Premium Times (Abuja)

13 March 2014

Nigeria: Fresh Fuel Crisis Looms As Finance Commissioners Seek Removal of Petrol Subsidy

Photo: Vanguard
End to Fuel Subsidy.

Two years after a nationwide protest forced the federal government to reverse its decision to remove subsidy on petrol, finance commissioners from Nigeria's states met and asked for the removal of the subsidy, their chairman has said.

The official pump price of petrol across Nigeria is N97 per litre. A total removal of the subsidy will raise the price to about N140 per litre.

The announcement of subsidy removal on petrol by President Goodluck Jonathan on January 1, 2012 triggered nationwide protests that forced the government to reverse the policy.

However, briefing journalists at the end of the meeting of the Federation Account Allocation Committee, FAAC, on Thursday, the chairman of the Forum of States Finance Commissioners, Timothy Odaah, said the commissioners agreed that it was in the best interest of Nigeria that the subsidy regime is brought to an end.

"The subsidy should be removed so that every state or any member of the federating unit sharing from FAAC will take its own money and determine how to use it or grant subsidy to the level that it can afford," Mr. Odaah, who is the Ebonyi State Commissioner of Finance, said.

Mr. Odaah's statement came barely two days after Nigeria's largest opposition party, the All Progressives Congress, APC, warned of surreptitious plans by the Peoples Democratic Party-led federal government to increase the pump price of petrol. The party accused the federal government of allowing the current petrol scarcity across the country to continue as a way of justifying an increase in official price.

The federal government, through the petroleum minister, Diezani Alison-Madueke, later denied that there were plans to increase the price of petrol.

Mr. Odaah, however, said the commissioners agreed that the subsidy was not solving the problem it was meant to solve and therefore called for the end of the regime. He said Nigerians were being deceived into believing that the subsidy was necessary.

"Nigerian Labour Congress (NLC) and majority of the Nigerian populace appear to have been deceived into clamouring for subsidy because of syndicated projects and programmes that were put in especially with regards to easing transportation problem and likewise tariffs on power supply, but you will discover that it's the average poor man that suffers," he said.

Mr. Odaah said the subsidy system "robs Peter to pay Paul by making the rich to grow richer and the poor to go poorer."

He said although the commissioners agreed at the FAAC meeting to set up a committee, they had resolved that subsidy be cut.

"A committee for subsidy has been constituted and it is to look into the impact of subsidy whether it should actually be allowed, but I want to tell you that the resolution we took is that subsidy should be removed," he said.

To brief governors, Jonathan

In order to actualise its desire to end the subsidy regime, Mr. Odaah said the commissioners' forum would brief the state governors and President Jonathan on their resolution.

He said the forum would "formulate a letter that will be sent to the Nigerian Governors' Forum and we are going to brief our respective governors and we will inform the President. We know it will be very difficult considering the critical period we are in."

Mr. Odaah adduced further reasons for the decision taken at their meeting.

He said, "There are some states that are fully industrialized and you have many industries and you use this subsidy in that particular place and the people who benefit more are those from the states that are industrialized because of the fuel consumption of those industries which use more of the fuel subsidy unlike the states that are under industrialized.

"Marketers are not following the intention of the government because it has created a very big market for them in certain ways. This is because transparency is not coming up. There are some people that are eating from the subsidy to the disadvantage of others."

The commissioner continued. "The resolution at FAAC, and that has been the position of the finance commissioners, is that the call should be made to the President so that he will have to review and reconsider the position of this subsidy and remove it."

Perhaps aware of the public outrage that would follow should Mr. Jonathan accept the recommendation of the finance commissioners, Mr. Odaah advocated the "sensitization of the average public in Nigeria and the labour leaders to understand that we were deceived because it is not really serving the purpose because many states are crumbling as subsidy payment has eaten so much into the crude reserves."

The Ebonyi finance commissioner also argued that the subsidy payment was affecting the money accruable to states.

"It (an increase of $1 billion in Excess Crude Account) is because certain approaches were followed; otherwise by the month of April, you will be discovering a situation where the states' allocation will have to be deducted to pay subsidy and where is this subsidy going into?"

He said the removal of subsidy would make more funds available to state governments for projects.

"You will be better employed in the states, the states will grow their own industry there will be more employment compared to the situation where subsidy takes away much that could be used for the purpose of industrialisation. There will be no employment, no investment and the vicious circle of poverty will continue," he said.

APC distances self

Reacting to Mr. Odaah's claim, the APC spokesperson, Lai Mohammed, distanced his party and its state commissioners from such decision.

Mr. Mohammed told PREMIUM TIMES that he had spoken to the Lagos State Commissioner of Finance, Ayodele Gbeleyi, who said the commissioners never agreed that petrol subsidy be removed.

Mr. Gbeleyi was, however, not at Thursday's meeting. It is not clear how many of the state commissioners from the 16 APC controlled states attended the FAAC meeting .

Mr. Mohammed, however, said the APC stood by its Tuesday statement.

"The more fuel trucks the government claims to have sent to major cities to ease the scarcity, the more difficult it is for Nigerians to obtain the product," the APC spokesperson had said on Tuesday. "This is an old trick and Nigerians should not be hoodwinked into believing there will be no increase in fuel prices.

"The only deterrent is to let the government know Nigerians will resist any price hike. The truth is that with the elections approaching, the PDP-led FG is desperately seeking all possible avenues to raise funds for its usual electoral shenanigans, and increasing fuel prices has always been an attractive option to the government, not minding what the impact will be on the same people it has impoverished since 1999."

Odaah blasts CBN

Mr. Odaah also took a swipe at the Central Bank policy on Cash Reserve Ratio (CRR). He said 75 per cent of public sector deposits were taken to the Central Bank as a deliberate attempt to create artificial scarcity of funds that states, local governments and even the federal government cannot borrow because the interest rate has gone so high.

"The FAAC members are calling on the Federal Government to look at it (CRR Ratio) and review it by bringing it down so that cash would be available because cost of funds is growing too high and with that state cannot meet up.

"You go to borrow from international organisations it is not possible. You want to borrow within Nigeria, it is not possible, because even the facilities you accessed previously at 12 per cent, the banks are now raising it to 25-28 per cent. And by the time they push the CRR to 100 per cent it would even become 50 per cent so who is it serving. We see it as a solution that is serving only to confuse that is one of the issues we took into consideration," he said.

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