The removal of fuel subsidy is a hard sell for the Federal Government. So it was punches and defences as representatives made their points at the Town Hall Meeting on Petroleum Subsidy Removal, organised by the Newspapers Proprietors Association of Nigeria, NPAN, which sought to find out: “Whose Interest Does it (removal) Serve, as captured by Kunle Kalejaiye. Excerpts:
Coordinator of the Economy and Minister of Finance – Mrs Ngozi Okonjo-Iweala
I want to urge the citizens of this country not to despair but to have trust in the Federal Government believing that they will deliver this time in spite of past broken promises. This policy (subsidy removal) will bring about a significant reduction in government’s borrowing and save the country N1.12trillion, next year. But if retained, the Federal Government would borrow heavily to fund subsidy and recurrent budget next year.
The sum of N3.7trillion was used to fund fuel subsidy between 2006 and 2011, and N1.35trillion between January and October, 2011, which amounted to 30 per cent of total budget, 118 per cent of capital project and 4.18 per cent of the Gross Domestic Product, GDP.
Last year, we borrowed about N852billion to finance the deficit in the budget. In 2012, we will be forced to borrow about N1.12trillion, almost the total of our capital budget. It is not healthy that we should be borrowing money for capital and recurrent expenditure.
I want to assure Nigerians that the funds saved from subsidy removal would be judiciously utilised. The government is setting up a programme and a committee of credible and eminent Nigerians that will bring about transparency in the management of the resources and effective implementation of designated projects.
The price of premium motor spirit, PMS or petrol in the country is currently not determined by the forces of demand and supply. The current landing cost of PMS is about $133 per litre with additional N15.72. Letting markets determine the pump price of petrol in Nigeria would push it up to N120 ($0.74) per litre from N65, but it will save over N1 trillion ($6.13 billion) in subsidies in 2012.
President Goodluck Jonathan wants to phase out subsidy as soon as possible next year, but previous attempts have been caught up in rancorous debates.
The major issue is the lack of trust. Under the leadership of the Vice President, a programme has been developed on how the resources are to be used, in a way that every Nigerian can monitor and assess for themselves the way government is utilising the resources saved from fuel subsidy removal. The government is setting up a committee comprising eminent Nigerians. This is to demonstrate to Nigerians that the savings made will be used for the benefits of all Nigerians and for the intended purposes.
The committee will oversee the fund and the programme. Instead of Nigerians asking the president, this committee will tell Nigerians what the funds are being used for and how the programme is being run.
People should give us the chance to build this country. We have to rebuild this trust that has been broken, and we have to rebuild it by starting with issues that are difficult. We know this issue of fuel subsidy is a difficult one. We need to prove a point; we need to help the poorest of the society to survive. We are willing to work with Labour and everyone to move this country forward.
Constitutional Lawyer, Mr. Olisa Agbakoba— I have nothing against the removal of fuel subsidy. Conceptually, there is nothing wrong with subsidy. But how can we ensure that subsidy removal will benefit Nigerians. Why must we remove subsidy tomorrow?
Why can’t we say we will remove it in a year’s time? Some people have talked about government being sanitised. When you want to put a burden on us, show us the one you are carrying because I have not seen what the government has done for me. I had my eyes broken, I was imprisoned and many more.
Government should put in place institutional and legal frameworks to guide and control the downstream sector after the subsidy is removed.
Minister of Petroleum Resources, Mrs Diezani Alison-Madueke I want to appeal to the likes of Agbakoba to give the government a chance to do something for them by supporting deregulation.
Clamoring for fixing of refineries before the policy would kick-off would not yield dividends because the government had been on the task in the last 10 years without success. New refineries could also not be built because there was no return on investment.
There are other subsidies the government is funding in the area of agriculture and ongoing people-oriented projects. Government has invited the original builders of the nation’s four refineries to do the Turnaround Maintenance, TAM, and getting them working up to 90 per cent capacity within 12 to 24 months.
About one million jobs would be created if the planned investments in refineries, fertilizer and Liquefied Petroleum Gas, LPG, are brought to fruition.
Secretary General, Nigeria Labour Congress, Comrade Isa Aremu— There is already a problem with this policy. Our fear is that the planned removal of the fuel subsidy will not be a win-win situation for the people. The challenge is that the drivers of this policy should make the deregulation process a win-win situation for Nigerians, because it is hard enough that we are importing fuel, and it is even worse that the products cannot be distributed across the country. The reality on ground is that Nigerians have not known the market forces responsible for the declining economy.
