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THE government mounted a strong defence of its plan to remove fuel subsidy yesterday defended its officials deployed facts and figures to back their case. It was all at the Town Hall meeting organised by the Newspaper Proprietors Association of Nigeria (NPAN) in Lagos.
Finance Minister Dr Ngozi Okonjo-Iweala said between January and November, the government borrowed N850 billion to make up this year’s N1.3 trillion fuel subsidy. She said the government is exploring ways to close wastage in the system, and promised that the Economic and Financial Crimes Commission (EFCC) will henceforth prosecute anyone found diverting petroleum products.
She urged Nigerians to support fuel subsidy removal and give the government a chance to make a change.
Mrs Okonjo- Iweala said deregulation will open up the market, thereby creating jobs. She said the policy will reduce smuggling of products to neighbouring countries and reduce fraud. The government has issued licences to 20 marketers to build refineries, but they have failed to do so because the market is not attractive.
She said between 2006-2011, the government spent N3.7 trillion on subsidy, stressing that as at October, this year alone, N1.3 trillion had been spent and it is estimated that by the end of this year, N1.43 trillion will have been spent.
Mrs Okonjo-Iweala said the money spent on subsidy could go into funding capital projects and reducing deficit. She explained that although N852 billion was borrowed this year to fund budget deficit about N1.1 trillion is expected to be borrowed next year, noting that constant borrowing is not healthy for the economy.
Central Bank Governor Sanusi Lamido Sanusi said the government was subsidising consumption and not production. The implication is that the country is exporting jobs and importing unemployment, he stressed. With fuel importation and subsidy, government creates jobs for other countries and improves their economies.
He said fuel subsidy benefits the rich and not the poor, adding that between January and November, the foreign exchange (forex) sold to oil marketers was $8 billion and within the same period $8.2 billion was paid to the marketers as subsidy. The revenue from the oil sector within the period was just $200,000 higher.
The CBN governor said considering the population of the country, it is untrue that Nigerians consume 35 million litres of petrol daily.
He noted that what the government calls subsidy is just paying for the inefficiency of the ports authority, demurrage as well as the corruption of some marketers. He said most of the products claimed to have been imported found their way to neighbouring countries through unscrupulous marketers.
He explained that he was compelled to publish the names of bank debtors because most of them were in the oil industry. He said he established that some marketers collected letters of credit, got paid their subsidies, yet failed to repay the loans they collected from banks. “What I believed is that most of the products they claimed to have imported didn’t come into the country,” he stressed.
He said regulation of fuel price in Middle East countries such as Qatar, Bahrain, United Arab Emirates, among others, “works because all the surrounding countries regulate their prices and there is no need for diversion”.
He said as long as the countries that surround Nigeria sell petrol at N140 per litre, and marketers gain N80 from every litre sold, they would always bribe their way to the borders and sell in those countries at higher prices.
To buttress that corruption exists on the subsidy, the CBN boss said it is unimaginable that 15 vessels of products would land at the port the same day, considering the differences in the import allocations to the marketers. “Yet, there is such a record.”
To confirm that fuel subsidy is for the rich and that the cost of running the government is high, Sanusi said he could not remember when last he went to a filling station to buy fuel.
He said there are hiccups in economies of countries, citing the Eurozone crisis. He said if the price of oil crashes, the value of naira falls to N200 to a dollar, inflation rises to 18 percent; what will the government do? He said as a country, “we should be prepared for the future”, adding that “if we borrow to subsidise today, it is our children that are subsidising us”.
“Let’s take a difficult decision today and make tomorrow better by supporting the removal of subsidy,” he urged.
Sanusi expressed the need for the country to have stability in the economy, saying, if the oil price crashes again by 30 per cent, it will be difficult for the government to pay workers’ salaries and that is when the country will experience hardship.
He said the major contributory factor to the financial crisis in the banking sector was their exposure to capital market and oil and gas.
Sanusi said that Nigeria is the only country where the government pays demurrage. He described the oil sector as the place an idiot can make money.
He said some government officials cannot say the actual price of fuel in the market because they do not buy, stressing that the price of fuel in Kano is N65 but outside the town, it costs about N100 per litre.
Sanusi said though petrol is sold at N65 per litre, in neighbouring countries – Cameroon – it sells at N140, so an importer can easily import fuel and transfer it to that country for more profit.
Minister of Petroleum Resources Alison -Madueke said the Federal Government is desirious of discontinuing the subsidy on petroleum products because it is a huge financial burden on the government. According to her, subsidy benefits the wealthy more and hurts the economy and development.
She said: “The total projected subsidy reinvestible fund per annum is N1.134 trillion based on average crude oil price of US90 per barrel. Out of this,N478.49billion,accrues to the Federal Government, N41.03billion to state governments, N203.23billion to local governments, N9.86 billion to the Federal Capital Territory(FCT) and N31.37billion as transfers to derivation and ecology, development of natural resources and stabilization funds.”
She said the discontinuation of subsidy will save additional resources for investment in programmes targeted at mitigating poverty and spurring economic growth. She said a robust programme structure has been developed to ensure adequate oversight, accountability and implementation of the various projects targeted to reduce the impact of subsidy removal.
“The entire project will be overseen by a Board to be constituted by Mr. President. Consulting firms with international reputation will be appointed to provide technical assistance to the Board in financial and project management. Relevant MDAs will set up Project Implementation Units to drive the implementation. An independent body will be responsible for monitoring and evaluating the implementation and will report directly to the Board,” she said.
SOURCE: The Nation, 23 December 2011. http://www.thenationonlineng.net
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