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Fuel Subsidy and A Fool and His Money

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“Fuel Subsidy: F.G. Admits N872bn Deductions from States and LG Accounts”.  The preceding is the title of a story on pg 2 of the 22nd of February 2010 edition of the Punch Newspaper. 

The report went on to state that “A major legal battle between the 36 states of the federation and the Federal Government may be imminent, as the former have expressed opposition to further deduction of N476.6bn belonging to them and their councils from the Federation Account.  The deductions are meant to finance the controversial fuel subsidy.”

“Apparently, a huge sum of N872bn had been skimmed off their accounts for the period covering 2006 to 2009, and the Minister of Finance, Dr. Masur Muktar, disclosed the governors’ opposition to more deductions from their states’ funds last week.

He said the governors declared the deductions as “unacceptable” just as he admitted that the N872bn already deducted posed legal challenges.

According to the report, ‘A Finance Ministry document’ “The Burden of Subsidy; 2006 – 9”also indicated that “the total subsidies of the 36 States stand at N1350bn, while that of federal government is N1.4 trillion making a total of over N2.5 trillion for the three tiers of government in the same period.

This implies that Akwa Ibom would have lost a staggering N122.37bn when the total deduction would have been completed followed by Rivers State N112.8bn and N108bn belonging to Delta State.”

The Finance Minister, Dr. Muktar, who is also the Chairman of the Deregulation Implementation Committee set up by Mr. President, also indicated after the FEC meeting of 17/2/10 that the huge amounts deducted from the allocations of the major oil producing states as subsidy was the revenue they would have earned from the excess crude account if the money was shared.

“Another issue that has surfaced is the legal dimension to the deductions that has been made in the past”, and the Minister agreed that “it is (the deduction) also illegal because it is not backed by any legislation in relation to appropriation”

In its attempt to promote the national acceptance of deregulation, The Movement for Economic Emancipation, MEE, a government sponsored agency, has declared petroleum subsidy as illegal, unfair, a value destroyer, and a huge finance burden in several propaganda messages in both print and electronic media with possibly hundreds of millions of tax payers’ naira.

This column has consistently maintained over the years that our constitution does not accommodate any such revenue subhead as ”Excess Crude Account”.  In spite of the patent illegality of this account, and the outright violation of our constitution, the National Assembly kept mute like dumb mules, and inexplicably, the 36 states and local governments appeared to have been star struck and consciously condoned the illegality.

So far, no one has been indicted for this grave affront on our constitution!  In this event, it  should not be surprising when other equally serious constitutional violations such as we are currently witnessing in the Presidency manifest in the full knowledge that there will be no criminal penalties for those ‘powerful’ Nigerians who insist on selfish interpretations of constitutional provisions.

Today’s title, “A Fool and His Money are Soon Parted” was first published on 27/07/2008.  It is obvious that neither the Economic Monetary Team nor the National Assembly nor the State Governors read this article!  They would have been forewarned!!

The following is the text of the same article; it is still not too late to adopt the right prescription of dollar certificates for the payment of petrodollar revenue rather than CBN’s unilateral substitution to naira before sharing.  Please read on.

“A fool and his money are soon parted” is an adage some of us learnt very early in primary school!  Consequently, as children, we clung tenaciously to whatever money we were given so that we were, not against our will, summarily separated from our kobos, toros and sicis, which, in spite of being coins, carried respectable values in those days!  In our innocence, we believed that we could only be divorced from our allowances if someone actually stole them from where we had kept them in our drawers, satchels or in the safe haven of the small inner pockets, under the belts of our school shorts.

We imbibed the words of the adage so that we would not be labeled as foolish by our mates in addition to the deprivation of the loss of our money!

Our young minds did not conceive the deeper context of the adage which implied that you could actually voluntarily relinquish your money as a result of false pretences by a receiver; such realization came much later in secondary and tertiary institutions when one recognised the literal and legal meaning of the word fraud!  In any event, whether your money was stolen by sleight of hand or by orchestrated deceit, the net effect on the victim is the same; you lose the purchasing value of the stolen money!

Indeed, the current incidence of prospering ‘419’ businesses in our country is ample testimony that the subtler style of stealing has been taken to higher levels and has become more successful than break-in and burglary.

