Governors, others kick as FG approves N3trn, 17.5 % of budget, for fuel subsidy Governors, others kick as FG approves N3trn, 17.5 % of budget, for fuel subsidy
The federal government yesterday approved N3 trillion for the new subsidy regime, having earlier suspended the implementation of the recently signed Petroleum Industry Act (PIA) till July.
The Federal Executive Council (FEC) approved the sum, which amounts to 17.5 per cent of the total of N17.126 trillion 2022 budget signed into law in December 2021, at its weekly meeting in Abuja.
This is even as the approved 2022 budget has a deficit of N6.39 trillion, which is 37 per cent of the N17.126 trillion, indicating that there would be more borrowing by the federal government to add to the country’s already huge debt profile.
The N3 trillion approved by FEC is 55 per cent and 43 per cent of the capital component and recurrent expenditure of the 2022 budget, respectively.
FEC at its meeting mandated the Finance, Budget and National Planning Ministry to reconcile the fuel subsidy budget with the Nigerian National Petroleum Company (NNPC) Limited, which prepared the estimate.
The council meeting presided by President Muhammadu Buhari also okayed the preparation of the 2022 Supplementary Budget, which would include the repeal of Clauses 10 and 11 of the Appropriation Act as well as incorporation of N103 billion removed by the lawmakers from the initial budget estimates, for submission to the National Assembly for approval.
The decisions reached at the virtual FEC meeting were made public by the Minister of Finance, Budget and National Planning, Zainab Ahmed, who briefed journalists after the meeting.
She explained that a memo in respect of the additional funding provisions to enable government meet the incremental fuel subsidy request in the 2022 budget was presented for the council’s consideration.
According to Ahmed, only N443 billion had been provided for in the 2022 budget to accommodate subsidy from January to June, but taking the prevailing economic realities, both locally and globally, into consideration, FEC proposed a year-long provision for the subsidy.
“You would recall that in the 2022 budget, as appropriated, we have made a provision of N443 billion for subsidy for January to June. Having taken into account the current realities: increased hardship in the population, heightened inflation, and also that the measures that needed to be taken to enable a smoother exit from the fuel subsidy are not yet in place, it was agreed by Council that it is desirable to exit fuel subsidy,” she said.
“The NNPC has presented to the ministry a request for N3 trillion as fuel subsidy for 2022. What this means is that we have to make an incremental provision of N2.557 trillion to be able to meet the subsidy requirement, which is averaging about N270 billion per month.
“In 2021, the actual under-recovery that has been charged to the federation was N1.2 trillion, which means an average of N100 billion, but in 2022, because of the increased crude oil price per barrel in the global market, now at $80 per barrel, and also because an NNPC’s assessment is that the country is consuming 65.7 million litres per day, now we’ll end up with incremental cost of N3 trillion in 2022.
“So, this has been considered by Council and we’ve also been asked to approach the National Assembly for an amendment to the fiscal framework as well as the budget, to also further discuss with NNPC on how to make provisions for this and how to rationalise this expenditure.”
The minister, however, noted that the government would engage the NNPC to see how the approved N3 trillion would be brought down so the country won’t have to pay such huge sum on subsidy.
“We’re going to engage NNPC to further interrogate the request that they presented with a view of trying to see how we can scale it down so that the country is not incurring N3 trillion for a fuel subsidy,” she said.
“We agreed with the view of governors, that there is a need to scale down on the size. So even as government is not immediately removing the fuel subsidy, we have to make sure that what the nation is incurring is efficient, and that it is real cost that has been consumed by the country.”
She further stated that the government would fund the N3 trillion subsidy regime through outstanding debts owed it by NNPC, which were being sorted out through on-going financial reconciliations with the company.
“We have several reconciliations with NNPC, which is owing, in some cases, the government. So we want to be able to settle some of the subsidy costs through this reconciliation process,” she said.
