State Finance Commissioners Call for Fuel Subsidy Removal

Chat212 - Mail Summary...

• Forum of Commissioners of Finance of the 36 states of the federation passed a resolution for the removal of fuel subsidy.
• The Federal Government has a budget of N971.1bn for fuel subsidy payment in the 2014 fiscal year, same as in 2013.
• Otunla said FAAC shared the sum of N641.29bn to the three tiers of government as statutory allocation for February.

Chat212 - Mail News... Report

The Forum of Commissioners of Finance of the 36 states of the federation on Thursday in Abuja passed a resolution for the removal of fuel subsidy.

The Chairman of the forum, Mr. Timothy Odaah, told journalists shortly after this month’s Federation Account Allocation Committee’s meeting, that the resolution was passed following irregularities observed in the fuel subsidy regime.

The forum passed the resolution just as fuel scarcity that started last week spread in the Federal Capital Territory, with many motorists queuing for hours at filling stations.

The FAAC meeting, which was chaired by the Accountant-General of the Federation, Mr. Jonah Otunla, was convened to consider and approve the statutory allocations for February.

Odaah, who is also the Commissioner of Finance, Ebonyi State, said the resolution on the fuel subsidy regime would be sent to the Nigerian Governors’ Forum for transmission to President Goodluck Jonathan.

He described the payment of fuel subsidy as a scam against some states, especially the less industrialised ones, as it had made “the rich to become richer, while the poor are becoming poorer.”

He argued that if Nigerians had not protested against the removal of fuel subsidy in January 2012, most states would have experienced significant level of development by now.

The Federal Government has a budget of N971.1bn for fuel subsidy payment in the 2014 fiscal year, same as in 2013.

Odaah, said, “We looked at subsidy on oil as more or less a solution worse than the problem it is meant to solve.

“Looking at it presently, you will discover that it is not solving the problem, which it is meant to solve. In the first place, the NLC (Nigeria Labour Congress) and the majority of the Nigerian populace appear to have been deceived into clamouring for subsidy.

“It is a system that robs Peter to pay Paul by making the rich to grow richer and the poor to go poorer.

“There are some states that are fully industrialised and you use this subsidy in that particular place and the people who benefit more are those from the states that are industrialised.”

Odaah added, “The fuel consumption of those industries uses more of the fuel subsidy unlike the states that are under-industrialised.

“So, what we are advocating is that the subsidy be removed so that every state or any member of the federating unit sharing from FAAC will take his own money, then decide to use it or grant subsidy in a level that it will be able to afford.”

The forum also accused oil marketers of taking advantage of the subsidy regime to engage in sharp practices, noting that the payment of subsidy was exerting immense pressure on the Excess Crude Account.

Odaah said if the issue was not urgently addressed, it would get to a point where the states would have nothing to share from the Federation Account as their allocations would be wiped out by subsidy claims.

He added, “If you also look at the oil marketers, they are also not showing the intention of the Federal Government because it has created a very big market for them in certain ways because transparency is not coming up.

“There are some people who are eating on the subsidy to the disadvantage of others. It is because of that that we passed a resolution at FAAC because many states are crumbling as subsidy payment has eaten so much into the crude reserves.”

Odaah also said the forum frowned on the decision of the Central Bank of Nigeria to withdraw 75 per cent of public sector funds from Deposit Money Banks, noting that this had made it difficult for the states to access loans at low interest rates.

As a result of this development, he said the forum called on the Federal Government to reverse the policy to enable states and local governments to raise funds for developmental purposes.

He said, “As of today, 75 per cent of the public sector deposits is taken into the central bank. This is a deliberate creation of scarcity of funds because states and local governments cannot borrow money because the interest rate has gone so high.

“There is a plan by the CBN to raise it to 100 per cent. If that is done; then, we will be having absolute scarcity of funds created by a manipulated means.

“So, we are calling on the Federal Government to look at it and review it by bringing it down so that cash will be available because the cost of funds is growing too high and with that, states cannot meet up.”

But Otunla, who also addressed journalists shortly after the meeting, said a 12-man committee had been set up to assess the impact of the fuel subsidy regime.

The committee, to be made up of six representatives each of the states’ commissioners of finance and accountants-general, has one month to submit its report.

“We discussed the issue of subsidy and we have set up a 12-man committee comprising six members from the commissioners’ forum and six members from the Accountants-General Forum to help us review the impact of subsidy on the Federation Account,” he said.

Otunla said FAAC shared the sum of N641.29bn to the three tiers of government as statutory allocation for February.

He said during the month, the gross revenue of N666.75bn was received, which was N125.87bn higher than the N540.87bn received in January.

He said while an exceptional payment of N82bn was made by the Nigerian Petroleum Development Company, which helped to boost revenue for the month and that the committee transferred the sum of $1bn to the Excess Crude Account.

This brings the balance in the ECA to $3.5bn.

When contacted, the acting General Secretary, Nigeria Labour Congress, Mr. Chris Uyot, said the union had not changed its decision to resist any ploy to increase fuel price through subsidy removal.

“We have a position on that; nothing has changed,” he said.

In a communiqué issued after the March 6 emergency meeting of its Central Working Committee, the NLC described the current fuel scarcity as “a cruel conspiracy” between the Federal Government and the marketers “to impose hardship and trauma on the poor and hapless Nigerians with a view to ostensibly increasing fuel prices”.