Abuse Of Oil Subsidy Leads To Corruption – Idika Kalu

A former minister of finance, Dr Kalu Idika Kalu, has said the wrong use of subsidies by past administrations had led to corruption in the oil sector.

He said the sustained wrong use of subsidies fuelled corruption in the country

Kalu made the assertion yesterday at “Meet and Talk Season 2” with the theme: “Understanding Subsidy (Petroleum) and FOREX policies”, organised by Brain Trust Nigeria in Abuja.

The former minister who was a guest speaker at the event, described “subsidy as a positive thing, but that positive things can be used very negatively, and that is what is being experienced in Nigeria.

“In 2014, I said, where you have allowed the wrong use of subsidies to be sustained, that is where corruption comes in. The wrong use of subsidies was sustained over a long time, where it affected a sizable proportion of the budget or whatever denominator you want to use.

“Whether it is your revenue, your GDP, or your export earnings, while you are using it to subsidize something, you should stop and think about whether you are doing the right thing.

“And the joker in the whole pack, we have never heard it being discussed because it is a very technical issue. Its exchange rate is running so much that domestic prices are dropping or foreign prices are increasing,” he said.

He faulted the sustained mismanagement of the exchange rate, that as long as the naira equivalent of the dollar continued to change so fast, to compensate somebody who imported in dollar terms, the government had to give him the equivalent of the new Naira level.

“I have been saying this since 1981, this just does not sink in for the most part. You see if the guy you spend $8 to import, the next year you are spending $12 to import. Somebody has to give you that differential because the dollar is still the dollar. Then the next time it is N16.

“So, if you have to compensate the guy importing it, you are encouraging him. The government cannot be importing this thing, it is private sector-led. But, the government as an entity knows that the system needs it.

“If the government does not pay the subsidy, then the private sector would, but somebody has to pay for it. Either the government pays a subsidy or the consumer pays the difference.

“But if you create artificial oligarchies by saying only NNPC can import or the VP or whatever can import. It is wrong. You need to leave it to the private sector and they will absorb the increased cost and the consumer pays the difference,” he said.