By Merit Ibe
For an economy that is burdened by huge fiscal deficit and unsustainable debt obligations, the Centre for Promotion of Private Enterprise (CPPE) has opined that huge sums of revenue can be unlocked from the forex and fuel subsidies.
Worried about the huge loses of revenue to subsidy regimes, which are damaging the economy the Director of the centre, Dr Muda Yusuf noted that already, with the plan to discontinue petroleum subsidy by the government , the action would unlock a minimum of N6 trillion revenue into the federation account annually, while a realistic exchange rate benchmark would boost the federation account revenues by about N4 trillion in 2023.
Discontinued fuel subsidy he said would also end the several years of plundering of the nation’s resources through the subsidy regime, stressing that the next administration would need to demonstrate the political will to put an end to this predatory practice.
On the foreign exchange side, the CPPE boss further explained that over the years, the exchange rate assumptions in the appropriation acts were grossly and deliberately understated, leading to loss of trillions of naira to the federation account.
“These are huge loses of revenue to foreign exchange subsidy which are as damaging to the economy as the fuel subsidy.
“But curiously, the National Assembly and the CBN had serially, grossly and inexplicably underestimated the exchange rate benchmark in the appropriation bills of the past few years, this should not be allowed to continue in 2023.”
He called for a review of the exchange rate assumption in the budget to reflect exchange rate realities and boost revenue to the federation account.
Yusuf said this could be done within the framework of the Finance Act, which is being reviewed.
This will not only benefit the federal government, but the states and local governments as well, he said.
“A realistic exchange rate would also improve forex inflows into the economy, enhance the country’s foreign reserves, strengthen the naira and elevate investors’ confidence.
“Currency brokers, middlemen and some operatives in the financial system are the major beneficiaries of the huge arbitrage opportunities, massive rent economy and the vast round-tripping enterprise that the forex subsidy regime has created.
“Unlocking revenues from the forex subsidy would be a significant major step towards realization of fiscal consolidation objective of government. “This would also reduce the current tendencies to impose additional burden of taxation on businesses and moderate macroeconomic headwinds.
“It should be stressed that this is not a devaluation proposition. It is a strategy meant to correct distortions in the forex ecosystem, boost government revenues, curb corruption in forex transactions and enhance liquidity in the forex market. It will also improve efficiency in forex allocation, promote transparency in the forex environment and raise investors’ confidence in the Nigerian economy.”