Remove Fuel Subsidy now! – World Bank Tells Buhari

Against the backdrop of the current fuel crisis across the
country showing no sign of abating, the World Bank,
yesterday, told President Muhammadu Buhari that the
time to remove petroleum subsidy is now.
While the Buhari administration has given hints of its
intention to remove fuel subsidy , many Nigerians,
including the organized labour, have rejected the plan. But
in what appears to be a prelude to the eventual removal of
fuel subsidy , President Buhari made no provision for
kerosene subsidy in the Medium Term Expenditure
Framework, MTEF, and Fiscal Strategy Paper, FSP, which
he presented to the National Assembly, yesterday.budget
At Monday’s Federal Executive Council meeting, the
Minister of Budget and National Planning, Udoma Udoma,
while unveiling the Medium Term Expenditure Framework
and the government’s N6 trillion budget proposal for 2016,
said the government was seriously weighing the options
between removing or retaining fuel subsidy next year.
Speaking at the launch of the new edition of Nigeria
Economic Report, the World Bank’s Lead Economist, John
Litwack, said the best time to remove fuel subsidy is now
when global crude oil price is at its lowest level, noting
that the Bank foresaw continuous decline in global crude
oil price.
Despite last Friday’s attempt by the Organisation of
Petroleum Exporting Countries, OPEC, during its 168th
conference to maintain its production quota so as to
stabilize the crude oil market, the price of the commodity
slumped further to $37.89 per barrel on Monday from
$38.09 on Friday.
Mr Litwack said now is the best time for the government
to scrap the subsidy , as doing so would not push retail
pump price beyond an average of N100 per litre, or
generate the kind of pressure that would negatively impact
on the people beyond what they are currently facing.
According to Litwack: “The fuel subsidy appears to have
vast modest benefits for the majority of citizens, but the
costs are quite high. There is a strong tendency for the
cost of fuel subsidy to increase over time as increasing
domestic demand for petrol outpaces growth in oil output
or revenues.
“The $35 billion cost of fuel subsidy during 2010 – 2014
was one of the reasons Nigeria was unable to accumulate
a fiscal reserve in the Excess Crude Account that could
have protected the country from the recent oil price
shock.”
He explained that fuel subsidy obligations were expected
to reach 18 per cent of all government oil revenues in
2015, pointing out that if the current regulated price regime
of N87 per litre was maintained, subsidy was projected to
increase to more than 30 per cent by 2018.
2016 Budget: Buhari scraps kerosene subsidy
Meanwhile, President Muhammadu Buhari may have
tacitly scrapped kerosene subsidy in the country as he
made no allocation for it in the Medium Term Expenditure
Framework, MTEF, and Fiscal Strategy Paper, FSP, which
he presented to the National Assembly, yesterday.
The document indicated that the present federal
administration is to borrow N1.835.88 trillion to fund the
2016 budget which stands at N6.04 trillion just as it
disclosed that a total sum of N350.33 billion
misappropriated funds will be recovered in 2016 .
A breakdown showed that while N1, 200.00 trillion would
be borrowed domestically, foreign borrowing stands at
N635.88 bn.
On the misappropriated funds, the president explained in
the Medium Term Expenditure Framework that N137.90
billion will be recovered from strategic alliance contracts,
while N162.43 billion will be recovered from the Nigerian
National Petroleum Corporation, NNPC just as N50 billion
will be recovered from other misappropriated funds.
But contrary to expectations that he would remove fuel
subsidy following series of complaints arising from its
handling, the President did not only retain it but allocates
the sum of N63.29 bn for it in the 2016 fiscal year.buh
Also, in his efforts at fulfilling his 2014 electioneering
campaign promises, President Buhari allocated the total
sum of N500 billion for Social Welfare Intervention
Programmes Initiative, conditional cash transfer to the
most vulnerable and post-NYSC grant.
He explained that “these interventions will start as a pilot
scheme and work towards securing the support of donor
agencies and our development partners in order to to
minimize potential risks.”
N39.88 billion for oil exploration in the North
The president, according the document, is expected to
spend the sum of N39.88 billion for exploration of oil in
the northern part of the country in the, 2016 fiscal year.