“When we are done with that, whatever is left that we are not able to apply to what NNPC is owing the federation will not be increasing the deficit. And that means increased domestic borrowing. But we haven’t finished with the issue of reconciliation.”
Ahmed further disclosed that FEC approved the 2022 Supplementary Budget to take care of areas that were overlooked by the National Assembly in approving the Appropriation Bill. She said FEC approved amendments to parts of the 2022 budget, which had initially been adjusted by the National Assembly during its legislative deliberations on the budget proposal submitted to it by the president in 2021.
According to her, the approved amendment to be transmitted to the National Assembly will request to repeal clauses 10 and 11 concerning the Economic and Financial Crimes Commission (EFCC) and the Nigerian Financial Intelligence Unit (NFIU) operations in the 2022 budget and restore the N103 billion the lawmakers had removed.
“The second memo we presented to Council today has to do with a request for approval of the 2022 Appropriation Amendment. If you recall, when the president signed the 2022 appropriation into law on the 31st of December, he raised some concerns that he had in some of the provisions in the budget and had indicated that he will be submitting an amendment proposal to the National Assembly for them to effect improvements in what has been done to the budget,” she said.
“So, today Council took that amendment proposal and I just want to report that part of the requests that Council has approved today is for the National Assembly to repeal clauses 10 and 11. Clause 10 is referring to a provision that has been made that will enable the EFCC and NFIU be able to take 10 per cent of whatever collections that they recover.
“We’re asking for that to be repealed because this is in direct contrast to the Acts of these two agencies and also it is in contravention of the Fiscal Responsibility Act and the Finance Act 2021.
“Clause 11, on the other hand, is a provision that has been made that says that the Nigeria embassies and missions are now authorised by this Appropriation Act to expend funds allocated to them under Capital Components without the need to seek approval of the Federal Ministry of Foreign Affairs. This, again, Council agreed, is inconsistent with financial regulations and also inconsistent with the provisions of the Public Procurement Act. So, we are asking for this to be repealed.
“Council also approved that some of the changes that were made in the Appropriation Act, totalling N103 billion, should be restored and examples of these are N22 billion that was provided for sinking fund to mature bonds that will be ready for payment in 2022 in the Nigerian domestic market, and also N12 billion for counterpart funding that is required for the various rail projects, and N189 million to be adjusted also in the budgets of the Ministry of Transport, Secretary to the Government of the Federation, and the Head of Service.
“These are projects that are provided in these ministries that are completely unrelated to their mandate, so implementation will be a problem. Also, N5 billion to be restored for non-regular allowances of the Nigerian Navy, N15 billion to be restored for the regular allowances of the police formations and police commands and several others that Council looked at in detail.
“So, there’s a detailed schedule of this N103 billion that Mr. President will be formally conveying to the National Assembly to restore the adjustments that were made.”
The minister equally disclosed that FEC ratified an instrument on diplomatic relations between Nigeria and South Africa.
“This has to do with the confirmation of ratification of Customs Mutual Administrative Assistance Agreement between South Africa and Nigeria and the purpose for us is for the customs law in the respective territories to be properly observed to prevent and also enhance investigation and to combat customs offenses and to afford each country mutual assistance in cases concerning the delivery of documents regarding the application of customs laws in two countries,” she noted.
“The importance of this for us is cooperation between Nigeria and South Africa, as it has become even more important now with the Africa Continental Free Trade Agreement. It will also help to increase trade relations between the two countries and facilitate exchange of information as well as strengthen our bi-national cooperation.”
Governors, Labour, others kick
Meanwhile, the Nigeria Governors’ Forum (NGF) and the leadership of the Nigeria Labour Congress (NLC) have criticized the NNPC for coming up with such huge amount of money for fuel subsidy.
Both parties therefore resolved to enter into working partnership to investigate consumption and distribution figures released by NNPC regarding petroleum products.
