*Idika Kalu blames delay in ending subsidy regime for current economic woes
Kenyan President, Mr. William Ruto, has said President Bola Tinubu’s removal of petrol subsidy is what Africa needs for development, adding that the decision will move the continent forward.
This is as a former Minister of Finance, Budget, and National Planning of Nigeria, Dr. Kalu Idika Kalu, attributed the severity of the current harsh economic realities to the failure of successive administrations to summon the courage to end the fuel subsidy policy as soon as it became a drain pipe to the economy.
The 84-year-old former minister, who also blamed the regime of dual foreign exchange policy of the immediate past administration for the current instability in the exchange rate, warned the current monetary authorities against arrogating a substantial portion of the foreign exchange management to parallel market forces.
Ruto spoke at a high-level event for African leaders with the theme “Africa’s green industrialisation” on the sideline of the ongoing COP28 in Dubai, United Arab Emirates (UAE).
Speaking on the removal of subsidy by President Tinubu, the Kenyan leader, according to TheCable, said African leaders needed to make more of such difficult decisions that would stabilise their economies.
“I want to congratulate my colleagues, heads of state – the President of Zambia for the many steps they have had to take to stabilise their economy,” he said.
“President Tinubu here, who has had to make very difficult decisions, including the removal of subsidy.
“We all have to make such difficult decisions to get Africa moving and I want to promise here that we will gather the courage to make the right decisions so that Africa can match into the future.
“And also partner with other regions of the world as we tackle the challenge of climate change, and as we create opportunities for young people so that our young people don’t have to get into dangerous routes to go to other destinations.
“We want to create jobs; we want them to get equipped on our continent and continue working on their continent,” Ruto explained.
He added that investors and development partners need to know that Africa has green investment projects and is ready to use renewable energy to turn the existential threat facing the continent into opportunities for investments, job creation, and development.
Ruto said African presidents needed to work together to attract the potential of green energy to the continent.
The Kenyan president said some companies are already stepping forward to invest in Africa because they saw the “tremendous potential, opportunities, and businesses that exist on our continent”.
Idika Kalu Blame Delay in Ending Subsidy Regime for Current Economic Woes
Meanwhile, a former Minister of Finance, Budget, and National Planning of Nigeria, Dr. Kalu, has attributed the severity of the current harsh economic realities to the failure of successive administrations to summon the courage to end the fuel subsidy policy.
The former minister, who was a guest on ARISE NEWS Channel yesterday, wondered why the previous governments could not have ended the programme with the level of fraud and leakages associated with it, however, added that subsidy was not a bad policy.
He said: “We should never have sustained subsidy the way we did and this has little to do with the new administration. It could have been done by the previous administration and even a few others before that.”
Explaining that though the petrol subsidy was not entirely bad, the former minister, however, pointed out that the policy outlived its relevance when its operation began to give rise to leakages and corruption in the system.
“The issue is not as if subsidies are bad. In fact, subsidies have been designed since the mercantile period as a way of encouraging domestic production to shorten the learning curve, to give the ability to both domestic competitiveness and external competitiveness.
“So, the issue is not whether the subsidy is good or not. In the same sense, the issue is not whether you remove subsidy or you didn’t remove subsidy. Nobody will argue that when it is not efficient when it is not encouraging production, when it is giving rise to increased costs, when it is giving rise to leakages and corruption in the system, there is no question one has to take that political decision to remove the subsidy,” Kalu explained.
He also blamed the anxiety over the 2024 budget on the complication in foreign exchange management, which he said has affected other aspects of the economy.
He said: “Regarding the budget, the shocks that we are having now come from the reasons that have been discussed over the past few years and it is the big leaps in the exchange rate, and the corresponding rise in costs, because of the sheer lag in eliciting reaction from the producers, both those who are producing and those importing,” he said.
The former minister said he would never support a double foreign exchange regime, insisting that no economy can survive under such a policy.
“I cannot support the practice of a double foreign exchange regime. When you look at advanced countries, you look at Asian Tigers, you look at most of Europe, they don’t talk in terms of double exchange rates. As a professional in the field that has helped other countries manage their exchange rate system, I believe the emphasis is on resource allocation.
“We should not be carried away thinking there is something laudable about two foreign exchange systems.
“I will advocate like what we had in the 1930s, 1940s, 1950s, and even to early 1960s when we were not talking about multiple exchange rates, but then you compare that to the position we had recently, which was a horrendous mixture of all kinds of presumptuous rates of exchange. You think farmers deserve this, market women deserve that, or large-scale producers deserve that.”
Speaking on the efforts of the current managers of the economy to improve the situation, Kalu pointed out: “We may be experiencing dynamic changes right now, but I think the government is doing everything to improve the situation.
“I listened to the Minister of Finance and Minister of Budget and National Planning trying to explain the details of the budget including the Governor of the Central Bank.
“I’m sure they will be trying to tackle some of the problems the way we have decided to adjust the exchange rate and the target is to move to a single-digit rate.
“The black market will always be there but it’s supposed to be a fringe market but the differential should be very small. On no account should we begin to arrogate such a sizeable play in the whole metrics in the parallel market. In some countries, it is non-existent and that’s where all the countries are moving to,” Kalu added.