 Welcome back to the breakfast and plus TV Africa we're heading straight to looking at our major conversation on the show the supplementary budget and Of course, we do have an economist who would join the conversation But a little bit of background to what is actually happening has happened following the suspension of fuel subsidy policy President Muhammad Abu Hari has transmitted the 2022 Appropriation Act amendment bill to the National Assembly now the president is seeking approval from the National Assembly the sum of 2.557 trillion Naira supplementary budget for petrol subsidy from July 2022 to December 2022 And this is as a result of the U-turn to stop the subsidy by June the highlights of the 2022 Appropriation amendment bill includes asking the National Assembly to review the finance act 2021 to restore the provision made for various key capital project in the 2020 executive proposal That were caught by the National Assembly and to reinstate the 225.81 billion Naira caught from the provision for the past sector Reform programming order to meet the federal government's commitment under the financing plan agreement with the World Bank others are to reinstate the four capital projects totaling 1.42 billion Naira in the executive proposal for the federal Ministry of Water resources that were removed in the 2022 Appropriation Act among others. I mean the list is almost endless, but we do have a whole lot Lodgy day who is an economist who joins the conversation this morning Good morning, sir. Thank you for joining us All right, so let's talk about this now to share your thoughts Despite the fact that we are Financially challenged. I mean looking at that. We're going to be spending 22% of the 2022 budget on debt servicing Which reflects that we do not have the capacity To actually meet our financial demands. It means that we will be servicing our 2022 budget by debt and that's what it means You were here now looking at the supplementary budget of 2.5 7 7 trillion Naira. What do you make of this? Well, it's the the choice we have made Appropriate I think the politicians have succeeded in pushing off in this In the real sense of it, there's no politician who wants to remove full subsidy in an election season Because they know that you remove it There will be all sort of a protest and not right And it might affect their own prospects in the election So what a politician will naturally enjoy is money to be able to spend not protest Nobody wants a protest so When we pass the PIA and part of the PIA also include the deregulation of the downstream When we go to the junction where we're supposed to make a decision we are unable to make that decision So we we boost ourselves in the direction of what the politician want which is to have money to spend So this is all you don't want first of all, that's fine Take the less let's make provision to spend money on first subsidy since you don't want to remove the subsidy Then let's let's make provision essentially what we're going to be doing is that we will be borrowing these 2.5 557 trillion and then we will share it among ourselves in the name of subsidy That's what we want since we are unable to come to the table and have a hundred discussion around full subsidy We think it is a youth versus me and we versus them kind of situation We're not at that point where we're seriously ready to address this matter and that is where we're heading now Mr. Olojede, let's look at the fact that we in the situation because you know, we don't have Refining capacity, of course. Yes, we know the government has told us they're rehabilitating or renovating whichever it is They put out the refineries and then the worry and Kuduna refineries will be done subsequently and but if we look at the fact that 15 billion dollars is expected to be the amount of the cost of building a dangote refinery And that amounts to about 6.2 trillion there Shouldn't we just be taking this money we use every year for fuel subsidies and don't they just give it to private sectors They take and build a refinery and then give us a Stake or add this to what you want to build a refinery with because this money could be used for that So we don't have to you know import fuel and then worry about the whole subsidy and all that The rule of government is to create the right environment for private money to come in into that thing to come into that space And I think that an element of that which is what today we have the dangote refinery which was meant to have come on stream earlier But unfortunately has not been able to get operational According to information by quarter three by the end of quarter three this year We should go live And like you mentioned government is also also awarded the revamp in April last year It's awarded the protocol refineries in August. It's a water boat kaduna and water refineries You know, this is all in a bid to get refining capacity in the mix. There's also There's there's an illusion side of things about how fuel will become very cheap Once we start to refiner it is an illusion and it's important that we get that out of our minds totally it is not Refining inside the country has his own advantage or advantages Stimulates the economy create jobs. There are a whole lot of multiply effect that that will create But one of the things you will not create is cheap fuel. It doesn't mean that because we're not refining inside We'll not become under narra palita. It's not about What we will have is what I will call a relatively cheaper fuel because the cost the Impotential logistic cost so you pay for shipping there is clearing and whatever all those costs will not be there So that would be a marginal decrease in what the price should be but it's not all those dreamy 150 nara, but no, no, no, no, that's not what we're going to have It's it's a resource if the federal federal government is spending To a month this amount of money to to import fuel and also to subsidize if you're imported And means that they can subsidize without necessarily doling out money in other words if they're able to be able to refine in this country it actually through the federal government owned refineries or through Refineries done with fellow men shares in them. They may be able to find it easier to to Give us Significantly cheaper fuel, you know, compared to marginally you're saying, you know The only cost we will save is the importational logistic cost so you You ship crew if you are doing a swap So you as a cost of shipping the crew to the refiner and then a cost of shipping it back to the country There will be some clearing charges and all the rest. That is what we're going to see all this matter may not be more than 10% Let's move. Let's let's let's play an extreme lock and say 15% Reduction it is significant if you look at it, but it is far away from what people are envisaged Now once we start refining this will come to know it is the cost of refining that will still go into What price we're going to pay so use there's to the price of the crude There is this there is the overhead of the of the refiner and several others now we're going to that Determine what is the final? Costs to the consumer So we have Yeah, yeah, so so if if so if we have this two-pointer