Artificial exchange rates, particularly when money is being printed, are not sustainable. A devaluation was inevitable."

"In my view, removing subsidies or liberalising exchange rates are beneficial interventions. The crucial questions are whether they were implemented at the appropriate time and if other necessary actions were overlooked."

"Liberalising the exchange rate while monetary conditions remained loose directly contributed to the currency's rapid depreciation."

"It is insufficient to simply state that the subsidy has been removed. This step was necessary. However, when 100% of revenue is allocated to debt servicing, the current path is unsustainable. Where will the necessary funds originate?"

"Nonetheless, if the decision is made to remove subsidies and liberalise exchange rates amidst very loose monetary conditions, and before tightening the money supply, the Naira is bound to plummet. This was a matter of timing."

"We have eliminated the subsidy and are now allocating those funds. What we should not observe is a failure in fiscal consolidation. Eliminating wastefulness should not be accompanied by continued borrowing. I have made this point before. The benefits must be evident. If the subsidy is no longer being paid and those funds are available, why is the government still borrowing extensively? What is the purpose of this borrowing?"

His observations coincide with the controversy surrounding a new loan request from President Bola Ahmed Tinubu. The President has asked the Senate to approve a $516.3 million loan for segments of the planned Sokoto–Badagry Superhighway.

In a correspondence to Senate President Godswill Akpabio, the President indicated that the 1,000-kilometre project aims to link Nigeria's North-West and South-West regions.

This borrowing proposal has faced criticism from various individuals, including former Vice-President Atiku Abubakar. Abubakar acknowledged the commendable nature of the project but advised the government to explore alternative funding mechanisms rather than increasing the national debt.