Paul Alaje, an economist and financial analyst, has said that the loan that the Nigerian National Petroleum Corporation Limited (NNPC) will not have a long-term impact on the Nigerian economy, as it is just a quick fix measure by the NNPC to stabilize the foreign exchange rate.
In an interview with ARISE NEWS on Thursday, Alaje shed light on the plan of NNPC to take a loan from Afreximbank, explaining the effects and benefits that it will have on the fuel price in their stations. He said, “It’s in a bid for NNPC to ensure that it stabilizes the rate with which PMS is sold in Nigeria… after President Bola Tinubu said subsidy is gone. And recall that we have also floated the Naira at the same time.
“What that means is that whatever happens to exchange rate and whatever happens to the price of crude in the international market will affect every user or every buyer of PMS in Nigeria. But what NNPC is doing is to first secure what dollar will be.
“So, with this agreement, NNPC could be assured that they have steadied FX coming to the corporation. Two, it’s not direct swap between naira to dollar, it’s product for FX. So, you are going to see some level of stability within the NNPC managed process.”
However, Alaje went on to say that this decision was simply a stop gap measure, and went on to give his opinions on decisions that should have been taken by the government to ensure a stronger economy.
He said, “This is a quick fix measure, this is a stop gap measure. You’ve asked time and again, what are the solutions we must adopt to be out of our shackles, (so) even if we devalue, it will not have tremendous negative impact on our economy.
“I go again to reinforce what I expected President Bola Tinubu to announce on the 29th of May was giving off those refineries that we have held so much.
“Recall that President Obasanjo had first privatized those refineries when he was president. When his successor, President Yar’Adua came to office, he reviewed it, and since that time, we’ve been stuck with these refineries, we have lost all potential output, we have not been able to do much with them.
“What I expect is that there are functional organizations that are owned by different countries, even private individuals, across the world, one of them is in Saudi. What I expect government to do is to request for a $16 billion instant payment to go to the federal government coffers. What will that mean? Foreign reserve will go up. significantly. Two, you can have between two to three years where local refineries will function without disrespect to what Dangote is doing with Dangote refineries. “We will not have just monopoly, we will have an oligopoly of some sort, and Nigeria can be guaranteed of the supply side. Our solution lies in supply.
“Ordinarily, our demand continues to grow almost on a daily basis, but what we don’t have in excess is the supply side.
“Government can also give out by issuing IPOs to those who are interested in buying shares into NNPC. Remember, NNPC is now a limited liability company. How come we still have a sole owner? Is it a one-man business? We need to make those who can run business to run it.
“Those who were there before now when it was a public institution are still those we have in NNPC. If it is private, it has to be private indeed.
“That is an immediate solution that can help Nigeria come off the current economic shackles.”
He then went on to give his opinion on medium-term solutions to strengthen the economy, saying, “The second thing we should look at is how do we now promote export? How do we produce some of the things we consume because certainly we cannot produce all. We have to start looking at plantation, agriculture without giving money to farmers alone and hoping that they will perform. Government must be involved in the process because insecurity is a major bane to farming in Nigeria today.
“It’s not just to throw money at the problem and expecting that there will be output. We must roll our sleeves and get involved. Government, and I mean federal, state, and local, must come together to ensure that we have significant output.”