Nigeria’s unimaginative Governors have again revealed their inadequacies and incompetencies by asking the Federal Government to stop paying fuel subsidies and hand over the money to them.
Dr. Kayode Fayemi, Ekiti State Governor and Chairman of Nigeria Governors’ Forum, argues that the N3 trillion that the Federal Government expects to deduct from the Federation Account to meet fuel subsidy in 2022 could be paid to state governments that are struggling and finding it difficult to pay staff salaries.
Ondo State Governor, Rotimi Akeredolu’s scathing criticism of Nigeria National Petroleum Company Limited is a more direct way of expressing disappointment with the NNPC (whose staff are the real beneficiaries of fuel subsidy).
He says: “Nigeria needs to remove the subsidy on PMS (or petrol) now… NNPC brought nothing to the table (in January and subsequent months of 2022).”
He attributes this NNPC failure to contribute to the revenue of the Federation to the fuel subsidy, which, you will agree, is a result of NNPC inability to efficiently run its refineries.
The call for removal of fuel subsidy should remind you of the same kind of demands made by state governors who were asking former President Goodluck Jonathan to give them their own portion of proceeds into the Excess Crude Account, the overage above the benchmark price set by Nigeria’s annual budget for revenue from the sale of crude oil.
President Jonathan had disclosed that “At any time the earnings (from oil) dropped, the governors would insist that there is no place in our law that actually says that the Federal Government should keep the reserve.
“(The Governors) always insisted that a part of the (Excess Crude Account) should be brought, (that is, shared among the Federal, States and local governments of the country who jointly own the proceeds).”
Rotimi Amaechi, former Governor of Rivers State, who was recently the Minister of Transportation, has however, provided a different explanation for the demands of the state governors for proceeds into the Excess Crude Account should to be shared among the beneficiaries.
He alleged that President Jonathan unilaterally made withdrawals from the funds without the notice and authorisation of the custodian of the Federation Account, the National Economic Council which is made up of the Vice President, as Chairman, State Governors and Governor of the Central Bank of Nigeria.
State governors are not only adamant that fuel subsidies should be removed and the savings paid to them, they are requesting the Federal Government to pay the balance of the Paris Club debt forgiveness refunds.
The desperate state governors are currently on the warpath against Attorney General and Minister of Justice, Abubakar Malami, who is actively promoting the idea of paying $418 million consultancy fees.
Following the cancellation of 60 per cent of the $30 billion debt Nigeria owed to the Paris Club creditors in 2004, it was discovered that some states had paid more than the expected debt service charge.
After the Federal Government finally agreed to pay the refund in 2016, the consultants involved in the debt forgiveness process submitted their fees, and that has gotten the goat of the state governors.
These frenzied clamours for freebies are a clear demonstration that most, if not all, Nigerian state governors have no idea of how to raise funds to run their governments, except to go cap in hand to Abuja, begging for funds.
Theoretically, fuel subsidy is a way by which the government pays a fraction of the price of petrol to ease the price burden felt by consumers. But in reality, those who are enjoying the so-called subsidy are the lazy bones employed in the unprofitable NNPC refineries in Nigeria.
In other words, the government is maintaining a sinecure system to provide some privileged, but idle, Nigerians a life of opulence at the expense of their less fortunate compatriots, most of whom will never have the same lavish opportunities.
According to Zainab Ahmed, the usually invisible Minister of Finance, Budget and National Planning, Nigeria, with a daily truck out of 65 million litres of petrol, and subsidy element of N283.20k per litre (the difference between N448 open market rate and N165 controlled price per litre), spends N18.397 billion daily on fuel subsidy.
Minister Ahmed disclosed that for January to December 2023, Nigeria is expected to spend as much as N6.715 trillion. But because President Muhammadu Buhari has accepted the recommendation to end fuel subsidies by June 2023, the government will be saving half of that amount, which is in the ballpark of N3.375 trillion.
She most definitely thinks the fuel subsidy should be removed because it serves the interests of only the oil marketers and their rich Nigerian consumers (most of whom have more than one vehicle).
She argues: “That is money that the Federation Account, (the) Federal and State Governments forgo… We think that by (retaining) the subsidy, we are helping the citizens. But at the end, they are the ones bearing the brunt of the subsidy.”
But the Nigeria Labour Congress thinks “removal of the (fuel subsidy)… would lead to unintended consequences which (Nigerians) would be better off without. That is the euphemism for an industrial action.
The World Bank and the International Monetary Fund think the same way. World Bank President, David Malprass, argues that (subsidies of any kind) are expensive because they (do not really) go to everyone. And they are often used by people with upper incomes, than by people with lower incomes.”
He adds: “So, (the World Bank) encourages that when there is need for subsidy, either for food (that Western countries use regularly) or for fuel… it should be carefully targeted at those much in need of it. And so, we have asked Nigeria to rethink its subsidy efforts.”
Note that the World Bank has not shot down any form of subsidy wholesale. The problem comes when you now have to devise a method to separate the rich from the poor who need the subsidy. The West didn’t exactly succeed in separating the rich from the poor when giving out food during the Covid-19 lockdown period.
When he was the Governor of the Central Bank of Nigeria, former Kano Emir Muhammad Sanusi II, once invited Nigerians to consider the cost of not removing fuel subsidy, vis a vis the cost of removing it. He argued that “(The government of former President Jonathan) can continue paying the (fuel) subsidy till 2015 (when it quits power) it will not come down.”
In warning that the next government will be saddled with a debt burden that it will not be able to maintain, he warned that “The grief situation (post-2015) will be nothing compared to where we were (pre-2015).
He wondered why, instead of keeping the reserves in the Excess Crude Account so that the country can cope in the event of an economic crisis, Nigerians would rather choose to continue to pay the N1 trillion that was the fuel subsidy bill of that time.
Efforts made by the Jonathan administration to wean Nigerians off fuel subsidy with the Subsidy Reinvestment Empowerment Programme, or SURE-P, by redirecting savings from fuel subsidy into investment in critical infrastructure needs of the country, failed woefully.
The Big Elephant in the room that everyone seems to be neglecting is for the government to either run the refineries efficiently, sell or shut them down.
