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UNENDING FURORE OVER FUEL SUBSIDY REMOVAL

By NBF News
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By CLIFFORD NDUJIHE
SINCE Tuesday October 4, 2011 when President Goodluck Jonathan informed the National Assembly about his government's plan to begin the removal of fuel subsidy from January 2012, the polity has been awash with anti and pro-fuel subsidy  debates.

Clearly, opponents of the proposed policy are in the majority and from all fronts, they waged a relentless crusade. And the heat became intense with the organised Labour, civil society groups, student groups, market men and women, among others threatening fire and brimstone, forcing the government to moderate the proposal three weeks later.

Jonathan: Confused over fuel subsidy removal?
Specifically, on October 25, the Federal Government said the policy would no longer begin next January. Before then the actions of the government showed that it would stop subsidising fuel with effect from January 2012. A pointer to the hardline stance was non-provision for fuel subsidy in the 2012 budget.

Following the groundswell of opposition, Petroleum Resources Minister, Mrs Diezani Alison-Madueke disclosedin far-away Perth, Australia, that fuel subsidy would not go again in January until due consultations had been held with Nigerians.

Return of PTF?
Alison-Madueke, who spoke with journalists at a Business Forum holding as part of the Commonwealth Heads of Government Meeting (CHOGM) in Australia, explained that because the government wanted to ensure openness and transparency in the disbursement of the proceeds of the subsidy removal, it would not handle the implementation of the benefits.

According to her, a special body would be set up to handle the savings  to prevent the proceeds getting 'bogged down in the usual manner of processes and procurement issues.'

If this sails through, it could mark a return to the late General Sani Abacha's Petroleum Trust Fund (PTF) era.

Abacha toyed with the idea of increasing fuel price by over 295 per cent in 1994 and immediately attracted strident opposition to his military government. Later, he was given a benefit of the doubt when he said a team of   eminent Nigerians would handle the proceeds of the fuel price hike.

Alison-Madueke
Consequently, General Abacha set up the PTF head by retired Major General Muhammadu Buhari to handle accruals from the fuel price increase from N3.25 to N11 per litre in October 1994.

PTF,  the public intervention agency was to rehabilitate the country's deplorable infrastructure: roads, buildings, education, health, school books, among others. From its inauguration on March 21, 1995 with initial capital of about N60 billion to May, 1999, PTF under Buhari touched many lives nationwide in just four years.

It revived comatose pharmaceutical, paint and printing industries, supplied drugs to hospitals and books to schools, rehabilitated hostels and lecture theatres in a few universities and, above all, created jobs. eminent Nigerians would handle the proceeds of the fuel price hike.

Consequently, General Abacha set up the PTF head by retired Major General Muhammadu Buhari to handle accruals from the fuel price increase from N3.25 to N11 per litre in October 1994.

PTF,  the public intervention agency was to rehabilitate the country's deplorable infrastructure: roads, buildings, education, health, school books, among others. From its inauguration on March 21, 1995 with initial capital of about N60 billion to May, 1999, PTF under Buhari touched many lives nationwide in just four years.

It revived comatose pharmaceutical, paint and printing industries, supplied drugs to hospitals and books to schools, rehabilitated hostels and lecture theatres in a few universities and, above all, created jobs.

The agency was also not without controversies including inequity in the siting of proceeds across the country and alleged N2.7 billion graft. Upon assumption of power in 1999, President Olusegun Obasanjo scrapped the agency saying among others that retaining PTF was like running a parallel government given the enormous funds it handled.

Critics fault govt's option
Thus, when the government thought along that line 12 years later, and announced that a committee of Nigerians with integrity would be raised to manage the funds accruing from the planned removal of fuel subsidy, it was not surprising, it elicited opposition.

The Nigeria Labour Congress (NLC) and former Secretary_General of the National Union of Petroleum and Natural Gas Workers (NUPENG), Chief Ovie Frank Kokori, said the proposal  was another means to force the policy down the throats of Nigerians and create jobs for those who helped President Jonathan to win the April 2011 presidential polls.

While Kokori described the move as another drain on the nation's funds, Head of Information and Public Relations of the NLC, Chris Uyot, said irrespective of the government's plan, the position of the Labour movement had not changed.

