Federal Republic of Nigeria Minister of Petroleum Diezani Alison-Madueke. The large oil producer and exporter says that there will be a decline in petroleum production during the month of November., a photo by Pan-African News Wire File Photos on Flickr.
Govt plans body to manage funds from subsidy removal
Wednesday, 26 October 2011 00:00 From Madu Onuorah (Perth, Australia) Collins Olayinka (Abuja) and Sulaimon Salau (Lagos)
-It’s a gimmick, job for cronies, Labour, Kokori assert
-No date set for deregulation yet, says minister
-World Bank backs policy, SWF
A GROUNDSWELL of opposition yesterday trailed the Federal Government’s announcement that a committee of Nigerians with integrity would be raised to manage the funds accruing from the planned removal of subsidy on petroleum products.
The government said its decision not to dissipate energy and time on the implementation of the benefits of the scheme was to make it more transparent to earn the confidence of Nigerians.
The Minister of Petroleum Resources, Mrs. Deziani Alison-Madueke, who disclosed the plan to journalists in Perth, Australian, said the committee would be raised soon by the government to undertake the task.
Alison-Madueke, who spoke with journalists at the ongoing Business Forum holding as part of the Commonwealth Heads of Government Meeting (CHOGM) in Australia, explained that because the government wants 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, for Nigerians to “fully benefit” from the removal of the subsidy, the implementation of the benefits of the savings will not go through the usual government channels as a special body would be set up to handle it in order to avoid the proceeds getting “bogged down in the usual manner of processes and procurement issues.”
In their reactions, 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 it was another means to force the policy down the throats of Nigerians and create jobs for those who helped President Goodluck Jonathan to win the April 2011 presidential polls.
Head of Information and Public Relations of the NLC, Chris Uyot, told The Guardian yesterday in Abuja that 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.”
Kokori described the move as another drain on the nation’s funds.
He said the whole issue is based on corruption, “until they stop corruption, all these ideas will not work. The current expenditure of the planned panel will take a larger portion of the fund, as we are seeing in other cases. They should start with real refineries and build new refineries. Nigeria is rich, we have money to build one, two or more refineries. Until the Jonathan government does this, Nigerians will not trust him.”
He further said the agencies are duplicated, adding that it is another way of siphoning money because the panel would incur expenditure on travelling and training and other logistics.
“Before you know it, the money is gone through another means. Enough is enough, we have had too many agencies, let us begin to do things right, Nigerians are tired of all these logics.”
Kokori said the planned panel is a new way of giving jobs to “the boys” (people who supported Jonathan to come to power). “Nigerians will not accept it because they have been pushed to the wall.”
President Goodluck Jonathan had at a retreat for his economic team and top leaders of the private sector on October 13, 2011 pledged that the removal of the subsidy would come in phases and with “human face.”
He had said in the event of deregulation, the administration would invest the resources in infrastructure and provide social safety nets and other mechanisms to moderate the impact of the reforms on the most vulnerable segments of the society.
Alison-Madueke said Nigerians should not be worried with the date of the implementation of the policy as “we are still in discussions with Labour and other stakeholders, including the National Assembly. Until that is finished, I don’t think it is right to give any definite date for the roll-out of the implementation of subsidy removal.”
Once there is an agreement on the removal, she said “major deregulatory benefits” would be put on the table.
The minister described the current implementation of fuel subsidy as “very painful” and a “major headache” for the government.
She said the government had flooded the market with the products but there were still “some parts of the country where the products remain fairly high cost-wise; which means that the middle line operators are gaining both ways. They receive the subsidy from government and at the same time charge the consumers double. And sometimes more than double the price. In other words, ordinary Nigerians are not reaping the benefits of this heavy subsidisation.”
Alison-Madueke said once the government meets with the various stakeholders and agree on a formula, major deregulatory benefits would be put on the table. “The government would not handle the implementation of these benefits so that it would be open and transparent. As we speak, a committee of highly respected Nigerians is being put together to monitor and advise on the implementation. There are benefits that will cut across all major sectors of the economy. Some of them involve major road works, public maintenance works. Others are ongoing mass transportation. There are schemes for skilled and unskilled. There will also be areas for maternity and childcare.”
