A Review of the Nigerian Energy Industry

States want fuel subsidy scheme reviewed

Fuel-dispencer14 March 2014, Abuja – The 36 states of the federation Thursday pushed for a review of the current fuel subsidy programme.

They anchored their call for a review of the scheme on their dissatisfaction with the rather limited results from the current fuel subsidy programme of the federal government that has gulped huge sums from the Federation Account.

The Federation Account Allocation Committee (FAAC), yeserday announced the constitution of a 12-man committee to appraise the impact of the programme on the common man.

Chairman, Finance Commissioners’ Forum, Mr. Timothy Odah, told journalists shortly after the monthly meeting of the committee in Abuja that the resolution, which was supported by states’ commissioners of finance seeks an end to the subsidy programme because it currently benefits the rich to the detriment of the common man, whom the initiative was designed to favour.

THISDAY gathered that the report of the 12-member committee to assess the effects of  the subsidy scheme on the people would be submitted at next month’s FAAC meeting, but it was not likely to change the stance of the FAAC members, particular states’ representatives, who insisted the subsidy programme had been abused.

The call for a review of the fuel subsidy scheme came as the Accountant General of the Federation (AGF), Mr. Jonah Otunla, yesterday disclosed that the Excess Crude Account (ECA) currently stood at about $3.45 billion from about $2.1 billion in January, while about N641.29 billion in statutory revenue was shared among the three tiers of government for February.

He also said yesterday’s meeting equally called to question the recent monetary policy measure by the Central Bank of Nigeria (CBN) which ordered banks to reserve 75 per cent of public sector deposits with it.

He said the committee viewed the policy as a deliberate move to create artificial scarcity of funds.
The meeting called on President Goodluck Jonathan to review both the subsidy programme and the policy on public sector funds, arguing that fuel subsidy   was a solution worse than the problem it intended to resolve.

He said:”We looked at subsidy on oil as more or less a solution worse than the problem it intends to solve. Looking at it presently, you discover it is not solving the problem which it is meant to solve.
“In the first place, the Nigeria Labour Congress (NLC) and the majority of the Nigerian populace appeared to have been deceived into clamouring for the subsidy because syndicated projects and programmes were put in place, especially with regards to easing transportation problem and also tariff on power supply among others.

“But you will discover now that it is an average poor man that suffers. For example, when you stand by the streets  most of the transporters are not applying any benefit from the subsidy in what they charge because we know of course that the federal government had the good intention to subsidise transportation so that it would be to the absolute benefit of the poor man and every Nigerian.
“But you will discover today that there’s no reflection of that subsidy benefit. Besides, it is like a system that robs Peter to pay Paul; makes the richer to grow richer and the poor to grow poorer.”

Odah added that presently only the rich benefited from the fuel subsidy programme.
He said:”The same thing is applying to the states: there are some states that are fully industrialised and they have several industries and factories and you use this subsidy in that particular place: the people who benefit more are those states which are fully industrialised because the fuel consumption of those industries and factories in those states use more of the subsidy unlike the states, which are under-industrialised.

“What we are advocating is that 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 then decide to use it or grant subsidy on a level it would be able to afford. Then you look at the issue of this subsidy as it applies to some individuals; the marketers are not truly showing the intention of the federal government because it has created a very big market for them in certain ways because transparency is not coming up.

“It is because of this that we passed a resolution at FAAC, and that had been the opinion of the finance commissioners, that a call should be made to President Goodluck Jonathan so he would have to reconsider the position of this subsidy and remove it. There should be sensitisation of the average public in Nigeria and the labour leaders to understand that they were deceived because it is not truly serving the purpose as many states are crumbling.

“The subsidy is eating too much into the crude reserve. You have heard that what we have today (ECA) is N3.5 billion and it is because certain approaches were even followed otherwise, by the month of April, you will be discovering a situation where the states allocation will have to be deducted in order to pay subsidy. Where is the subsidy going to?”

On the  CBN monetary policy on public sector funds, Odah said: “We also took the case of (CBN Governor, Sanusi Lamido) Sanusi’s monetary policy into consideration. And that is the credit ration reserve. You discover that as at today, 75 per cent of public sector deposits 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;  the coupon or interest rate has gone so far.  And there’s a plan, we learnt  the CBN equally wants to increase it to 100 per cent. If that is done, it is an absolute artificial scarcity of funds created by a manipulated means.”
He said the committee would write to the Nigerian Governors’ Forum (NGF) as well as brief the 36 state governors on their positions.

Meanwhile, the AGF, while addressing journalists in Abuja after the monthly meeting of the committee, said gross revenue for the month under review stood at N666.74 billion or N125.8 billion more than the N540.8 billion received in the previous month.

He noted the appreciation occurred despite a drop in production occasioned by shutdown of some terminals due to some repair works, pipeline leaks and fire outbreak.
Notwithstanding, he said total collection was boosted with an exceptional payment of N82 billion by the Nigerian Petroleum Development Company (NPDC).

According to him, total mineral revenue for the month was put at about N569.13 billion, while the non-mineral component stood at about N96.60 billion.

Revenue from value added tax (VAT), however  decreased by about N15.47 billion to N66.80 billion, compared to about N82.27 billion in January. The distributable statutory revenue without VAT was put at about N531.33 billion.

A breakdown of the net statutory distribution showed the federal government received about N247.53 billion while the states shared N125.55 billion, and the local governments about N96.79 billion.

Also, about N56.38 billion was allocated to oil and gas producing states under the derivation principle.
Also distributed was the regular N35.5 billion proposed under the Subsidy Re-investment Programme (SURE-P) as well as the N7.617 billion  Nigerian National Petroleum  Corporation (NNPC) indebtedness to the Federation Account.



– This Day
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