The Senate Tuesday said it is considering the removal of fuel subsidy and the devaluation of the Naira as part of measures to stem the looming economic devastation caused by the spread of the Corona virus (COVID-19) on the country’s economy.
Apart from devaluation of the Naira and removal of fuel subsidy, the upper chamber noted that the review of the Appropriation Act 2020 as passed by the National Assembly is inevitable.
The modalities to be adopted in the review of the budget, it said, must be as suggested by the legislative and the executive arm of government.
The position of the Senate is contained in the interim report of the Senate Joint Committee on Finance, Appropriations, National Planning, and Petroleum Resources (Upstream) which was set up last week to liaise with relevant agencies of the Federal Government to proffer a way forward for the country following the ravaging effects of COVID-19 on world economy.
The Joint Committee was tasked with the “need to assess, examine and suggest to the Senate the urgent steps to be taken on the economic situation of the sharp drop in oil prices and other economic issues caused by the outbreak of the deadly Corona virus (COVID-19) and the uproar between the governments of Saudi Arabia and Russia.”
Chairman of the Joint Committee, Senator Solomon Adeola, in the report, said that the committee during its inaugural meeting with the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, considered a wide range of issues.
Adeola, who represents Lagos West Senatorial District, said the issues bordered on the current economic realities in the country which includes:
“The current Appropriation Act 2020 passed by the National Assembly; cost of production of a barrel of crude oil compared with the other counterparts in the petroleum producing countries.
“The reality of the current situation of the government in terms of number of agencies and parastatals of the government putting into perspective the Oronsanye panel report.
“The need to prioritise both the social and the real sector of the economy looking at their importance to the overall benefit of Nigeria.
“Loss of revenue as a result of gas flaring which runs into several billions of dollars.
“Devaluation of Naira; removal of oil subsidy and other sundry issues.”
The Senate adopted the interim recommendations of the committee which among others mandated the Senate joint committee to continue to engage the executive arm of government to keep the Senate abreast of the current ongoing in the economic front.
Other recommendations included: “That the review of the Appropriation Act 2020 as passed by the National Assembly is inevitable, but the modalities to be adopted in the review of the budget must be as suggested by the legislative and the executive arm of government.
“That the revenue generating agencies must be alive to their responsibility in line with the Fiscal Responsibility Act passed by the National Assembly and other relevant laws of the National Assembly.”
Adeola said that the joint committee looked at the issues discussed from two angles, that is, the short and long term solutions.
According to him, “The short term solution is to address the sharp drop in the crude oil price which is creating difficulties in funding the 2020 Appropriation Act as passed by the National Assembly.
“The long term solution discussed is the need to consider and pass the Petroleum Industry Bill (PIB), which is yet to be laid before the National Assembly.
“This will address the issue of cost of production and gas flaring where the country’s resources are going down the drain and other issues that might affect the petroleum sector.”
He noted that as part of the fact finding mission of the joint committee, it sought and received different views from experts in finance and economy on the state of the economy which included:
“Devaluation of the Naira: while the Federal Government has come out to tell Nigerians that devaluation of Naira is not on its agenda… experts believe will be over as soon as a solution is found to COVID -19 and the price war between OPEC members, Saudi Arabia and Russia, is over.
“Also experts believe that fund from internal loans and bonds sourced from the Capital Market should be mobilized to fund infrastructural development, a model exemplified by India with population of 1.1 billion people, as this will be much cheaper for us as a Nation.
“Allowing funds taken out of the country to be returned back into the economy without destroying the anti-corruption war of the president by providing legal instrument to ensure the return of this funds.
“Experts believe it is time Nigerian should start to look beyond oil as a major source of revenue to the government and ensuring proper diversification of the economy.
“Experts noted that our shallow policy in agriculture is responsible for our dependency on oil as our major source of income.
“The government should show more commitment in returning the country as a major leader in agricultural produce both within and outside the African continent.”
Senate President, Ahmad Lawan, noted in his comments that the country is really in a very challenging period.
He insisted that the country should, more than ever before, begin to look inward to ward off threatening economic crisis.
Lawan said: I think we are in a very challenging period but every challenge normally presents some opportunities. I think like Senator Odebiyi asserted that we should take our opportunities.
“The PIB we had expected by now would have been in the National Assembly but it is not. We had thought we would be able to pass the PIB within this year so that we are able to make our petroleum industry to have the legal framework that investors would find attractive to be here. But we are still expecting that the executive would work faster and harder to present the PIB to the National Assembly in the shortest possible time.
“But before then, now that we know that it is difficult or even impossible to get the foreign loans that we had built our hopes and implementation of our capital budgets on, I think we have to be very ingenious as a country.
“We have to look inwards. The Central Bank of Nigeria has come up with some measures that are intended to support the economy.
“I think it requires a holistic approach, both fiscal as well as monetary policies and if need be we pass a speedy legislation to create an environment where our economy does not collapse; that our economy is sustained with internal resources.
“But we have to be very careful. If we have to now borrow as a government from the domestic available resources, we should be very careful that we do not crowd out the private sector from getting required loans.
“So it is going to be walking a tight rope. But we need to have a plan in which both the executive and the legislature come together.
“We need to listen to them really. I would probably suggest that going forward, in the next one or two weeks that the entire Senate to have a briefing from the Ministries of Finance, Petroleum and the Central Bank so that we are abreast with what is going on and then we can make our suggestions.
“But meanwhile, our joint committee continues to engage them but this is a very tough time and it is a time that we should not suffer only but we should also benefit from this tough time.
“We need to understand what the CBN is talking about. I saw about seven or eight measures that the CBN has come up with to support local investments.
We need to engage them and find out whether that is good enough or we can do better because the truth is, every country now will be trying to stay alive. So probably there may not be anything to spare for any other country and if we are not ingenious enough, I think we will be in a deeper trouble.
“But Nigeria is a very resilient country so we should come together with the executive arm of government and work out a way out of this mess and probably come up with more serious agenda for diversification.”