Vanguard (Lagos)

14 March 2014

Nigeria: Withdraw Fuel Subsidy, Finance Commissioners Tell FG

Photo: Vanguard
End to Fuel Subsidy.

Abuja — Finance Commissioners from the 36 states of the federation rose from the Federation Accounts Allocation Committee, FAAC, meeting in Abuja, yesterday with a resolution asking President Goodluck Jonathan to withdraw fuel subsidy.

The Ebonyi State Commissioner for Finance and Chairman of the Finance Commissioners Forum, Mr. Timothy Odaah, told journalists that fuel subsidy had failed to achieve its objectives and had become a source of massive fraud which must be discontinued in the interest of the Nigerian public.

His words: "We looked at subsidy on oil and see that it is more or less a solution worse than the problem you intend to solve. You would remember that during the National Conference on Economic Development, NACONFED, meeting in Niger State, it was one of the issues we presented.

"Looking at it, you discover that it is not solving the problem it is meant to solve.

"But you discover now that it is the average poor man that suffers. For example, stand by the street, most of the transporters are not applying any benefit from subsidy in what they charge because we know of course that the Federal Government had a good intention to subsidise transportation so that it will be to the absolute benefit of the poor man and every Nigerian.

"But you discover that there is no reflection of that subsidy benefit. Besides, it is like a system that robs Peter to pay Paul. It makes the rich to get richer and the poor to get poorer.

"For example, look at this simple analysis of econometrics: If a poor man uses a motorcycle that uses five litre‑full tank then you look at the subsidy granted at 50 kobo, for example, the 50 kobo on five litres will give you N2. 50k.

"Then you look at a big man that has 10 cars. Each of his cars has 100-litre tanks. That will be 1,000 litres. Then multiply it by 50 kobo and you will see the worth of subsidy the big man enjoys.

"Then subtract the poor man's subsidy of N2.50 kobo, what do you have? The same thing applies to the states.

"There are some states that are fully industrialized. You have many industries, factories and you use this subsidy in that place. The people who benefit more are those states that are fully industrialized because the fuel consumption of those factories use more of the subsidies, unlike the states that are under‑industrialised.

"What we are advocating is that the subsidy should be removed so that every state or any member of the federating units sharing from FAAC will take its own money then decide to use it or grant subsidy at a level that it will be able to afford.

On marketers

"Then you look at the issue of subsidy as it applies to some individuals. The marketers are not truly showing the intention of the Federal Government because they have created a very great and big market for themselves in certain ways. I said in certain ways because transparency is not coming up.

"There are some people who are eating on the subsidy to the disadvantage of others. It is because of this that we passed a resolution at FAAC and that is the opinion of the Forum of the Finance Commissioners: that a call should be made to his Excellency, the President of Nigeria, Dr. Goodluck Jonathan, so that he will reconsider the position of this subsidy."

NLC, Nigerians were deceived

Mr. Odaah said the Nigeria Labour Congress, NLC, and the Nigerian public were deceived into agitating for the sustenance of fuel subsidy, thinking it was meant to serve the interests of ordinary Nigerians but the contrary has been the case.

He said: "In the first place, the NLC and the Nigerian populace appear to have been deceived into clamouring for subsidy because syndicated pressures and programmes were put in especially to ease transportation problems and likewise tariffs on electric power."

The forum's chairman said the commissioners had set up a committee which would write a letter to the Nigerian Governors' Forum and make a presentation to President Jonathan on the matter and that each of them would return home to properly brief their governors.

He said: "A committee has been constituted to look into the impact of the subsidy -- whether it should be actually allowed. But I want to tell you that the resolution we took is that subsidy should be withdrawn.

"The committee will formulate a letter that we will send to the Nigerian Governor's Forum and we are going to brief our respective governors. They have to be informed. We know it will be very difficult considering the critical period of this time. But Nigerians will need to be told and convinced that they were deceived by some people into agitating for subsidy. The committee is to present its report by next FAAC."

Subsidy eating into crude reserves

Odaah disclosed that many states have been grumbling over the subsidy as they considered themselves cheated in the subsidy arrangement.

His words: "Many states are grumbling. The subsidy is eating too much into the crude reserve. You have heard that what we have today is $3.5 billion and it is because certain approaches were followed. Otherwise, by the month of April, you will have a situation where the states allocations will have to be deducted in order to pay subsidy. Where is the subsidy going to?

"You will be better employed in the states, the states will grow their own industries, there will be much more employment. A situation where subsidy alone takes away much of what could be used for the purpose of industrialization, there will be no investment, there will be no employment. In that aspect, you will discover that the vicious cycle of poverty will come in."

According to the commissioner, sensitization campaigns would be required to sufficiently convince the NLC and the Nigerian public on the advantages of withdrawing fuel subsidy.

On CRR

The FAAC, he added, also considered the interest rate regime as well as the Cash Reserve Ratio on public deposits which CBN raised to 75 per cent before Malam Sanusi Lamido Sanusi was suspended, saying it was stifling the economy. The FAAC, therefore, called for a downward review.