He said: 'What kind of committee is that? The position of the NLC has always remained the same thing. The Congress has said it is against deregulation and that ordinary Nigerians are not willing to pay a kobo more on petroleum products.

That has always been the message. The National Executive Council (NEC) of the NLC took a position on the issue and that has not changed. This new strategy is a fraudulent means to rail-road Nigerians into accepting deregulation.'

Fuel subsidy is unsustainable - Mbagwu
However, a chieftain of the PDP, an economist and management consultant, Chief Cliff Mbagwu, said the government proposal was on the right track, warning that fuel subsidy was unsustainable.

His words: 'One fact must be made abundantly clear about the issue of fuel subsidy and that is fuel subsidy is unsustainable and this is so for two reasons: The total amount of subsidy per litre and the global subsidy for the aggregate quantity of fuel consumed in this economy are both 'moving targets' or variables which is a function of changes in exchange rate and the total periodic increase in the global demand.

Which means as the Naira depreciates against the dollar and as the total demand for fuel increases, the amount of subsidy will continue to increase, that is as long as the domestic prices are driven by international market forces. There is therefore no way the government can keep pace with this unless it is ready to at a point even spend more than the national budget on subsidy.

'In my opinion the solution is to remove the subsidy perhaps in two phases and create an internal environment that can attract both foreign and domestic investors to establish refineries so as to met local demand and even export.

In the absence of such investors for whatever reason, the government should establish at least five refineries in five oil bearing states or states close to them on a commercial basis. Refineries are too important to the economy for government to use the absence of private sector investors as excuse for inaction.'

He continued: 'Some people have argued that the removal of fuel subsidy will cause inflation and widespread suffering especially among the vulnerable members of the society. This is true but it would only be in the short term.

In the medium to long term when competition among refineries, dealers and domestic market forces begin to impact on the market price of fuel and other derivatives, prices will fall to a level that would harm neither the masses nor the economy.

It has also been said that the subsidy situation is creating room for corruption. Of course nobody should begin to doubt this in a country where corruption has become a way of life and almost a culture. If this is correct as, I am sure that the only solution is to remove the subsidy.

'Fuel subsidy in this economy is like a tumor spreading cancer cells of inefficiency, corruption, vanity, misplacement of priority and like all tumors must be removed irrespective of the inconvenience.

To cushion the effect of the fuel subsidy removal, government at all levels must increase social spending in the areas of mass transportation, free bus ride for students of all levels, one free meal a day for all pupils in the primary school, free medical care for all citizens above the age of '65 and below the age of '18 and free ante -natal care for pregnant mothers including free caesarean operation in public hospitals.

Government at all levels must also give serious thought to the possibility of establishing social housing schemes. There must be some benefits individual citizens must derive for being citizens, currently there is virtually none. This is, perhaps, why opponents of the fuel subsidy removal are rather too emotional in their arguments.

'However an economy is not managed on emotions. The economy should be managed on sound reasoning which in this instance favors fuel subsidy removal. It is also evident that it is not only fuel that is subsidized in Nigeria today. We are subsidizing Lawmakers and other political office holders at high cost to the economy.

Nigeria is perhaps the only country where lawmakers at both federal and state levels are provided costly vehicles by the government which they take home after their tenure. This is uncalled for and even fraudulent. The cost of providing costly vehicles for lawmakers in 36 states and the two chambers at the federal level is colossal and constitute a subsidy that must be removed along with the practice of providing and furnishing accommodation for them.

'The 36 states structure itself is dysfunctional, bogus and very expensive and amounts to subsidizing unviable political entities lacking the ability to self sustain. Nearly over 80% of the states cannot generate enough money on their own to run their affairs for even two weeks.

In effect, these states are living on subsidy from the centre just because they have oil revenues from the Niger Delta to depend on. This variant of subsidy is as destructive to the economy as the fuel subsidy. This structure and the high cost of governance it induces leading to nation_wide decay of infrastructure is unsustainable. No matter the pretences of the beneficiaries of this senseless structure at all levels, it will soon be clear to everybody that we cannot continue like this.