The amount that can be stolen by such mundane physical methods are limited so far in our country to barely tens of millions while the sophisticated variant of stealing has brought in hundreds of billions of naira to those skillful practitioners, who have honed their style to the extent that their victims might even erroneously believe that the ‘guyman’ aka ‘419’ parlance was doing them a favour, until the bubble inevitably bursts!

In the preceding eight years or so, Nigerians have been fed an emasculating diet of subsidy on oil prices!  What is clear is that, although paradoxically, Nigerians have become poorer with increasing levels of subsidy, yet we seem to love the sweet pangs of subsidy as we have been tutored to believe that such misplaced government generosity is in our best interest even if the level of our social and economic welfare does not justify the supposed largesse!

From what is now apparently a modest value of about N100bn five years ago, Minister of State for Energy, Mr. Odein Ajumogobia recently reported that the value of fuel subsidy would amount to about N1.5 trillion yearly!  (See Guardian Newspapers of 18/7/2008).

Meanwhile, in spite of such huge naira outflows to oil merchants and the joy of the NLC and the Masses that government has been constrained to provide fuel subsidies, most Nigerians, especially the 70% or more who live on the proverbial $1 a day, know that living has become a stiffer uphill task today than before the advent of a full-fledged subsidy policy – five years ago.  The value of subsidy indicated by the Minister is best appreciated when juxtaposed as almost 70% of the N2.2 trillion 2007 federal budget.

We should be reminded that the highest sectoral allocation of over N400bn for security in the Niger Delta in the 2008 budget pales in comparison to the fuel subsidy of N1500bn; yet, in spite of such enormous provision, the Minister regretted that “the research it conducted indicated that the ordinary Nigerian does not in any way benefit from the measure… and only a priviledged few enjoy from the largesse”.

I beg your pardon, but if the objective of government is to expend our resources in a judicious manner for the greater good of the majority, it would seem that government’s focus has been derailed if almost 70% of federal revenue impacts only minimally on the masses!

In other words, with such huge fuel subsidies, we are losing our money to a ‘priviledged few’, who do not need to physically break in or burgle our treasury, but are generously gifted with our patrimony while relaxing in the comfort of their homes in Nigeria or other more palatial abode abroad.

Meanwhile, the generosity of the masses to our elite beneficiaries is reflected in inadequate funds for education, health, transportation, power, etc, none of which sectors received more than 15% of the provision for fuel subsidy.

I recall that in our “Monetary Policy Management & Insincerity-9” of 3rd December 2007, in this column,” we had noted the conspicuous absence of any allocation whatsoever for the payment of fuel subsidy.  We had concluded that the removal of such subsidy was imminent as the final 2008 budget assented to by Mr. President after the approval of the National Assembly was also mute on the payment of subsidy.

The Energy Minister’s recent rapport with the National Executive Council of the Trade Union Congress is obviously a testimony that subsidies are being paid to the benefit of a small ‘priviledged few’.  One must wonder on which authority and from which funds these subsidies are being paid.  Indications are that the Executive arm of government has once again been dipping its hand into the illegally constituted excess crude account.

Yar’Adua, however, does not have the constitutional priviledge to spend any money from the federation account unless such money has been formally approved by the National Assembly.  Apart from some media reports that the President  has received an informal consent of State governors to use ‘part’ (value not defined) of the illegal excess crude account for fuel subsidy, so far, we do not recall any presidential bill to the National Assembly for approval of any such subsidy.

Notably, such omission is against the provision of Section 162 of the 1999 Constitution which does not provide for any informal decisions between State Governors and the Federal Executive with regard to revenue accruable to the federation account.  An appropriate bill to this end should normally be properly submitted to the National Assembly either as part of the appropriation or a supplementary bill for approval before Mr. President can spend our money!

In the event that N1500bn is wasted according to Agumogobia, and another sizeable chunk of capital vote is looted via contract excesses, and unaudited recurrent expenses accounting for over 70% of the federal budget, it is clear that we are gleefully parting with our money to a small elite who still manage to convince us that they are assiduously working in our interest, in spite of the pervasive poverty in the land.

But, all is not lost if we immediately stop the substitution of increasingly worthless naira issues for crude oil export dollars.  This will immediately bring down petrol and diesel prices below their current levels and still allow the government to garner a healthy sales tax in place of wasteful subsidy.

The spate of industrial actions will also subside as the purchasing value of erstwhile meager incomes improve considerably; inflation will also be restrained as we take real value for what we have so that the title of ‘fools’ will not be our lot!

Save the Naira, Save Nigeria!!

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