By IFEANYI OTTAH
President Muhammadu Buhari was angry recently when he called those he described as manipulators of fuel subsidies payment which led to its escalation into billions of naira as wicked.He also warned that severe sanctions will be visited on any individual or organization that violates the directive of payment of all national revenue into the Federation Account.
President Buhari blamed past administration for the current situation in which Nigeria is forced to spend billions of naira annually on alleged subsidies for petroleum products.
The Senior Special Assistant to the President on Media and Publicity, Garba Shehu, quoted the President as saying at a meeting with the chairman and members of the Revenue Mobilisation, Allocation and Fiscal Commission (RMAFC), that the escalation of Petroleum subsidy payments in recent years was due to the deliberate neglect of the nation’s refineries, oil pipelines and other related infrastructure to allow for the importation of petroleum products and corruption to thrive.
Buhari also used the occasion to express his huge disappointment with the way Nigeria’s oil industry has been run since he left office as Petroleum Minister and Military Head of State, stating, that he was convinced that if the development of the country’s domestic refining capacity and petroleum products distribution network had kept pace with national demand, there would not have been any need for the huge subsidies currently being paid to importers.
“They allowed the infrastructure to collapse so that their cronies can steal by bringing in refined products from overseas,” President Buhari said.
The President urged the chairman and members of the RMAFC, who availed him of their view on the vexed issue of petroleum subsidy payments, to go “back to the drawing board” and come up with more humane proposals to rescue ordinary Nigerians from the “wicked manipulation” of the country’s oil industry by corrupt operator’s.
The President said that the Nigerian National Petroleum Corporation, the Nigerian Ports Authority and other MDAS which previously relied on the laws establishing them to retain all or part of revenues collected by them, did so illegally and must now comply with the Nigerian constitution by paying all revenues to the Federation Account.
HISTORY OF FUEL SUBSIDY IN NIGERIA.
It would be recalled that the issue of fuel subsidy in Nigeria dates back to April 1992 when General Ibrahim Babangida’s government raised the price of a liter of fuel from 15.3 kobo to 20 kobo. He did it again on March 31, 1986, from 20k to 39.5k; on April 10, 1988, from 39.5k to 42k.
On January 1, 1989, he increased the price from 42k to 60k (although the regime said it was for private vehicles only, but the price remained 42k for commercial vehicles).
On December 19, 1989, it moved to a uniform price of 60k. On March 6, 1991, the price of a liter of fuel was increased from 60k and that was the price when he stepped aside in August 1993. Chief Ernest Shonekan increased the price of a liter of fuel from 70k to N5 on November 8, 1993 but a hectic mass protest, saw Abacha take over power.
The incoming Abacha regime reduced the increment to N3.25 on November 22, 1993. On October 2nd 1994, the Abacha junta increased the price of fuel to N15, from N3.25, but after massive street protests, the regime reduced the increment to N11 on October 4, 1994. That was the price till Abacha passed on, and the Abdulsalami Abubakar regime raised the price from N11 to N25 on December 20, 1998 and after days of sustained protests, it was forced to reduce the increment to N20 on January 6, 1999. The Obasanjo’s presidency adopted fuel subsidy as the bedrock of its economic policy, for no sooner than it was sworn in that it effected an increment of N30 on June 1,2000 but protests and mass rejection forced it to reduce the increment to N25 on June 8, 2000 and further down to N22 on June 13, 2000. The regime was again to increase the price to N26 on January 1, 2002 and again to N40 on June 23, 2003. He was to raise it up to N70 by the time he left in May 2009 but former President Musa Yar’Adua’s government reduced it to N65, after general protest against the new price regime. Although the Yar’Adua government made efforts to increase the price of petroleum products it could not scale through following increased mass disapproval for such act.
But on January 2015, the Goodluck Jonathan administration removed fuel subsidy which the administration claims will save it N1.3 trillion to N1.5 trillion annually which it will channel into infrastructural development.
However, observer are of the view that the idea of fuel subsidy was a good one as it was intended to give the average Nigerians access to cheap petroleum products, reduced transport and production costs.
The group Managing Director of the Nigerian Petroleum Corporation (NNPC), Mr. Emmanuel Ibe Kachikwu, is of the view that fuel subsidy be removed.