'Furthermore, government should as a matter of urgency consider reducing the salaries and allowances of all political office holders including lawmakers, ministers ,councilors etc by 50%.It is absurd that in a country where state governments are refusing to pay N18,000 minimum wage ,political office holders earn extremely scandalous salaries as they are currently earning in

Nigeria. The constitution must therefore be reviewed to remove sections that create conducive environment for political office holders to loot our common patrimony. The provision for security vote has become an avenue for unmitigated looting by governors, chairmen of local government areas and other political office holders.

In some states governors take away as much as N1 billion monthly and others N700 million as reported by their successors while local government chairmen take away N5 million monthly as security vote.

Taking into account the fact that we have 36 state governors and 776 local government chairmen, one can begin to see why this democracy has brought nothing but sorrow to the people; with unmotorable inner city roads all over the country, lack of pipe borne water, collapsed power infrastructure, dilapidated school buildings and hospitals that has lost it capability to attend to the large number of patients seeking medical attention.

It'll be political suicide by PDP - Iroche
However, another stalwart of the ruling and national chairmanship candidate, Chief Sunny Iroche, cautioned the government that removal of fuel would amount to political suicide.

He said: 'The much speculated removal of the fuel subsidy, by the Federal government while it makes economic sense, will amount to political suicide by the PDP-led government.

While I agree that from a long term view it makes economic sense, but with the current harsh economic situation in the country, with unemployment at an all time high, spiralling inflation, youth restiveness and very high misery index in the land, it would amount to political suicide by the Jonathan administration to contemplate removal of fuel subsidy at this critical time, especially with the recent youth_ led revolution in the Arab world. There is need for extraordinary caution at this very sensitive period of our nation life and global dynamics.'

'The government can only start to contemplate subsidy removal if it  addresses some of the following: rehabilitation of all the country's moribund refineries, creating at least two million middle and  low level employment, rehabilitation of infrastructure including power and security of lives and property, true fiscal federalism, seriously address the cancerous malaise of corruption, leadership by example at all levels of governance and most importantly convene a sovereign national conference aimed at discussing the future structure of Nigeria, resource control, power rotation, sectarian violence and to address the fears, genuine concerns and mutual suspicion of the constituents that make up Nigeria.

Only after addressing some, if not all of these pending crucial matters, can we start thinking of subsidy removal. The dire consequences of fuel subsidy removal, devaluation of the Naira and reintroduction of toll gates on our highway in 2012, if I may say is ill advised and not well thought out. The PDP stands t

he risk of losing woefully in the next general elections. We must rethink some of these policies.'

Petroleum subsidy removal, a threat to unity of Nigeria - ACN

In like manner, the Action Congress of Nigeria (ACN) warned that fuel subsidy removal could threaten the country's unity.

National Publicity Secretary of the party, Alhaji Lai Mohammed, in a statement, condemned the reduction of the subsidy removal debate to a purely fiscal issue, without considering the responsibility of the government to improve the lives of the people through prudent management of state resources.

The party proposed establishment of modular refineries with a total of 280,000 barrels per day refining capacity in nine cities _ Gusau, Enugu, Ibadan, Kano, Makurdi, Maiduguri, Lagos, Auchi and Gombe, in addition to reviving the existing ones.

It said the template being used by the government, which puts the pump price per litre of petrol at N144.70 instead of the current price of N 65 Naira, was inaccurate and amounted to making the ordinary Nigerian pay for the inefficiency of relevant government agencies.

''In any case, why should Nigeria, with huge crude oil deposits, have to import refined products? Why should Nigerians pay for the resources so bestowed on them by God through their noses?

Why is the price of products, even among importer/exporter nations higher in Nigeria? The answer lies in the crude, prebendal, corruption_ridden state system that we run in this country. 'For example the pump price of petrol in Iran is N58.40, N30.66k in Kuwait, N32.12k in Qatar, and N17.52k in Saudi Arabia while it is a meager N5.84k in Venezuela. In Egypt pump price of

petrol is N46.72k, while it is N39.42k in Bahrain. It is N135 in the USA for high premium inclusive of all state and federal taxes,'' ACN said.