The NGF disclosed this, yesterday, at its meeting with labour leaders, led by NLC President, Comrade Ayuba Wabba, to deliberate on the fuel subsidy removal issue.
A statement by NGF’s media adviser, AbdulRazaque Bello Barkindo, disclosed that “both parties agreed that the lacuna in the subsidy removal agenda was hidden in the untruths bandied by the administrators of the subsidy, particularly the NNPC, which both groups identify to be at the forefront of the mismanagement of the proceeds that accrued therein.”
Delivering his opening remarks at the meeting, which was also attended by the Trade Union Congress (TUC) president and a host of other leaders of organised labour in the country, NGF chairman and governor of Ekiti State, Kayode Fayemi, argued that the nation’s economy is at the precipice and that it has become necessary for the two groups to carefully verify all NNPC’s estimates, to ensure that whatever action is taken on subsidy will be to the benefit of the people and not a few wealthy individuals and their cronies.
The NGF chairman, who led a delegation of governors Simon Bako Lalong of Plateau State and Godwin Obaseki of Edo State, to the meeting, stressed that governors cannot ignore the economics of petroleum, arguing that all the countries surrounding Nigeria, including Niger, Mali, Cameroun and Ghana have their fuel pump price at the equivalent of a U.S. dollar.
“Nigeria has a pump price that is far less than a dollar and is uncomfortable with the removal of subsidy until the challenge of what the NNPC is telling the country is confronted frontally.
“We need a partnership with the NLC to confront the challenges of what the NNPC is about, because there is a lot of fraud in the consumption and distribution figures that the country is getting and we can only move forward if the NLC engages all those who are knowledgeable in the field like PENGASSAN to conduct a thorough research into the sector before any further action is taken on subsidy,” Fayemi said.
He added that only about eight states are benefitting directly from the subsidy while all the others have to contend with the situation on their own.
Commenting, Obaseki warned that the country has a choice of continuing to behave “like Father Christmas (Santa Claus) or take concrete actions on a problem that is permanently with us rather than throwing away N3 trillion on subsidy.”
The Plateau governor, who like Obaseki, joined the meeting virtually, recalled that the NGF had spent three years on this matter. He stated: “We must find options and create opportunities that address the hardships that stare our people in the face.”
The unionists, according to the statement, argued that the conflicting figures that always came from managers of the petroleum sector had always tended towards inefficiency, which have remained, and to organised labour, completely objectionable.
Wabba and TUC president, Quadri Olaleye, wondered why the subsidy issue had always been shrouded in secrecy on the part of government.
IPMAN Asks FG to Repair Dilapidated Refineries
On its part, National Operations Controller, IPMAN, Mike Osatuyi, reiterated their support for the federal government in whatever decisions they made, noting that the 18 months suspension would give the government the avenue to put in palliatives and support for Nigerians.
Osatuyi who spoke in a statement also clarified the notion about the group being government agents, stating that they are an association of businessmen who condemn subsidy.
President of IPMAN, Alhaji Debo Ahmed, in the statement, also appealed to the federal government to ensure the availability of petroleum products to the NNPC depots across the country. He stated that selective supply to private depots was, “making it impossible for the product to be sold at the government upper price band.”
The IPMAN president restated his association’s demand for payment of outstanding Bridging Claims owed marketers by the defunct Petroleum Equalisation Fund, now operating under the name, Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).
The statement said, “The leadership of IPMAN commends the federal government for the suspension of the removal of fuel subsidy. We reiterate our position that the four nations’ refineries be repaired and allowed to function optimally before the removal of fuel subsidy.
“We also use this opportunity to call on the federal government to resume the supply of petroleum products to NNPC depots nationwide as against the selective supply to private depots, making it impossible for the product to be sold at the government upper price band.
“Our huge funds are tied up with PPMC Ltd, a subsidiary of NNPC, where members pay for NNPC products supplied to their depots. We are equally pleading that marketers transportation claims be paid to allow members remain afloat in business.”