He said: "We also took the case of the Sanusi monetary policy into consideration which is the Cash Reserve Ratio, CRR. You discover that as at today, 75 per cent of public deposits in the banks are taken to the Central Bank of Nigeria.

"This is a deliberate creation of artificial scarcity of funds. Then states, local governments and even the Federal Government cannot borrow because the coupon rate of interest rate has gone so high and there is a plan that the CBN equally wants to increase it to 100 per cent.

Lower the rate

"We are calling on the Federal Government to bring the rate down so that cash will be available because the cost of funds has risen too high and because of that states cannot meet up. You go to borrow from international market, it is not possible, you want to borrow within Nigeria, it is not possible.

"You discover that even the facilities you accessed previously at 12 per cent, the banks are now raising them to 25‑28 per cent. By the time they increase the CRR to 100 per cent, you will discover that nobody can borrow money from the banks again at all. Who is this policy serving? We see it as a policy that is serving only to confuse."

He added that the commissioners demanded that the Petroleum Products Pricing Regulatory Agency, PPPRA, should attend the FAAC meetings and clarify issues, especially as they concern the NNPC.

"They don't come before us here but they feel it is wise to go to the National Assembly and make statements concerning NNPC. It is statutory. It is not a matter to be debated. Therefore, we demand that they should be present here," he said.

FG pays petroleum marketers N41bn

Meanwhile, the Federal Government, yesterday, paid N41.074 billion to 27 petroleum products marketers.

Paul Nwabuikwu, Special Adviser to the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo‑Iweala, said in a statement in Abuja that the payment was for claims that have been successfully verified.

Those paid were: A-Z Petroleum Products Limited; Acorn Petroleum Plc; Aiteo Energy Resource Ltd; ASCON Oil & Gas Co Ltd; Avidor Oil & Gas Company; Conoil Plc; Dee Jones Petroleum & Gas Ltd

Others were: Dozzy Oil & Gas Ltd; Folawiyo Energy Ltd; Gulf Treasures Ltd; Hudson Petroleum Ltd; Hyde Energy (Nig) Ltd; Ibafon Oil Ltd; Masters Energy Oil & Gas Ltd; Matrix Energy Ltd; Mobil Oil Nigeria Plc; MRS Oil & Gas Company Ltd; Nepal Oil and Gas Serv. Ltd.

NIPCO Plc; Northwest Petroleum & Gas Ltd; Oando Plc; Obat Oil & Gas Services Ltd; Rainoil Limited; Shorelink Oil and Gas Services Ltd; Techno Oil Ltd; Tempogate Oil & Energy Company; and Total Nigeria Plc were also paid.

Mr. Nwabuikwu said the payment was made public "in continuation of the ministry's focus on transparency and accountability in the management of the subsidy regime."

He added that claims by some marketers that they were being owed subsidy for nine months supply was incorrect.

The Independent Petroleum Marketers Association of Nigeria, IPMAN, had earlier in the week, alleged that its members had not been paid since last September.

Addressing a press conference, Tuesday, President of IPMAN, Alhaji Abdulkadir Aminu, blamed the lingering nationwide fuel scarcity on the failure of the Federal Government to pay marketers for petrol imported into the country in the third and fourth quarters of last year.

According to him, "we are being owed Q3 subsidy payment, which is last year, another Q4 and Q1 pilling up to about nine months unpaid subsidy to marketers. We need to be paid this money because we are in business."

Aminu warned that the current fuel scarcity would persist because, according to him, there was a supply gap due to the fact that the Nigerian National Petroleum Corporation, NNPC, which it claimed was the sole importer of fuel, could only supply 50 per cent of the country's needs.

He explained that why NNPC could continue to import was because it was an agency of government but private marketers could not do so because of liquidity limitations.

The IPMAN boss, who called on the Ministry of Finance to commence immediate payment to allow marketers import the product, insisted "shortage in supply today is as a result of non‑payment of marketers' oil subsidy; partly Q3, Q4 completely not paid and we are in Q1. For our national consumption today, NNPC supply 50 per cent of the national consumption."

FG, states & LGs share N641bn

Also, the three tiers of government, yesterday, shared N641.299 billion, representing revenue that accrued to the Federation Account as well as proceeds from the Value Added Tax, VAT, in the month of February.

Statutory Federation Allocation stood at N531.332 billion; N64.129 billion from Value Added Tax , VAT, proceeds; SURE‑P distribution stood at N35.549 billion, while the NNPC made a refund of N7.617 billion.

Jonah Otunla, Accountant‑General of the Federation, AGF, told journalists at the end of the FAAC meeting in Abuja, that total statutory federation account revenue was N666.745 billion which was N125. 875 billion higher than January statutory revenue of N540. 870 billion, while VAT total proceed was N66.801 billion, representing a N15.476 billion fall from the N82.277 billion earned from VAT in the preceding month.

The improved revenue profile of the month under consideration reflected in the amount each tier of government received for March expenditure.

The Federal Government took a total of N257.152 billion, the states got N157.617 billion, while the local governments were given N119.24 billion.

In addition, the oil producing states got N56.384 billion. They include: Akwa Ibom, Rivers, Bayelsa, Delta, Abia, Imo, Ondo, Edo and Cross River.

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