A chartered accountant and financial expert, Dr. Olutayo Obadina, has attributed the cause of the current economic hardship being faced by Nigerians to government’s floating of the Naira.
At a press conference in Lagos, Dr. Obadina addressed the controversy surrounding Nigeria’s fuel subsidy removal, offering a candid analysis of the economic challenges the country is facing.
He explained that while many attributed the growing inflation and hardship in the country to the removal of fuel subsidies, he opined that floating of the naira had wrecked more havoc to the economy.
The Case for Removing Fuel Subsidy
“The decision by President Tinubu to remove the fuel subsidy was, indeed, the right call,” Dr. Obadina stated. He argued that subsidising fuel in Nigeria effectively subsidised the entire West African region, as neighbouring countries such as Cameroon and Benin Republic benefitted from Nigeria’s cheaper petrol. With a 33,000-litre tanker of Nigerian fuel costing N1, 050 per litre in the country and selling for a substantial profit abroad, he noted that the incentive for smuggling had contributed to fuel scarcity and weakened the local economy.
He acknowledged that the President did indeed remove the subsidy at the time, but said that the return of subsidies was an unintended consequence of the Naira’s depreciation.
Foreign Exchange as the True Culprit
Dr. Obadina emphasized that the core problem lay not in the price of fuel itself but in the sliding exchange rate. “Anything to do with crude oil or fuel must be calculated in dollars,” he explained, noting that oil companies such as Shell, Mobil, and Chevron operate in dollars, as do fuel importers. As the Naira weakened against the dollar, the price of petrol soared accordingly.
Using data, he illustrated that when the exchange rate stood at N80 to the dollar, the subsidy amounted to N13.40 per litre. By the time President Tinubu was inaugurated, the rate had risen to N460 to the dollar, making fuel 60% subsidised. While the President initially addressed this by raising fuel prices to N500, then N600 per litre, further devaluation continued to push prices higher, reaching N1,050 and even speculated to rise beyond N1,300.
“The solution isn’t just about increasing the price of fuel,” Dr. Obadina contended. “The true mathematics of removing the fuel subsidy involves stabilising the exchange rate. If the dollar rate were reduced from N1,600 to N460, the unsubsidised fuel price would drop to N450 per litre. The exchange rate is the problem.”
A Call for Policy Reversal
Urging a reconsideration of the government’s economic strategy, Dr. Obadina argued that the recent decision to float the Naira had worsened the situation. He implored President Tinubu to acknowledge the “mistake” of floating the currency and urged the NLC to shift its focus from advocating for fuel price reductions to campaigning for a stronger Naira.
He lamented the impact of devaluation on pensioners, especially those under contributory pension schemes, who had seen their purchasing power severely diminished. “Even those still working are suffering,” he added, while noting that the informal sector, including drivers and market traders, seemed relatively insulated from the crisis, as they could adjust their prices more readily.
Proposals for Stabilizing the Naira
Dr. Obadina argued that the Central Bank of Nigeria’s (CBN) decision to devalue the Naira was likely driven by issues such as round-tripping, where importers exploited currency markets for personal gain. He suggested that if the CBN had enough foreign currency to meet demand for imports, the exchange rate could be stabilized. He called for a coordinated effort to increase Nigeria’s foreign exchange reserves through structured exports, urging the government to revive state marketing boards.
“The President should direct the 37 states to set up marketing boards to oversee the export of commodities,” he suggested. This would include reintroducing exports like cocoa, groundnuts, palm oil, and solid minerals that were prominent during the First Republic. He also recommended appointing marketing ambassadors to seek international buyers and generate purchase orders, triggering local production.
Dr. Obadina advised that the state marketing boards should initially be funded through 10% of state budgets, with a long-term plan to privatise 51% of their shares within one to three years, ensuring private sector efficiency while maintaining some state oversight.
Medical Schools and Human Capital Export
Dr. Obadina did not shy away from proposing unconventional measures, including exporting skilled professionals. He noted that Nigeria’s medical school graduates could be encouraged to seek employment abroad, thereby increasing remittances back to the country. “Out of every three doctors we produce, two are willing to travel abroad,” he observed, suggesting that the government could formalize this process to maximize economic benefits.
In conclusion, Dr. Obadina urged the Tinubu administration to return the Naira to a more stable rate of N460 to the dollar, thereby addressing the root cause of rising fuel prices and inflation. “The honourable thing for the government to do,” he said, “is to reverse this ill-advised policy and stabilise the currency for the sake of all Nigerians.”
I think that a major source of PRESSURE on the FX is unbridled government expenses, both Capital and Recurrent. As a matter of urgency the Size of the legislature should be reduced, if it means the adoption of Parliamentary system of government. Government should embark on Serious Austerity measures. Vehicle purchase and ALL forms of construction should be halted. The external trips should not involve a LARGE entourage .