House Shuts Down Motion Seeking to Reverse FX Unification Policy

•Oniha: Subsidy removal, FX unification have immediate gains, pains

Ndubuisi Francis and Adedayo Akinwale in Abuja

The House of Representatives yesterday, shut down a motion that sought to reverse the naira unification policy introduced by the federal government.

But the Director General,  Debt Management Office (DMO), Ms. Patience Oniha, yesterday declared that the removal of subsidy on petroleum motor spirit (PMS) and unification of the exchange rates of the naira have yielded immediate benefits as well as created some pains.    

Moving the motion titled, “Need to Stabilise Nigeria’s Foreign Exchange Rate”, Hon. Beni Lar, recalled that on 14 June 2023, the Central Bank of Nigeria (CBN) announced the unification of all segments of the foreign exchange market.

She said, however, on July 17, 2023, the US dollar was trading at N815 to $1. The lawmaker added that in July 1980, the exchange rate was $1 to 0.80 Kobo, while as of July 2022, the rate was $1 to N670, adding that as of July 2023, the exchange rate is now about $1 to N815.

Lar, added that in the 80s, most of the food and products consumed were grown or produced in Nigeria, whereas today, the Nigerian economy is mainly dependent on importation and there lies the source of the terrible exchange rate the country is now experiencing;

She noted that the importation of vehicles and other commodities have dropped, since the floating of the naira exchange rate.

The lawmaker pointed out that the impact of the unified exchange rates has made Nigerian students abroad to suffer tuition fees increment by over 60 per cent making the money in their bank accounts insufficient to pay school fees due to devaluation of the naira.

Lar, expressed concern that the naira has been on a rapid decline against the US dollar, Euro and Pounds Sterling, thus leading to hike in prices of goods and services, thereby worsening the inflationary situation and the cost of doing business in Nigeria.

She noted that if the policy was not reversed, $1 could be exchanged for N1,000 by December 2023, saying the current economic situation may throw Nigeria into economic recession and depression.

Leading the debate on the motion, Lar added: “We all know that the foreign exchange rates depend on market forces. What is triggering the increase in the decline of the naira is due to the fact that Nigeria depends heavily on importation.

“We do not produce our own homegrown indigenous products and services that we can market to the outside world and earn foreign exchange from it. Rather, we are a country that is dependent largely on consumption.

“There is inflation all over the world but that of Nigeria is higher than normal and this is so partly because of the floating exchange rate policy, which is actually a good policy.

“I have nothing against the unified exchange rates system but the government must put in place deliberate policies to stimulate economic growth in the country. We have to stimulate our own domestic production.”

Contributing, Hon. Ahmed Jaha, commended Lar for presenting a motion that considers the suffering of Nigerians as regards the issue of exchange rates.

He opined that they should be fair to the current government which was just barely 60 days old.

“The cabinet has not been formed, we should give this government the benefit of the doubt for some time before assessing the performance of the government,” he added.

On his part, Hon Leke Abejide, said the exchange rate cannot be done by fiat, saying it has to be done by market forces.

In his submission, the Minority Leader, Hon. Kingsely Chinda urged the lawmakers to look at the prayers of the motion. He was of the opinion that the prayer was in support of the government and not against the government.

Before ruling on the motion, the Deputy Speaker, Hon. Ben Kalu who presided over the plenary said the motion presented by Lar was disjointed.

He stressed that the title of the motion was different from the body and the prayers of the motion.

Kalu, noted that one of the points in the body of the motion was asking the House to reverse a policy it once supported.

After putting the motion to vote, there was kind of a tie between the “Ayes” and the “Nils”, but Kalu ruled in favour of the “Nils.”

DMO: Subsidy Removal, FX Unification Have Immediate Gains, Pains

Meanwhile, Oniha, yesterday declared that the removal of subsidy on petrol and the unification of the exchange rates of the naira have yielded immediate benefits as well as created some pains.  

Oniha, stated that government was trying to alleviate the attendant pains, particularly for the most vulnerable in the society. 

In a goodwill message, which she presented at a one-day technical roundtable on Tinubu’s economic blueprint, organised by ActionAid Nigeria, the DMO boss noted that the reversal of these policies by the president had resulted in much higher revenues for all tiers of government.     

She said: “I would like to highlight that during the campaign, a Manifesto and an Economic Plan were made available to the public.

“We have also witnessed implementation of some aspects of the plan such as the removal of subsidy on PMS and the unification of the naira exchange rates.              

 “The implementation of these has yielded immediate benefits but has also created some pains which the government is trying to alleviate, particularly for the most vulnerable in the society.

“Over the past few years, the economy has been the subject of intense debates with suggestions from many experts and analysts on what the government should or should not do to remedy the situation. “However, it is essential to recognise that the situation of the economy needed critical and urgent attention to avoid a deterioration in major economic and social indices.                            

 “Thus, some of the measures that have been taken so far were not only needed but essential to propel Nigeria towards sustainable development. In this pursuit, we must aim for a development model that leads to increased employment opportunities and higher income levels.”       

 According to her, low growth with high unemployment levels were insufficient to achieve sustainable growth that aligns with the nation’s collective aspirations, adding that while the pains from the recent government actions have led to criticism about their necessity and timing, she commented on the impact of subsidies and exchange rates on the budget.                      

 “Perhaps, this may enable us better appreciate the long term benefits of these policy actions. As many of you are aware, the debt stock has grown but it is important to understand the reasons behind this growth. Subsidies are an Expenditure item in the Budget, thus invariably, they contribute to the budget deficits.                                  

“On the other hand, the naira exchange rates used for the budgets are the official rates, which we all know are much lower than the open market rates, the effect of which is lower revenue.                        

“Overall, these two policy stance that were maintained over many years, contributed to consecutive budget deficits which were financed by an average of 90 per cent through borrowings.                        

“For instance, the size of the 2023 Appropriation Act (Budget), is about N21 trillion with a Deficit of N11 trillion to be financed by New Borrowing of over N9 trillion.                                

“The reversal of these policies by his Excellency, the president has resulted in much higher revenues for all tiers of government. In June and July 2023, the funds distributed by the Federal Accounts Allocation Committee (FAAC) were over N907 billion and N1.959 trillion respectively, compared to between N500 billion and N750 billion previously.  

“As the debt stock continued to grow due primarily to consecutive budget deficits, it unavoidably resulted in an increase in debt service obligations,” she stated.

Currently, debt service consumes a significant portion of our revenues, not necessarily because debt stock is high but because revenue is low and worse still, underperforms the targets in the budgets, Oniha argued.                      

  “It is pertinent to state that Nigeria’s debt stock to GDP ratio at below 25 per cent is among the lowest globally. While debt service to revenue ratio, which in 2022 reached 100 per cent, is relatively high and reduces the fiscal space available to government.                   

 “This indicates that the issue lies with our revenue. Unfortunately, the focus on revenue improvement previously did not change the outcomes significantly.

“The recent quick actions to bring revenue to the fore by the present administration are steps in the right direction. My main message here is that we cannot discuss growth, development, or debt without giving due consideration to revenue.     

“It is now imperative that we confront revenues and take decisive actions to further strengthen our revenue streams from all sources. We expect to see improvements in revenues from the work of the Committee on Revenues set up by his Excellency, President Tinubu,” she stated.