"This fuel subsidy has to go," the former Central Bank governor declared at the All Africa Business Leaders Award West Africa held in Lagos.
Sanusi, who spoke extensively on the state of the economy, said the country can no longer afford the many leakages that have battered the economy over the years.
Quoting CBN figures,he said: "in the first two quarters of this year, this country spent over 500 billion naira on debt servicing. At end of this year, it will be over 1trillion which is more than the amount of money budgeted for health, education and defence combined.
"There is no room in the government’s balance sheet for borrowing and spending. We have no option but to block leakages and to stop non-priority expenditures.
"It is for this reason that we cannot afford to spend all our time talking about the past. It is time to look at what we are doing now and ask ourselves if the fiscal stance and monetary stance are the appropriate stances for the situation we are in.
"Does it make sense at this time for the government to continue paying petroleum subsidy? It does not, and we must say it.
"When you need fiscal consolidation, when you cannot borrow, when you are not earning because oil prices are down, you have to shut down, especially those expense lines that have been known historically to be the sights of those seeking rent.This fuel subsidy has to go."
He also called for the expansion of the tax base and an increase in VAT.
" Our tax base has to expand, VAT have to go up. We can’t continue having an economy where we collect tax from oil companies, collect tax, maybe, from the telecoms companies, and then 60, 70 per cent of the GDP does not pay taxes. This is something that has to be looked at."
He expressed disgust at some of the anomalies in the economy, saying: "we are Africa’s biggest oil producer but the biggest export from the United Kingdom to Nigeria is petroleum products. We don’t refine our own crude. We don’t have a petro-chemical industry. We burn our gas and we don’t have enough electricity.
"We produce cotton and import textiles from China. We have a large tomato belt and we import tomato paste. Everywhere you turn…we produce cassava, we don’t produce starch. And what we don’t have we export. It is so bad that we had a military government that conducted free democratic elections in Liberia. We exported democracy when we had a military government."
Speaking on his personal experience as CBN governor, he said: "The biggest challenge I had as Governor of Central Bank was convincing politicians that there would be a day when we will regret not saving the money when oil price was high. That the leakages in the oil sector could not continue; that oil was a commodity whose price goes up and goes down and when it comes down, if you don’t have the buffers, you are going to suffer.
" It is one of these moments where if you were not a Nigerian, you would say well, I told you so. But you can’t, because it is a very sad story. It is very obvious and it has happened over and over again. You have high oil prices, high oil revenues and you blow the money away, and when oil prices crash, you don’t know how to face the situation.
"In 2009, we had a huge crisis. Oil prices crashed from 140 dollars to less than 40 dollars. That was the time I was coming to the Central Bank. But at that time, the government had a number of advantages. The previous administration had saved a lot. There were physical buffers. The Central Bank and the Ministry of Finance could pursue countless fiscal and monetary policies, even though we had devaluation, even though we had some inflations, even though we dealt with the biggest banking crisis in our history, the economy continued to grow and people continued to be employed.
"The situation today is different. We spent years deceiving ourselves, calling ourselves the 21st biggest economy in the world based on something called rebasing. We said our debt to GDP ratio was 11 per cent and that the ratio looked very good. Yes we had a debt to GDP ratio of 11 per cent, but we were spending 33 per cent of government revenue servicing debts."
Besides,he asked the federal government to devalue the naira and warned that Africa’s biggest economy is in danger of a long term slump unless the government confronts slowing growth.
"Let’s stop being in denial, we cannot artificially hold up the currency," he said.
He said President Muhammadu Buhari, who is against a weakening of the naira, "needs help on the economy."
Under current Governor Godwin Emefiele, Nigeria’s central bank has virtually fixed the exchange rate since March.
Rationing dollars and limiting foreign-exchange trading have stabilized the naira, which has remained at about 198-199 per dollar since declining 8 percent in the first quarter.
The central bank’s moves are hurting the economy, said Sanusi, 54. It expanded 2.35 percent on an annualized basis in the second quarter, the slowest pace since at least 2010.
"We are depriving certain key industries of imports," he said. "If we have to make a choice between economic growth and a devaluation, my recommendation is that we protect growth."
"The portfolio flows are gone," he said. "Inflation is already upon us. You have fiscal consolidation. It is time to loosen monetary policy. Otherwise we compound an exchange rate crisis for businesses with high borrowing costs and declining demand."
Some portfolio investors have withdrawn from Nigeria, with foreign holdings of naira government bonds falling to less than 10 percent of the total from 27 percent in 2013, according to Standard Chartered Plc. In September, JPMorgan Chase & Co. kicked Nigeria out of its local currency emerging markets bond indexes, tracked by more than $200 billion of funds, saying exchange controls made it difficult for international investors to buy and sell naira debt.
Sanusi said ministers acted like "courtiers" under previous administrations and shouldn’t do the same in Buhari’s cabinet.
"I hope people will have the courage to know that loyalty is about telling your boss the truth," he said.
Buhari, who came to power in May, has nominated ministers, although he hasn’t announced their portfolios and the Senate still has to approve them all.
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