Over two trillion era being set aside to to fund the subsidy What do you say about the fact that it's costing about 15 billion dollars six point two trillion era to build the dango to refinery out of that The federal government is farming our four billion era to buy shares and to support this building through the NMPC And should we not just be taking the the bullet and saying no what we're ending this we can take this money Instead of using it to subsidize every year we can take this money and ensure that we can have our own fuel refined in Nigeria You see I'm gonna be frank with you The way we have approached the matter of those subsidy Rightly so is the thing that it is a we versus them situation the people versus the government And and there's a justification for that that that issue has its roots in the trust capital Between the government and the people so the people are dissolution because over and over again Government has promised and that's not delivered. They are doing a lot of deceit in that space So these are the things that are making it Appear see it is he has to be it would be against them. No the first subsidy is real And what we need to be able to do is to discuss it honestly get all the stakeholders Across around the table put all the cards on the table. This is the reality of this is the reality The reality of this and let us together fashion a solution That is gonna be a compromise for everybody it is not To think that we can fundamentally change that space without some bit of pain is Decisive so if all the stakeholders are sitting across the table and we're willing to discuss honestly We cannot come up with a solution that will work for us as a country But if we decide to play this week against them, this is what we're gonna want. They say, oh, let's remove first I'll do the no no no you cannot remove something. Okay, so you don't want to do something We will be paid this much as subsidy. So They're putting us in between the devil and the devil see Okay, so let's talk about financing and you know the implication of this of course was still talking about the issue of We having to Fund the 2022 budget week four point. I mean borings We're looking at six point four trillion are and so if we don't have enough moneys That's what it means. We have to borrow to fund the budget Where will the Nigerian government get two point five five seven trillion? I Said we'll be borrowing it and sharing it as something so what will be the implication for the economy and The Nigerian people when does this leave the people? The implication is that we're digging a deeper hole right now Um, it is still we're still managing to you know to manoeuvre our way through the means In the next over the next few months if we go along the same line following two point five five seven trillion and sharing it as subsidy We will get to a point. We won't be able to pay salaries Although the federal workers are not we won't be able to fund anything in this one We're going to bring this country under a debt over hand. We won't be able to move forward In fact at some point the creditors will start becoming unwilling To give Nigeria an addition happen It seems it seems the the the economic policy of this government federal government in Nigeria Led by president Muhammad Buhari is is the policy of the model. They are they are operating. It's simply Borrow borrow money to solve your problems Pump money into the economy If if sectors need money and keep pumping and now we're hearing that they won't be given the commercial deposit deposit money banks any effects So this this model of borrowing and borrowing you say it in drivers in drivers into a grave But I'd like to just step aside thing mess you have a follow-up question So let's take yes a bit of that because we remember the time where the finance minister Zainab Ahmed made some statements saying that we are within the capacity of borrowing and therefore We have not exceeded our capacity to borrow and yeah, you're saying that it would just plunge us To a state where one able to pay salaries because what we'll be looking at the issue of spending about 70% of you know the capital expenditure on debt servicing and what happens to infrastructure But I'd like you to share your thoughts on the fact that we are within our boring capacity as a country Okay That is a comfortable statement or a comforting statement from the government You know, there are two ways to look at this one is what you call your debts to GDP When you look at the debt to GDP of Nigeria, it is fantastic We are well within the range of what we should be borrowing in fact We're not borrowing nearly enough at all if it is there to GDP you're looking at but here is the problem Nobody pays it repays debt from GDP. You repay your debt from revenue So what we should be looking at is not just debt to GDP with the government is emphasized But the debt to the revenue according to the IMF in 2022 Nigeria will be spending 92% of its actual revenue servicing debts 92 that is the projection of the IM So when you look at when you look at the revenue side of thing, it is horrible. It is abysmal but if you want to play on You know trying to enforce the people that oh, we are still doing okay You lean on the Debt to GDP ratio the problem of Nigeria is I have a huge But it has been unable to trans to translate that GDP into a sizable revenue The GDP of South Africa is smaller than that of Nigeria But when you look at the revenue size of South Africa is about four times What Nigeria budgets every year so you need to ask yourself How is it that some countries are able to make four times on a smaller GDP and Nigeria is unable to do it? Unless we are able to deal with the revenue issue, which is at the heart of our problem This debt has reached a non-sustainable level by the time you will be servicing there with 92% of your revenue You know get the crisis Borrowing an additional 2.557 trillion and sharing it as subsidy. It's not something that should be on the table It's unfortunate such a bleak picture, you know We're looking for solutions and some sort of creativity from the government beyond borrowing and borrowing and Increasing taxes some will say some one of the ways to increase revenue or reduce expenditure It's actually to reduce your expenditure, especially recurrent expenditure and spending on frivolities But we've not seen any of that from this administration I would have loved to ask you questions on the direct purchase or excel model and who the subsidy Payment is going to because the opaqueness in the oil sector, you know Makes it a bit, you know hazy week. We can't really tell what's going on But we'll have some other time to discuss this with you Agbo la ho lo jede is an economist and he's a guest on the breakfast right here in plus in Africa Thank you very much and a belated happy birthday to you from all of us here including a Production team who are behind the cameras. They say we should wish you a belated happy birthday Thank you very much. I appreciate it. Thanks for having me. All right Quite quite a bleak picture there as far as the natural economy is concerned and we just hope for better days We hope for better days. We have more discussions ahead