Nigeria’s Economic Advisory Council calls for petrol subsidy removal

Nigeria's Presidential Economic Advisory Council has called for the removal of petrol subsidies to reflect the true cost of the commodity, as the country grapples with a mounting trade deficit and economic challenges exacerbated by the COVID-19 pandemic. The Central Bank of Nigeria reported a trade deficit of $2.5 billion as of January this year, highlighting the urgent need for structural adjustments to address the country's economic woes. Tilewa Adebajo, CEO of CFG Advisory, weighed in on the current economic landscape in a recent CNBC Africa interview. Adebajo commended the Economic Advisory Council's recommendation to remove petrol subsidies, emphasizing the critical need for fiscal reforms to address revenue shortfalls. The National Petroleum Corporation's inability to meet financial commitments to the Federation account further underscores the pressing need for subsidy removal. Adebajo stressed that Nigeria's fiscal challenges require immediate attention, as reliance on monetary policy alone has reached its limits. The Nigerian economy faces staggering inflation rates, weak economic growth, and soaring unemployment, exceeding 50%. Adebajo predicted that inflation could rise to around 19%, driven by food inflation surpassing 22%. Structural issues, including food supply chain disruptions due to insecurity, contribute to Nigeria's persistent economic challenges. Moreover, Nigeria's debt profile has skyrocketed to $115 billion, with foreign debt tripling in the past four years. Adebajo highlighted that debt service now consumes 90% of government revenues, rendering the country technically insolvent. Urgent measures, including subsidy removal and debt restructuring, are necessary to avert a fiscal crisis. In light of rising interest rates and growing debt pressures, Adebajo warned that the government's reliance on debt issuance risks crowding out private sector investments. Nigeria must address its debt sustainability to prevent further economic deterioration. The country's trade deficit, reaching $2.5 billion in January, poses additional challenges for Nigeria's economy. Adebajo noted that the trade imbalance could further weaken the currency and hinder efforts to boost non-oil exports. Structural reforms are imperative to bolster productivity, drive export growth, and revive the economy's competitiveness. As Nigeria navigates complex economic challenges, Adebajo emphasized the importance of prioritizing structural reforms, concessioning, and subsidy removal to revitalize the economy. Addressing the root causes of Nigeria's economic woes is crucial to reigniting growth, stimulating exports, and restoring fiscal stability. With mounting pressure on the government to implement bold reforms, Nigeria stands at a critical juncture in its economic trajectory. The decisions made in the coming months will shape the country's economic future and determine its ability to overcome the current crisis.