Confab: Removal of Fuel Subsidy Generates Heat
The on-going National Conference in Abuja witnessed a heated session on Monday as delegates spoke either in support of or against the complete removal of fuel subsidy as recommended by the Committee on Public Finance and Revenue.
Each party in the debate spoke with passion on reasons the Federal Government should either keep subsiding petroleum products for the public or why subsidy was meant to serve the economic interest of just a handful at the expense of the majority.
The Committee, headed by Senator Adamu Aliero, had stated in its report that subsidy on petroleum products was an avoidable major financial burden the nation has been made to bear.
It said between 2006 and 2007, subsidy accounted for 30% of government expenditure which translated to 118% of capital budget and 4.18% of the Gross Domestic Product.
It was also revealed that subsidy payment of N2.527 trillion in 2012 and 2013 averaged N1.263 trillion per annum and described it as “a burden too heavy for the nation and its populace.”
The Committee stated that the situation was anomalous and encouraged smuggling; and that government resources which should have been used to undertake more developmental projects were being spent on subsidy.
It argued that subsidy removal “will most certainly ensure product availability at all times and significantly mitigate illicit cross-border activities.”
It was the Committee’s position that the poor and the rural dwellers to whom the subsidy scheme was initially targeted were not reaping the benefits; and that removal of subsidy would encourage investments in refineries and the downstream sector generally.
Those who argued against the removal said since constant power supply in the country was still a mirage; government should first fix all the sick refineries for local production of petroleum products before removing the subsidy.
They observed that criminal activities would increase nationwide if the removal was carried out since majority of artisans who rely on small power generating sets to do their business would be out of work.
However, those in support of the removal of subsidy also presented appalling situations of wastages and high level corruption among both the fuel importers and certain government officials.
They argued that continuous subsidization of fuel would amount to deliberate effort to enrich a few Nigerians at the expense of others; and that what was advisable would be to ensure judicious use of funds accruing from the subsidy removal.
Professor Anya O. Anya in his contribution said it was unfortunate that the argument has been reduced to “I support subsidy or I oppose subsidy,” describing such argument as “over-simplification of a more complex issue.”
He said delegates needed to come up with a road-map in the area of having the crude oil refined in Nigeria.
Professor Anya demanded of the delegates to come up with “a comprehensive national plan for the withdrawal of subsidy,” such that people will not suffer at the end.
He suggested a phased withdrawal that should follow a comprehensive overhaul of the system with the requisite infrastructure in place such that would make the subsidy issue completely irrelevant and unnecessary.
Final decision on the debate would be taken on Tuesday when the Conference in the Committee of the Whole would consider each of the recommendations clause by clause.
The Committee also recommended that in order to enhance accountability, transparency and avoid mistrust between the three tiers of government, it has become absolutely necessary to have Accountant Generals of the Federation and that of the Federal Government.
Consequently, the Accountant General of the Federation would manage the accounts of the federation while Accountant General of the Federal Government would handle the finances of the Federal Government.
It was observed by the Committee that in the 1970s, budgetary allocations, up to 70%, were always in favour of capital expenditure; a situation it said enhanced economic development; but that the situation has since changed.
In the last 10 years, it said approximately 73% of the annual budgets have been devoted to recurrent expenditure leaving a mere 27% for capital.
The committee remarked: “The present budget mix is unacceptable as no economy can grow with such a paltry allocation for capital and still be expected to provide vital infrastructure and social amenities for the populace.”
It also frowned at situations where budgets are submitted to the National Assembly and thereafter, the crude oil benchmark is subjected to upward reviews, thereby increasing the size of the budget.
It was the position of the committee that “it is the prerogative of the Executive branch to propose the annual budget and to determine crude oil benchmark.”
The Committee therefore recommended that the country maintains a budget mix of at least 60% capital expenditure and 40% recurrent expenditure to leave substantial fund to address infrastructural gap, provide jobs and promote general economic growth and development.
It urged that the time frame for the presentation of the annual budget to the National Assembly should be on or before September 30th preceding the budget year; while the passage and presidential assent must be completed on or before December 31.
It was also the opinion of the Committee that the Fiscal Responsibility Act of 2007 which deals on budget issues be enshrined in the 1999 Constitution and all the controls and sanctions therein adhered to.
On solid minerals, the Committee provided a comprehensive list of essential solid minerals found in states of the federation explaining that these can be a veritable source for diversification of the country’s non-oil revenue base and that when fully tapped, the revenue profile would change from oil dominance.
Under the Sovereign Wealth Fund (SWF), the Committee recommended that a minimum of 50% of all funds in excess crude account be transferred to the SWF while the balance should be used to augment where necessary, certain shortfalls in the FAAC in the short term.
To make it more effective with a higher legal backing, it was the recommendation of the committee that the SWF be enshrined in the 1999 Constitution.
In order to stop the on-going revenue losses due to oil and gas pipeline leakages and theft, the Committee urged that commensurate security be deployed to these areas to deter, detect, apprehend and prosecute perpetrators of the crime.
Besides deployment of security personnel, Committee members said there was need for acquisition and deployment of appropriate technology to check fuel and pipeline vandalism.
Principally, it demanded of government to provide opportunities for young people to be involved in the oil and gas activities as this would engender gainful employment for youths.
While calling for the passage of the Petroleum Industry Bill, it emphasized the need for intelligence gathering and processing in tracking movement of ocean bound vessels coming in and going out of Nigeria.
The Committee said government should consider involvement of private companies in the management and replacement of oil pipelines, some of which it said are over 50 years old.
It was the position of the Committee that as things stand now, Nigeria’s external debt ration is below the international benchmark of 40%; and that this has created room for further external borrowings.
It said back home, instead of the stated position helping in the growth of the economy, domestic debt profile, especially debt owed local contractors, unpaid salaries of public servants, pensions and gratuities have contributed to hamper the growth.
It recommended that while there is room for borrowing, such external borrowing must be tied to designated projects which must be efficiently and prudently implemented to reduce pressure on lendable funds.
Meanwhile, Conference Chairman and former Chief Justice of Nigeria, Justice Idris Legbo Kutigi, has thanked Nigerians and particularly, delegates to the National Conference and the media for the support and cooperation extended following the death of his wife, Maryamu, last week.
He observed that both Christians and Muslims were with him throughout the period; from his home to the mosque, to the cemetery and back to the house, adding, “I was overwhelmed. This is why Nigerians should not fight over religion.”
Also on Monday, two moves to resolve the controversial issues of Land Tenure Act and the establishment of Religious Equity Commission (REC) failed. In addition, the issue of states establishing Pilgrims Welfare Board was left unresolved.
A motion by Chief Mike Ozhekome on the need to establish REC, stating the usefulness of such a body to the religious harmony in Nigeria and the resuscitation of Pilgrims Welfare Baord only at state levels, was defeated by voice vote.
Conference Deputy Chairman, Professor Bolaji Akinyemi had equally announced a decision by some delegates who discussed with him on the need to keep Land Use Act in the Concurrent List. The move also did not receive approval.
These issues were carried forward last week when reports of Committees on Religion, and Land Tenure and National Boundaries were presented and no consensus was arrived at on them.
Professor Akinyemi said that based on the development on Monday, the issues would still be discussed at another level until an acceptable resolution is found for each of them.
