Sanusi questions Nigeria’s continued borrowing despite subsidy removal

The Emir of Kano, Muhammadu Sanusi II, has raised concerns over Nigeria’s rising debt profile, questioning why the Federal Government continues to borrow despite the removal of petrol subsidy.

In an interview aired by News Central TV on Friday, the former Central Bank governor acknowledged that key reforms such as subsidy removal and exchange rate liberalisation were necessary. However, he warned that poor sequencing and weak fiscal discipline could undermine their intended benefits.

Sanusi criticised Nigeria’s long-standing reliance on foreign refining, describing it as a structural weakness, while local refining capacity remained underutilised. He reiterated that the subsidy regime was unsustainable and faulted the continued support for foreign refineries despite Nigeria’s status as an oil-producing country.

He noted recent improvements in domestic refining, pointing to a shift from heavy importation of petroleum products to exports, which he described as positive for the economy.

Despite backing the reforms in principle, Sanusi questioned their timing and coordination. According to him, implementing exchange rate liberalisation in a loose monetary environment contributed to the sharp depreciation of the naira.

Sanusi also challenged the government’s fiscal direction, arguing that savings from subsidy removal should lead to reduced borrowing rather than an expanded debt profile.

“I have always said the subsidy regime was unsustainable. We cannot continue supporting foreign refineries. We’re an oil-producing country. Keeping refineries open abroad while we’re not doing our own,” Sanusi said.

He, however, welcomed recent progress in domestic refining, noting a shift from heavy importation of petroleum products to export activity.

“Today, we have a situation where we have our own domestic refinery. We’re not importing petroleum products. We’re even exporting to Europe, and this is very good for the economy,” he added.

Despite supporting the reforms in principle, Sanusi questioned the timing and broader policy coordination, suggesting that critical measures may not have been implemented in the right order.

He said, “Artificial exchange rates, especially when you’re printing money, cannot work. There was going to be a devaluation.

“For me, removing subsidy or liberalising exchange rates, these are good interventions. Were they done at the right time? Those are certain questions. Were there other things that should be done that have not been done? These are other issues.”

The former apex bank chief argued that implementing exchange rate liberalisation in a loose monetary environment contributed to the naira’s sharp depreciation.

“It’s not enough to say, oh, they removed subsidy. You had to. When you get to a point where 100% of your revenue goes into debt service, you cannot continue. Where is the money going to come from?

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“However, if you decide to remove subsidy and liberalise exchange rates in an environment of very loose monetary conditions, before you have tightened money supply, the Naira drops to a bottomless pit. That was a timing issue.”

Sanusi further challenged the government’s continued borrowing, insisting that savings from subsidy removal should translate into fiscal consolidation rather than increased debt.

His comments come amid reports that the Federal Government plans to increase its 2026 borrowing to ₦29.20 trillion, including a proposed $516 million loan sought by President Bola Tinubu for infrastructure projects.

President Bola Tinubu also recently sought Senate approval for a fresh $516 million loan to finance the Sokoto–Badagry Superhighway project.

“We’ve removed the subsidy. We’re now spending it. What we should not see is fiscal consolidation. You cannot remove wastages and continue borrowing. I’ve said this before. You need to see the benefits.

“If you’re not paying the subsidy and you’ve got the money, why are we still borrowing and borrowing? What are we borrowing for?” Sanusi questioned.”

He stressed that eliminating subsidy costs should translate into fiscal consolidation, not continued borrowing, and called for clearer accountability on how the savings are being utilised.