I believe that the Federal Government need to dialogue with the people of Nigeria because petroleum is an important product to be compared with other sectors that have so far been deregulated. We have been too ideological about the deregulation process and it is important that we must be pragmatic about it. For me, there is nothing terribly wrong about subsidy.
What labour is saying is that there is need for good governance. For me, building more refineries is the major challenge for government. I think we need to build on the ideas that have been generated here. Nigerians are desirous of good governance. I want to add that all of us need to work together and the Nigeria Labour Congress must be factored in all of government’s policies.
Central Bank of Nigeria, CBN Governor, Mallam Sanusi Lamido Sanusi— The issue around subsidy is not ideological but that the rent seeking practice that had characterised the downstream sector of the oil and gas sector must be stopped in the interest of the majority of Nigerians.
The situation in the sector had encouraged corruption to thrive, and to put a stop to this practice the country must free or open up its resources, otherwise the government would incur so much debt to the extent that the next government after 2015 may not be able to operate when it comes on stream.
The country cannot continue to fund consumption instead of production, but I want to urge opponents of fuel subsidy removal to channel their energy towards campaigning for increased local production of fuel.
People said we should subsidise. Yes, subsidy is good, but the question we should be asking is, if we should be subsidising consumption or production. Should we subsidise the poor or should we subsidise those who are making illegal gains from the system? We always complain that government makes promises and do not meet up with its promises. We have an opportunity every four years to change that government.
If the government removes this subsidy and it does not do anything tangible with the funds, when the government later come for re-election, people have the opportunity to assess if the government delivered on its promises and the people have a chance to take their destiny into their own hands. That is why we must strive to deepen and strengthen democracy.
When oil prices crashed in 2008 from $147 per barrel to $37, the only reason the country’s economy was still growing was that there was a $62billion reserve. Today, there is no such shock absorber. If the oil price crashes again by about 30-40 per cent, and Naira exchanges at the rate of N200 to the dollar, while inflation rises to 18 per cent, that will be the end. I am willing to guess that this policy will never be a popular policy. If people are paying N65 per litre, and government is saying they should pay N140 per litre, it is not going to be popular.
Nigeria spent $16 billion of its foreign exchange on costly imported fuel in the first 11 months to this year – $8 billion sold by the bank to petroleum importers and a further $8 billion spent by the Treasury on the subsidy itself. You don’t need rock science to tell you that marketers are making money. It is a business that a stupid person will go into and make money.
Removing the fuel subsidy is not some magic silver bullet that can solve all the problems of Nigeria, but the burden is unsustainable on the government’s finances. We can keep paying the subsidy into 2015, but the next government will be saddled with the debt. So it is our responsibility to pursue the popular policy or the policy that is right for Nigeria.
Subsidy removal will not address the issue of corruption, inefficiency and bad governance, but if the subsidy is not removed, the burden would be too much for the government.
Human Rights Activist, Mr. Femi Falana— The Federal Government must listen to “alternative suggestions” and allow for more time to engage Nigerians before going ahead with the plan to remove fuel subsidy.
The country will not come to this cross road if the government had implemented extant laws in the nation’s statute books that would have dealt with those holding the country to ransom.
Fuel cabals should be prosecuted because they had brought us to where we are today. They have benefited from the non-removal of subsidy because the government has refused to implement all the necessary laws that would have prevented them from ripping off Nigeria. Don’t impose further punishment on Nigerians. They cannot afford to pay for the corruption and inefficiency of government.
Edo State Governor, Adams Oshiomhole— We must be sure of what we want to achieve; we must have the courage to do what we want to do. I do not want my colleagues in the labour to be shocked by the views I am going to express. The truth of the matter is that beside petroleum price, which other price has remained what it was five years ago? Can we therefore conclude as rational human beings that there are certain forces that could have guaranteed stable N65 per litre, and yet every other price in the system has been changing? I think that you can’t argue that every other price can change except petroleum.
Should subsidy be removed? Yes! But Nigerians must rise and insist that the proceeds must be judiciously utilised.
Again, the facts and figures presented by government are not real and we need to get these things clear. When you say that the pricing for petroleum products so far are not market determined, we need to find out why the prices are not market determined.
I think there are a lot of inefficiencies in the system. It is bad enough that government is importing petroleum products, but worst that it cannot deliver the product due to its own inefficiency. So these prices we are talking about are the prices Nigerians will pay for government.
The removal of the fuel subsidy does not address the issue of who benefits from it or not. Who are those benefitting from the subsidy? These are the issues that must be addressed we have not subsidised production and therefore, there are no jobs being created. If jobs must be created, the alternative is that production must be subsidised. For me, we have subsidised the oil sector and with that, few people are helping themselves by feeding fat at the nation’s expense.
