Finance commissioners call for subsidy removal

AFTER a long while, the fuel subsidy debate is set to reopen.

Members of the Federation Account Allocation Committee (FAAC) are agitating for the removal of subsidy on Premium Motor Spirit (PMS) or petrol.

The government believes such a step will free funds for infrastructural development but critics say it will enrich a few and deepen the common man’s pains.

Speaking yesterday at the end of this month’s FAAC meeting in Abuja, the chairman of finance commissioners, Mr. Timothy Odaah, said they were advocating 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 determine how to use it or grant subsidy to the level that it can afford.”

“Subsidy is not solving the problem which it is meant to solve,” Odaah said.

He noted that the “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 its the average poor man that suffers.”

For example, Odaah said, most transporters are not applying any benefit of subsidy in what they charge “because we know of course that the Federal Government has a good intention to subsidize transportation so that it will be to the absolute benefit of every Nigerian, but there is no reflection of that subsidy benefit. Besides, its like a system that robs Peter to pay Paul by making the rich to grow richer and the poor to go poorer.”

Odaah said: “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.”

The committee, he said, “will formulate a letter that will be sent to the Nigerian Goverors 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.”

To back the claim for the removal of subsidy, Odaah said “there are some states that are fully industrialised 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 industrialised because the fuel consumption of those industries which use more of the fuel subsidy, unlike the states that are under industrialised.”

With regards to marketers of petroleum products, the chairman of Finance Commissioners Forum said “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,” he said.

It is because of that, he said “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”.

To prevent a backlash, Odaah advocated the “sensitisation 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 Excess Crude Account (ECA) has $3.5 billion because $1 billion was transferred and, according to Odaah, “it 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?”

However, “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 cycle of poverty will continue,” he said.

Odaah speaking on behalf of commissioners of Finance, took a swipe at the policy on Cash Reserve Ratio (CRR) of the Central Bank of Nigeria (CBN). He expressed concern that “75 per cent of public sector deposits are taken to the Central Bank. This is a deliberate attempt to create artificial scarcity of funds. Then, states, local government and even the Federal Government cannot borrow because the interest rate has gone so high and there is the plan by the CBN to increase it to 100 per cent if that is done it is an absolute artificial scarcity of funds created by a manipulated means.”

FAAC members, he said, “are calling on the Federal Government to look at it and review it by bringing it down so that cash would be available because cost of funds is growing too high and with that states cannot meet up. You go to borrow from international organizations, 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.”

It was reiterated at the meeting that the Petroleum Products Pricing and Regulatory Agency (PPPRA) should be co-opted into the membership of FAAC. According to Odaah, “there is no reason why it should stay away from FAAC meeting and we have demanded that they should be represented here.”

Total allocations to the three tiers of government for February was N641.299 billion made up of N531.332 billion as statutory allocations to the Federal Government (52.68 per cent or N247.533 billion); states (26.72 per cent or N125.552 billion); local governments (20.60 per cent or 96.795 billion) and derivation (13 per cent to oil producing states).

Also for February, N66.801 billion was shared by the three tiers of government from Value Added Tax (VAT) proceeds, N35.549 billion from SURE-P and N7.617 billion refunded by the Nigeria National Petroleum Corporation (NNPC)