According to the MTEF submitted, the sum of N150 billion
was earmarked for settlement of arears of the 2015
subsidy on domestic consumption.
This came as he slashed the yearly budget of the National
Assembly from the sum of N120 billion contained in the
2015 budget to N115 billion in the 2016 fiscal year.
He equally trimmed down the allocation for Presidential
Amnesty Programme from N47.39 billion to N20 billion.
To improve revenue generation and collection as well as
plugging leakages, the president said his administration
had commenced a forensic audit of key revenue
generating and collecting agencies of government with a
view to recovering lost revenues as well as identifying and
blocking loopholes for poor collection and remittance of
revenue in the treasury.
The president added that the multiplicity of government
accounts had made it difficult to have an accurate picture
of public financial resources.
“Government has, therefore, enforced the full
implementation of the Treasury Single Account, TSA
system. Already, this is facilitating a more effective
aggregate management and control of government cash
balances, which, hitherto, had been maintained in several
bank accounts.
“Government has similarly, enforced the full
implementation of the integrated payroll and personal
information system, IPPIS in all MDAs, which should result
in some cash, “he explained.
President Buhari hinted of possible job cut as well as mass
reduction of MDAs, when he said: “Government will, in the
near-to-medium – term, continue to prune the size of
federal government and its MDAs to more efficient levels
without compromising effectiveness.
“Over the Medium-term, however, government will revisit
the need to rationalize the agencies of government and
strategically implement relevant provisions.”
The president said the 2016 Budget, standing at N6.04
trillion, proposed government revenue of N3.82 trillion,
implied a projected deficit of N2.22 trillion.
No hope in sight, as fuel scarcity bites harder
The fuel crisis continued in Abuja, yesterday, as motorists
continued to find it more difficult to get the product, with
some queueing for a minimum of four hours before getting
the product to purchase.
The fuel crisis showed no sign of abating, as the queues
continued to grow longer while the number of petrol
stations with the product continued to decline.
Despite the sufferings, the Federal Government, the
Department of Petroleum Resources, DPR and the NNPC,
seem to have abandoned Nigerians to their fate, as they
have kept mute in spite of the worsening situation.
The DPR failed to respond to enquiries on its efforts at
alleviating the sufferings faced by Nigerians, while the
NNPC had stopped sending its daily update of supply to
petrol stations across the country.
In Suleja, most petrol stations were selling fuel to
motorists, but the queues were long while motorists
accused the filling stations of under-dispensing, claiming
that their pumps had been tampered with.
At the Airport Road in Abuja, most of the petrol stations
were not opened when Vanguard visited, while the few
selling, NNPC and MRS, witnessed large number of
vehicles and very long queues.
In Lugbe, only MRS petrol station was selling, while the
other petrol stations where shut down, claiming they have
ran out of the products to sell.
At the Conoil and Total petrol stations opposite the
Nigerian National Petroleum Corporation, NNPC,
headquarter in Abuja, the queues had gone round about
four streets, inhibiting traffic in the process.
At the Forte filling station in Gudu, a long queue was seen,
with motorists spending long hours on the queue, while the
situation was no different at Yaman petrol stations in Area
3, Garki, Abuja.
In Gwarimpa, most of the petrol stations were shut,
including the NNPC station inside Gwarinpa , as the station
was shut to motorists.
Along the Abuja – Keffi Expressway, only Forte Oil at
Nyanya was selling, while all the NNPC retail outlets
around Nyanya were shut down.
Along the Kubwa expressway, the large queues witnessed
at the NNPC retail outlets at Katampe and Total filling
stations continued and showed no sign of improvement.
Some motorists told Vanguard that they have been on the
queue for about four hours and called on the Federal
Government to do something about the situation.
Due to the worsening scarcity, widespread incidences of
sharp practices were recorded in most petrol stations,
with rising cases of under-dispensing, hoarding and
exploitation.
Also, most petrol stations no longer sell to motorists
during the day, as they only sell at night when they feel
they could get away with whatever sharp practices they
are engaged in. Most of them sell to black market dealers
in drum and other large containers at the dead of the
night, while during the day, they claim they do not have
products to sell.
(Source: 36NG )