Nigerians must commend the federal government for not increasing the prices of fuel despite the current oil prices. Every other thing has changed except the oil sector.
Unfortunately, my own pain is that we have since as a nation resolved not to subsidise production, when diesel was deregulated; when LPFO – the black oil, which was used in my own industry, the textile industry, to run the boiler was deregulated, those who are responsible for production of goods and services procured their diesel at market rate. Therefore, production is no longer subsidised. Unfortunately, those of us in the civil society did not address that issue. So, today, job creation is not being subsidised, unfortunately
The question is what are we subsidising and what are we not subsidising. Today, we are not subsidising cost of production. We are not subsidising employment but we are subsiding cost of consumption. I think we should credit both Yar’Adua and Jonathan for not taking arbitrary position as it affects subsidy removal by throwing it to public discourse. If it is about five years ago, we all know what would have happened, even though I won’t like to mention names.
Public policy is never value-neutral. You consciously choose your policies. You target who to benefit and you also target who pays for it. There is no free lunch. When a government plans to provide free benefits to a certain class of people, it must at the same time, target those who will pay for it because it is for the people. There is no free lunch; whether in a socialist economy or capitalist economy or both and when public officers give an undertaking and fail, the wages for that is to be retired.
Who will not like to steal $4billion and then be retired? Who wants to die on the job? If, as the Minister of Petroleum said, people diverted kerosene that was subsidised with tax payers’ money; the guy should go to jail. I think confidence building to me means that Nigerians want to see their president dealing with these guys called cabals
Don’t push the people to do what they are not capable to sustain, let us allow the Federal Government to move forward in the direction it has chosen. If President Jonathan does not take the decision to do the right thing now, Nigeria will crash in no distant future.
Chairman, Silverbird Group, Mr. Ben Murray Bruce— His arguments took a slightly different turn, as it was precede with the playing of late fro beat maestro’s song: “Shuffering and Shmiling” and later with the late solo king, Barry White’s, “Practise What You Preach” to underscore the impoverishment and deprivations of Nigerians, yet, the ruling class calls for more sacrifice while they ride on N20 bullet-proof sport utility vehicles, SUVs is pushing the people too far. He argued:
The money derived from the removal of fuel subsidy should be used to subsidise transportation for the masses. The funds will also enable transporters to buy energy-efficient buses and taxis. The Standards Organisation of Nigeria should make it a policy that only vehicles that are energy-efficient can come into Nigeria. We also ask that energy-efficient vehicles should be brought into Nigeria duty-free, so that the average person can buy these vehicles.
However, the federal government should also develop a transport policy to check the use of unsafe and unhealthy vehicles. The importation of tricycles for the masses to use while ministers drive in N20million worth of SUV should be discouraged.
Now, if you bring those tricycles to Nigeria, a minister or a commissioner must ride in it himself. You cannot bring it to us to ride. You must ride it yourself. Do not use N20million SUVs and provide tricycles for the rest of us. You can’t do that.
It is estimated that Nigerians spend between N30billion and N50billion yearly on transportation I want to appeal to the federal government to provide $500 million yearly to subsidise the transport sector as part of the $2billion intervention. The government must give us hope by providing a $500 million intervention fund for the transport sector.
We want another $500 million to subsidise those going by bus. We want another $500 million for infrastructure, such as bus stops. Then, finally, we want another $500 million for the trucks, instead of these broken down trucks that destroy all our roads, making it impossible for us to get to places we want to.
In all, we want $2 billion every year for the next five years. Now, we make a deal; if you want to remove subsidy, go ahead and remove it but this is what you must do. You must subsidise the transport sector 100 per cent.
Trade Union Congress, TUC President Comrade Peter Esele
It is regrettable that the government had not implemented various reports of committees it set up on this issue. The government has failed to yield to our demands for the refineries to be handed over to labour for management and we will fix the refineries within six months.
People talk about cabals, the cabals cannot survive if they do not have people in government. The NNPC must be allowed to run like a multinational company as observed in other parts of the world. If we do not see any action, we will not support the removal of the oil subsidy.
Publisher/Chairman, Vanguard Media Ltd, Mr. Sam Amuka
It seems this has been the most worthy meeting, both sides have benefited. It is clear to me that the removal of subsidy is a matter of time, when or how, the government must get the citizenry to trust government by reducing cost of governance, tackling corruption, reducing hardship and assuring the people that benefits would accrue from fuel subsidy savings.