80% of smuggled Nigeria’s fuel consumed by Benin Rep —IMF
From COBHAM NSA, Abuja –
INTERNATIONAL Monetary Fund (IMF) yesterday said Nigeria’s fuel woes may not end soon with Benin Republic consuming about 80 per cent of smuggled petroleum products from Nigeria.
Also, the fund warned that expansionary fiscal policies by Nigeria will be detrimental given current uncertainty in the global economic scene.
Senior Resident Representative of IMF, Nigeria, Mr Scott Rogers said the country must however take advantage of its current growth rate to strengthen her fiscal position and save for the rainy day.
Mr Rogers, who presented the Regional Economic Outlook for Sub-saharan Africa in Abuja, said the present situation where smuggled fuel from Nigeria represents about 80 per cent of petrol consumption was an unhealthy development that has persisted in the last two decades.
He said the injurious situation would persist given the incentive of high profit derivable from selling the commodity in Benin as well as other neighbouring countries since Nigeria’s fuel price remains the lowest within the West African sub-region.
“Eighty per cent of PMS consumed in Benin is from Nigeria. Nigeria’s oil price is the lowest in the region. This has been going on for many years and not a new phenomenon. It will continue. As long as your prices are far below prices in other countries around you, you will always have products smuggling. Wouldn’t you like to have efficient refineries? Wouldn’t you like to see the queues go away”, he said.
According to Mr Rogers, “The funds spent on petroleum subsidy to be redeployed to other critical sectors. Wouldn’t you like to have better-funded educational sector? Wouldn’t you like a better health sector? Better transport system? Nigerians have to make a choice. Nigerians have to decide for themselves.”
The IMF official stated that Nigeria currently pays for petrol being consumed in other countries due to its subsidy regime, noting that it was unacceptable that Nigeria as one of the world’s major oil producers continues to import fuel and have long queues at petrol stations.
Similarly, he said early global economic recovery was far from being sight, stressing that, “The global economic outlook remains uncertain. The global context has continued to witness slowing growth mostly marked in the advanced economies. The US housing prices remain depressed and that the nation’s weak economy is impacting negatively on many other countries of the world because the US is an export destination of many countries of the world.”
The IMF official said though the US economy was recovering, the rate has remained frail and not as rapid as expected, adding, “If the world economy remains weak, it will continue to affect countries of the world especially those with strong ties with the US and the Euro area which could actually go into recession. Export growth in Sub-Sahara Africa has remained weak due to the weakening economies of the advanced countries.”
“That will mean rise in tax rates and cut in government expenditure across board which could further weaken the growth or even throw the economy into recession” he said, while urging the Federal Government to come up with policies through which to save as much funds as possible and avoid undue increase in government spending, to avoid a burst if oil prices crash.
For Mr Rogers, Nigerian economy stands the risk of being faced with lower crude oil prices due to weak global economy and that a high oil price benchmark, as being proposed by the National Assembly, could be detrimental to the economy.
He said it was imperative for the country to generate fiscal surplus while oil prices were still high and utilize the funds in enhancing the foreign reserves, instead of the existing practice of always sharing from the Excess crude Account.
The IMF man said, “Stop spending what is meant to be saved. Make the oil price rule effective” and maintained that the resources from oil being a depleting asset must be deployed to the expansion of the nation’s economic base.
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