Kachikwu said the removal of subsidy would not cause protests as observed in January 2012 emphasizing that over 90% of Nigerians do not benefit from the subsidy regime.
The NNPC boss, who was speaking in an interview on Television on August 26, also disclosed the corporation would explore third party financing to increase the capacity of refineries to 80% within a 12 to 18 month period.
“The truth is that the over 90 percent of Nigerians today are ready not enjoying subsidy. Subsidy is likely in the big cities like Lagos and Abuja and mainly for the rich because the subsidy element does not trickle down to the hinterland and those who are poor,” he said.
Meanwhile, Kachikwu noted that rather than deal with subsidy in the sense of absolute removal in the way it is known, the NNPC would generate ways to remove the perception of subsidy.
“Right now for example, we have not removed subsidy but petroleum products are selling at market prices due to inefficiencies in the system and people are buying those products and avoiding queues.
“We have got to be intelligent about it; the truth is that as the oil price continues to drop, we are going to face the reality of our time, which is survival.”
He stated that the NNPC stopped the off shore processing Agreements (OPAS) with oil dealers so as to have the chance to look at the contracts and make them see through for Nigerians to get better value than they are getting from the existing contracts.
Kachikwu added that the target was to raise the refining capacity from the current 30 to 40% to 80% in the next 12 to 18 months.
“I think the reality is that we lose money for each barrel you put into the refineries because our system is not working efficiently and the equipment is down. The plan is that when you get investors, you get the system cleaned up,” he stated.
NNPS director also hinted that the oil corporation was on the road to raise full funding for Train 7 of the Nigeria LNG, emphasizing also that the corporation would explore the possibility of getting long term funding for other LNG projects in the pipeline. Consequently, President Buhari has said that his administration would not make any decision on the clamour for the removal of fuel subsidies, adding, however, that his government would handle the issue on their removal “with care”.
According to the statement by Garba Shehu, the President’s senior special Assistant, Media and Publicity, the President spoke after receiving a briefing from the Ministry of Petroleum Resources, Nigerian National Petroleum Corporation (NNPC) and other agencies in the oil sector.
Shehu said Buhari told the officials that he had so far received a lot of submissions on the need to remove fuel subsidies but that he was still carefully reviewing them. He quoted Buhari as saying: “I have received many literature on the need to remove subsidies but much of it has no dept.
“When you touch the price of petroleum products, that has the effect of triggering price rises on transportation, food and rent. That is for those who earn salaries, but there are many who are jobless and will be affected by it.”
Buhari also said that the lack of security, sabotage, vandalism, corruption and mismanagement, not necessarily subsidies, were the most serious problems of Nigeria’s oil sector. He promised to deal decisively with all identified problems in the oil and gas sector.
“We have to go back to the good old days of transparency and accountability,” the president said.
Buhari directed NNPC to review existing agreements for the crude oil swaps with a view to injecting more honesty and transparency into the process to reduce costs. He also asked NNPC’s management to do more to improve the supply of liquefied petroleum gas (LPG.) Buhari also assured investors in the oil and gas sector that his administration would implement far-reaching reforms to boost accountability and transparency in Nigeria’s oil and gas industry. The President made the statement when he held a meeting with senior officials of Chevron led by the company’s President for Africa and Latin America, Mr. Ali Moshiri.
Buhari stated that his adminitration was ready to effectively address the challenges in the sector.
“We understand the situation in the industry and we will do our best to address the challenges affecting exploration, production and distribution of oil products in the while acknowledging the merits of the Amnesty programme initiated by President Umaru Musa Yar’Adua to stem Military in the Niger-Delta region, Buhari said his administration would build on good aspects of the programme. The President, according to the statement, added that his administration would also implement other measures to enhance security in the Niger Delta and optimise investments in Nigeria’s oil and gas industry.
Moshiri urged Buhari to restore the confidence of international investors in the industry. He identified improved security in the Niger Delta as key to increased investment in the oil and gas sector in Nigeria.
According to Moshiri, Chevron, which has a 36.7 percent stake in the West African Gas Pipeline Company Limited, is keen to support Nigeria’s gas sector and provide more electricity for Nigerian consumers.
