ABUJA, Nigeria –The 16th Emir of Kano and former governor of the Central Bank of Nigeria (CBN), Muhammadu Sanusi II, has queried the rationale behind borrowings after the removal of petrol subsidy by President Bola Ahmed Tinubu’s administration.
Speaking in Abuja yesterday at the Oxford Global Think Tank Leadership Conference and Book Launch, the emir said the removal of fuel subsidy had led to increased revenue.
Sanusi commended Tinubu’s administration for removing fuel subsidy and unifying exchange rates, describing both as “painful but necessary steps.”
He, however, cautioned that the reforms would fail unless matched with fiscal discipline and transparent spending.
“If you stop paying subsidies but continue borrowing more, it means you’ve filled one hole only to dig another. The real challenge now is the quality of government spending and the management of the revenues saved,” he said.
Sanusi, who served as CBN governor between 2009 and 2014, said Nigeria’s current economic woes were the consequence of years of policy inconsistency and populist politics.
“In 2012, we warned that the subsidy was unsustainable, but politics took over. Now, the same people who led protests against it have inherited the problem and had no choice but to do the right thing,” he said.
He applauded the professionalism of the current economic team for the steps taken to stabilise inflation and reduce exchange rate volatility but insisted that government waste must be urgently curtailed.
Questioning the government expenditure, he asked, “Why do we need 48 ministers? Why do we need convoys of vehicles? Why are we still borrowing even after removing subsidies? If you fill one hole, why dig another?
“This government needs to look at institutions, transparency and how money is being used at all levels. Because if you keep earning more and spending badly, you’ll undo every gain made.
“We have too many sycophants in government. You sit in a meeting, and someone begins with, ‘Mr. President, I thank you for your leadership; God has blessed Nigeria by making you our leader.’ By the time they finish the praise-singing that is the advice the president takes.
“However, people like me that will say, ‘Mr. President, this is wrong,’ are branded enemies. So, when leaders surround themselves with praise-singers, they never get good advice.
“That is why people like Aigboje Aig-Imoukhuede and myself often end up being enemies of the state because people don’t like hearing bad news.
“We told Buhari everything — about printing money, waste, exchange rates, and subsidy— but each time, it was seen as a personal attack. Those around him convinced him we were enemies. Leaders must begin to ask, “Who do I surround myself with?
“And ministers should know — it’s not to your benefit to become a praise-singer. You debase yourself when you do that.”
Speaking on why the Jonathan government could not remove the fuel subsidy, Sanusi said, “The only reason the government compromised then was Boko Haram. There were thousands of Nigerians on the streets in Lagos, Kano, Kaduna and there were suicide bombers in the country. I told them, if one of these bombers explodes among protesters, we’d have 200 corpses; it won’t be about subsidy anymore.
“So, I must give President Jonathan credit. He was determined to do it, but at the end of the day, the compromise was made to save lives.”
Sanusi said that in 2012, “We were in a situation where we had what we called a hedge — not a subsidy. You see, a subsidy means the government pays a percentage of the price. But what we had was what, in risk management, you call a naked hedge, the worst possible derivative you can have. You will not pay more than X amount per litre of petrol, no matter what happens.
“So when oil prices rose from $40 to $140, the federal government paid the difference. When exchange rates moved from N155 to N300, the government paid the difference. When interest rates moved from 5 percent to 15 percent, the government paid the difference.
“All those costs — crude, refining, transportation, interest — were absorbed by the government. We moved from using revenues to pay subsidies, to borrowing money to pay subsidies to borrowing money to pay interest on the borrowed money. We became bankrupt.
“Anyone who takes a naked hedge ends up bankrupt — especially when you don’t control the price of the commodity.
“Now, if Nigeria had allowed the Jonathan government to remove subsidy in 2011, that would have caused pain— but a very small fraction of what we face today. This is the cost of delay.
“At that time, we worked out the numbers in the Central Bank. I stood up and said: remove the subsidy today; inflation will move from 11 percent to 13 percent, and I’ll bring it down within a year.” We wouldn’t have had 30-something percent inflation today.
“But people like my friend Kayode Fayemi and his APC colleagues came out on the streets — Occupy Nigeria, saying we couldn’t do it. I called one of my closest friends then and said, ‘You know what we’re doing is right.’ He said, ‘Yes, I know. But I’m in opposition. My job is to make the government look bad. You’re the CBN governor; go and defend your government.
“Now, what has the Central Bank achieved? Its role is to provide stability — not growth or employment — but a conducive environment for both.
“You don’t want inflation moving from 10 percent to 15 percent to 30 percent. As I said recently at the NESG, Nigerians don’t realize we were on the brink of hyperinflation. Beyond a certain rate, it becomes uncontrollable — like Zimbabwe or Venezuela.
“We were printing money like mad and heading in that direction. But inflation has now been tamed, runaway devaluation stopped. Yes, the naira is at N1,400, but it’s better to know it will remain N1,400 for six months than to see it jump to N2,000 tomorrow.
“The Central Bank’s job is not to give you a ‘strong’ naira or low prices; its job is to reduce volatility. So, when you assess the bank, ask: have we reduced inflation volatility? Yes. Have we brought it down? We’re working toward single-digit inflation,” he said.
On the fiscal side, the emir said, “Tax reforms will kick in next year. But even before that, government revenues have increased, and debt-service ratios have dropped from over 100 percent to about 40 percent. The Finance Ministry deserves credit for that.”
