CBN needs to manage cost-push inflation after fuel subsidy removal – CEO of CFG Advisory

Adetilewa Adebajo, the Chief Executive Officer of CFG Advisory, has said that the Central Bank of Nigeria will need to focus on managing cost-push inflation after the fuel subsidy is removed. 

The CEO stated this during an interview with Arise Television earlier today. He said:

• “If we remove the fuel subsidy, we will have some breathing space, then it will be a question of how we manage cost-push inflation, and all other crises which are where the CBN needs to focus its attention. If we remove fuel subsidies, we need to manage monetary policy and tighten liquidity to ensure that the inflationary impact is minimized.”  

Phased furl subsidy removal: According to Adebajo, he had suggested years ago that Nigeria needs to remove fuel subsidies of 10% to 15% every year on a phased basis. He emphasized that if this had been done in the last 8 years, this problem would have been over and there would be no need to consider removing the subsidy all at once.  

Silver lining public revenues: Adebajo explained that there is a silver lining because the Federal Inland Revenue Service (FIRS) has stepped up its revenue figures. In all these, Nigeria’s economy has been diversified because non-oil revenues account for more than oil revenues. Adebajo is hopeful that in 2023, Nigeria should be able to see about N10 trillion from the FIRS.  

Oil investments needed in Nigeria: Speaking on increased revenue from high oil prices because of the ongoing Russian-Ukraine war, Adebajo said Nigeria could still see increased oil revenues. However, he said for this to happen, investments are needed in the oil sector to make positive returns. 

He gave an example with the Nigeria Liquefied Natural Gas Limited, which he said has brought $100 billion to Nigeria in 20 years. He said the federal government is making up to $1 billion in dividends, not to talk about taxes.  

Debt problems: He noted further that if fuel subsidy is removed, the problem of debt will be resolved immediately because there will be cash flows of $15 billion every year and the country will stop budget deficit financing. According to him, Nigeria needs only to manage the process, but fuel subsidy removal is key. 

What you should know: Earlier today, Nairametrics reported that Nigeria’s finance minister, Dr Zainab Ahmed said that the removal of fuel subsidies would be formally announced by President Muhammadu Buhari before he hands over power to the next president. e added that the federal government plans to educate Nigerians on the importance of putting an end to fuel subsidies.