The minister said the government would ensure that across the board the package is robust and monitored by Nigerians of high integrity so that it is clear that it is a credible and transparent process.
She said under the arrangement, public works would not go through the government channels as usual as Special Purpose Vehicles (SPV) would be set up to handle it so that “we don’t get bogged down in the usual manner of processes and procurement issues. We shall mobilise upfront because deregulation subsidies are paid monthly and we cannot wait obviously to collect money monthly.”
Jonathan, who is also attending the event, said yesterday that his administration would implement policies and projects that would ensure rapid development of Nigeria’s solid minerals sector in the next four years.
The President said the move would boost government’s efforts to create more jobs for the youths.
At an interactive dinner with leading Australian mining and solid minerals investors, Jonathan said he was committed to the full development of Nigeria’s solid minerals sector because of its huge potential for boosting the national economy.
The President therefore invited the leaders of Western Australia to invest their resources in Nigeria’s solid minerals sector, saying: “You are well known for solid minerals and you will find a lot to do in Nigeria.”
President Jonathan also assured the gathering that his administration had the political will and commitment to fully implement all the regulatory reforms required to facilitate the entrance of more investors to Nigeria’s mining sector.
Alison-Madueke explained that the money would be borrowed upfront from the CBN (Central Bank of Nigeria) and mobilisation would start immediately so that it would be clear that “we intend to put our money where our mouth is, this time around. The President is adamant that if we remove subsidy, we must give Nigerians the full benefit and the full impact of that removal. We cannot please all the people at the same time but I think most Nigerians will be happy with the quantum and impact of all the parameters that we are putting in place to ensure that we match words with action.”
On the level of subsidy for the products, the minister said household kerosene (DPK) is subsidised by N105 per litre, as the landing cost is N145 per litre. “We sell DPK to the middle line operators at N40 per litre, which means we are subsidising at N105 per litre and we expect that the DPK will reach the ordinary consumer at roughly N50 per litre. But as we all know that it reaches them at a higher cost. On the average, it costs N85 per litre. There has been time when it was sold for over N100 per litre.”
The World Bank yesterday endorsed Nigeria’s plan to remove subsidy on petroleum products from January.
It said the policy and the setting up of the Sovereign Wealth Fund (SWF) coupled with strict budgetary fiscal discipline would be in the interest of ordinary Nigerians.
Its new Country Director, Marie Francoise Marie-Nelly, at her maiden media interaction on her resumption in Abuja, said: “The subsidy removal plan and the SWF are important policy decisions of the Nigerian government and the policy debates have been very robust and helpful and I think they are pointing to ensure fiscal sustainability to forestall a situation in future where maybe the government may want to decide to sack workers or ask them to take pay cut because of the inability to meet up with commitments if revenue streams fail.”
Meanwhile, the crisis in the Euro zone is casting a shadow on the three-day Commonwealth meeting starting on Friday as the British Prime Minister, David Cameron, whose country heads the body, will miss the opening ceremonies as he battles to find solution to the threat to the European Union (EU) economies.
Cameron, who has cancelled part of his planned trip to Aisa and Australia, is however expected to attend at least some parts of CHOGM.
Australian Prime Minister, Julie Gillard, at the opening of the Commonwealth Business Council had asked the leaders to band together to pressure Europe to address its crisis.
In a speech that appeared like a political scene-setter for CHOGM, Gillard called for a new commitment to free global trade.
“While the epicentre of the crisis is in Europe, all of us, as Commonwealth member nations, stand to suffer if correct response is not forthcoming. This would include those of us in Commonwealth countries who have worked so hard to maintain prudent financial oversight and balanced growth; those of us who have worked so hard, especially in Africa, to boost governance, democracy and the rule of law; those of us who rely upon the flow of remittances from our workers abroad to sustain our economies at home. So, we look to Europe for decisive action.”