Meanwhile, the governor of Kaduna State, Nasir el-Rufai, has declared that NNPC has failed in its statutory responsibilities, should be scrapped and replaced with a new fit-for-purpose National Oil Company (NOC).
El-Rufai, who spoke at the 2015 Wole Soyinka Media Lecture series with the theme, “Nigerian and the Oil Fortune” in Abuja, also alleged that in the last three years, NNPC faild to remit to the government N3.670 trillion, which he said represents 42 percent of monies earned by the country from her oil and gas activities from 2012 to the first half of 2015.
He explained that NNPC made about N10.463 trillion within the period by remitted just about N6.73 trillion but has failed to remit the balance, thus confirming last year’s price water house coopers’ (PWC) forensic audit report and the 2013 reports of the Presidential Committee on verification of subsidies headed by Aigboje Aig-Imoukhuede that the corporation retains some 43 percent of oil earnings for its operating cost. NNPC has argued on several occasions that its deductions are backed by the Act establishing it and former President Olusegun Obasanjo had given it permission to make the deductions for its operations.
However, AMEN Super News learnt that President Buhari plans to totally remove oil subsidy and use the proceeds for the provision of free and compulsory primary/secondary education across the country.
This was disclosed by a source among the transition committee set up by Buhari to work out a blue print for his administration. The source said the administration is also said to be working on unbundling the NNPC, to make it more efficient in the production and delivery of products to Nigerians.
The source, who spoke on condition of anonymity, which said these proposals form part of the strong recommendations made by the transition committee, also revealed that members of organised labour in the country were consulted by the committee and they made presentations on what should be done over the matter.
“Labour is part of the decision; they have accepted the proposal of fuel subsidy removal,” the source said.
The source revealed that the committee also recommended the unbundling of NNPC to reposition the agency to serve the needs of Nigerians better. He said all refineries in Nigeria are to be made to work at maximum capacity by the federal government to be able to deliver adequate products to the consumers. He added that the FG was set to block all Channels of fund leakages in the NNPC, adding that the era of allocating more crude than the refinery in Nigeria was over, as it was discovered that the policy encouraged corruption and diversion of funds. Depite reports that labour accepted the proposal for the fuel subsidy removal as recommended by the transition committee raised by Mr. President, it was also reported that Joe Ajaero led Nigeria labour congress faction, on Sunday, June 21, insisted that federal lawmakers must further cut their N120 billion budget in line with the recent economic realities. The NLC said the reduction of the National Assembly’s budget from N150 billion to N120 billion is too small and not far reaching enough. The body threatned a mass revolt should the lawmakers and the executive fail to cut down their recurrent expenses.
Speaking in Kaduna State, the faction’s Deputy President, Comrade Issa Aremu, who is also the General Secretary of the Textile Workers Union, avised lawmakers to appreciate the mood of the nation for leadership sacrificies, resource allocation for national development and common good as opposed to self-helf. Responding to their demand, a House of Representatives member, Mohammed Abdulkadir, explained that the N120 billion is not all for salaries.
The Labour stated that nations prosper when their leaders are willing to sacrifice; while nations fail when leaders engage in selfish self-help agenda. It asked why 109 senators and 360 members of the House of Representative should get N120 billion in a year, an amount the body said it twice the 2015 budget of Ekiti state (N80.774 billion), a state with the population of 2,384,212 people. The factional NLC group also asked how reasonable it is for less than 500 national legislators to receive N120 billion annually when Osun State with a population of 3,423,535 people and unfunded 2015 Appropriation Bill of N20 billion is yet to pay salaries for seven months. It said Benue State, which has as many as 4,219,244 people, budgeted N98.54 billion; Zamfara with 3,259,846 citizens, budgeted N92.80 billion while Ebonyi State, budgeted N80.02 billion for 2,173,501 people. The NLC said the budgets of these three states are half of the budget of the National Assembly and questioned how equitable is that? The labour advised the lawmakers to take the advantage of the current goodwill of Nigerians in making amend because failure to do so will spark mass revolt of the people. It advocated that NASS budget should be reversed to 2003 budget of N50 billion, which will certainly cut the existing, budget of the assembly by more than 50 percent.