09 December 2015, Abuja – Against the backdrop of the current fuel crisis across the country showing no sign of abating, the World Bank, yesterday, told President Muhammadu Buhari that the time to remove petroleum subsidy is now.
While the Buhari administration has given hints of its intention to remove fuel subsidy, many Nigerians, including the organised labour, have rejected the plan. But in what appears to be a prelude to the eventual removal of fuel subsidy, President Buhari made no provision for kerosene subsidy in the Medium Term Expenditure Framework, MTEF, and Fiscal Strategy Paper, FSP, which he presented to the National Assembly, yesterday.
At Monday’s Federal Executive Council meeting, the Minister of Budget and National Planning, Udoma Udoma, while unveiling the Medium Term Expenditure Framework and the government’s N6 trillion budget proposal for 2016, said the government was seriously weighing the options between removing or retaining fuel subsidy next year.
Speaking at the launch of the new edition of Nigeria Economic Report, the World Bank’s Lead Economist, John Litwack, said the best time to remove fuel subsidy is now when global crude oil price is at its lowest level, noting that the Bank foresaw continuous decline in global crude oil price.
Despite last Friday’s attempt by the Organisation of Petroleum Exporting Countries, OPEC, during its 168th conference to maintain its production quota so as to stabilize the crude oil market, the price of the commodity slumped further to $37.89 per barrel on Monday from $38.09 on Friday.
Mr Litwack said now is the best time for the government to scrap the subsidy, as doing so would not push retail pump price beyond an average of N100 per litre, or generate the kind of pressure that would negatively impact on the people beyond what they are currently facing.
According to Litwack: “The fuel subsidy appears to have vast modest benefits for the majority of citizens, but the costs are quite high. There is a strong tendency for the cost of fuel subsidy to increase over time as increasing domestic demand for petrol outpaces growth in oil output or revenues.
“The $35 billion cost of fuel subsidy during 2010 – 2014 was one of the reasons Nigeria was unable to accumulate a fiscal reserve in the Excess Crude Account that could have protected the country from the recent oil price shock.”
He explained that fuel subsidy obligations were expected to reach 18 per cent of all government oil revenues in 2015, pointing out that if the current regulated price regime of N87 per litre was maintained, subsidy was projected to increase to more than 30 per cent by 2018.
2016 Budget: Buhari scraps kerosene subsidy
Meanwhile, President Muhammadu Buhari may have tacitly scrapped kerosene subsidy in the country as he made no allocation for it in the Medium Term Expenditure Framework, MTEF, and Fiscal Strategy Paper, FSP, which he presented to the National Assembly, yesterday.
The document indicated that the present federal administration is to borrow N1.835.88 trillion to fund the 2016 budget which stands at N6.04 trillion just as it disclosed that a total sum of N350.33 billion misappropriated funds will be recovered in 2016.
A breakdown showed that while N1, 200.00 trillion would be borrowed domestically, foreign borrowing stands at N635.88 bn.
On the misappropriated funds, the president explained in the Medium Term Expenditure Framework that N137.90 billion will be recovered from strategic alliance contracts, while N162.43 billion will be recovered from the Nigerian National Petroleum Corporation, NNPC just as N50 billion will be recovered from other misappropriated funds.
But contrary to expectations that he would remove fuel subsidy following series of complaints arising from its handling, the President did not only retain it but allocates the sum of N63.29 bn for it in the 2016 fiscal year.
Also, in his efforts at fulfilling his 2014 electioneering campaign promises, President Buhari allocated the total sum of N500 billion for Social Welfare Intervention Programmes Initiative, conditional cash transfer to the most vulnerable and post-NYSC grant.
He explained that “these interventions will start as a pilot scheme and work towards securing the support of donor agencies and our development partners in order to to minimize potential risks.”
N39.88 billion for oil exploration in the North
The president, according the document, is expected to spend the sum of N39.88 billion for exploration of oil in the northern part of the country in the, 2016 fiscal year.
According to the MTEF submitted, the sum of N150 billion was earmarked for settlement of arears of the 2015 subsidy on domestic consumption.
