He said fuel subsidy removal would release N1tn per annum for investment in people, alleviating poverty, unemployment and inequality, adding that “the timing is auspicious due to low oil prices.”
Agbaje, who stated this at an investors’ forum in Lagos, said, “The economy is paying the cost of deregulated fuel (most people have bought fuel at N110 and above in the last three months) without getting the benefits of deregulation.
“Fuel subsidy is a middle class; consumption subsidy that is wasteful and prone to corruption. Nigeria needs to invest in the poor rather than middle class,” he said.
He said the country spent N2.19tn on fuel subsidy in 2011; N1.049.6tn in 2012; N971.1bn in 2013 and N971.1bn last year.
He said, “Spending 25 per cent of federal budget on importation of petrol, while Nigeria has huge crude oil and gas reserves does not make economic sense.
“The subsidy prevents the creation of a domestic refining and petrochemical sector through private investment (private investors and their potential financiers cannot invest in a sector where prices are regulated and subject to political veto).”
According to Agbaje, those who want subsidies to stay believe that the removal of fuel subsidies will lead to higher food and transportation costs and raise inflation, and may lead to political instability.
He, however, said, “The inflationary effect of oil subsidy removal is a one-off economic adjustment, which is vastly outweighed by the benefits.”
He argued that the risk of political instability could be easily managed by a careful communication campaign, adding that many Nigerians were now ready to accept higher oil prices in return for elimination of cycles of instability and scarcity.
Agbaje noted that given Nigeria’s rich crude oil and gas deposits, the country should be an exporter of refined petroleum and petrochemical products, rather than just crude.
“The sole factor preventing investment in domestic refineries is the oil subsidy. Full industry deregulation will produce a huge domestic, private sector, refining and petrochemical sector.
“This will increase the value of our exports and create jobs locally rather than subsidise foreign jobs,”