This came as he slashed the yearly budget of the National Assembly from the sum of N120 billion contained in the 2015 budget to N115 billion in the 2016 fiscal year.
He equally trimmed down the allocation for Presidential Amnesty Programme from N47.39 billion to N20 billion.
To improve revenue generation and collection as well as plugging leakages, the president said his administration had commenced a forensic audit of key revenue generating and collecting agencies of government with a view to recovering lost revenues as well as identifying and blocking loopholes for poor collection and remittance of revenue in the treasury.
The president added that the multiplicity of government accounts had made it difficult to have an accurate picture of public financial resources.
“Government has, therefore, enforced the full implementation of the Treasury Single Account, TSA system. Already, this is facilitating a more effective aggregate management and control of government cash balances, which, hitherto, had been maintained in several bank accounts.
“Government has similarly, enforced the full implementation of the integrated payroll and personal information system, IPPIS in all MDAs, which should result in some cash, “he explained.
President Buhari hinted of possible job cut as well as mass reduction of MDAs, when he said: “Government will, in the near-to-medium – term, continue to prune the size of federal government and its MDAs to more efficient levels without compromising effectiveness.
“Over the Medium-term, however, government will revisit the need to rationalize the agencies of government and strategically implement relevant provisions.”
The president said the 2016 Budget, standing at N6.04 trillion, proposed government revenue of N3.82 trillion, implied a projected deficit of N2.22 trillion.
No hope in sight, as fuel scarcity bites harder
The fuel crisis continued in Abuja, yesterday, as motorists continued to find it more difficult to get the product, with some queueing for a minimum of four hours before getting the product to purchase.
The fuel crisis showed no sign of abating, as the queues continued to grow longer while the number of petrol stations with the product continued to decline.
Despite the sufferings, the Federal Government, the Department of Petroleum Resources, DPR and the NNPC, seem to have abandoned Nigerians to their fate, as they have kept mute in spite of the worsening situation.
The DPR failed to respond to enquiries on its efforts at alleviating the sufferings faced by Nigerians, while the NNPC had stopped sending its daily update of supply to petrol stations across the country.
In Suleja, most petrol stations were selling fuel to motorists, but the queues were long while motorists accused the filling stations of under-dispensing, claiming that their pumps had been tampered with.
At the Airport Road in Abuja, most of the petrol stations were not opened when Vanguard visited, while the few selling, NNPC and MRS, witnessed large number of vehicles and very long queues.
In Lugbe, only MRS petrol station was selling, while the other petrol stations where shut down, claiming they have ran out of the products to sell.
At the Conoil and Total petrol stations opposite the Nigerian National Petroleum Corporation, NNPC, headquarter in Abuja, the queues had gone round about four streets, inhibiting traffic in the process.
At the Forte filling station in Gudu, a long queue was seen, with motorists spending long hours on the queue, while the situation was no different at Yaman petrol stations in Area 3, Garki, Abuja.
In Gwarimpa, most of the petrol stations were shut, including the NNPC station inside Gwarinpa , as the station was shut to motorists.
Along the Abuja – Keffi Expressway, only Forte Oil at Nyanya was selling, while all the NNPC retail outlets around Nyanya were shut down.
Along the Kubwa expressway, the large queues witnessed at the NNPC retail outlets at Katampe and Total filling stations continued and showed no sign of improvement. Some motorists told Vanguard that they have been on the queue for about four hours and called on the Federal Government to do something about the situation.
Due to the worsening scarcity, widespread incidences of sharp practices were recorded in most petrol stations, with rising cases of under-dispensing, hoarding and exploitation.
Also, most petrol stations no longer sell to motorists during the day, as they only sell at night when they feel they could get away with whatever sharp practices they are engaged in. Most of them sell to black market dealers in drum and other large containers at the dead of the night, while during the day, they claim they do not have products to sell.
*Henry Umoru, Emma Ovuakporie, Michael Eboh, Joseph Erunke, Johnbosco Agbakwuru & Grace Udofia – Vanguard