Subsidy: FG May Deduct N2.4tn Palliative From Federation Account

Posted by African Examiner Featured, Latest Headlines, News From The State Friday, November 26th, 2021

(AFRICAN EXAMINER) – The Federal Government may deduct at least N2.4tn from the Federation Account to fund the N5, 000 cash palliative that will be handed over to 40 million poor Nigerians after the fuel subsidy has been removed next year.

The list of poor Nigerians on the Federal Government’s National Social Register had surpassed 42 million and may hit 43 million by December. This implies that the figure to be spent on the subsidy palliative may hit N2.58tn in one year.

When contacted on the telephone on Thursday on how funds for the N5,000 palliative would be sourced, Yunusa Abdullahi, the Media Adviser to the Minister of Finance, Budget and National Planning, Zainab Ahmed, referred to a statement by his principal after the Federal Executive Council meeting on Wednesday.

In the statement, Ahmed noted that the funding would come from FAAC allocations. FAAC which is headed by the Minister of Finance, comprises Commissioners of Finance from the 36 states, representatives of revenue-generating agencies such as the Nigerian National Petroleum Company Limited, Federal Inland Revenue Service, Department of Petroleum Resources, Central Bank of Nigeria, Nigeria Customs Service among others.

These revenue-generating agencies are expected to remit a specified amount of their revenue to the Federation Account which will be distributed among the three tiers of government.

“So these are things that we are still in negotiation because it’s still money that would have to come from the Federation Account. So everybody that is a member of FAAC will have to agree on the numbers.”

The Group Managing Director of the Nigerian National Petroleum Company Limited, Mele Kyari, had on Tuesday announced at a World Bank event in Abuja that the subsidy on petrol was not sustainable.

He said the Federal Government would in 2022 remove petrol subsidy paving the way for the sale of the product for between N320 and N340 per litre.

Also at the World Bank event, the Minister of Finance, Budget and National Planning said the subsidy was not benefitting the poor.

According to her, to cushion the effect of fuel subsidy removal, the Federal Government will give a transport grant of N5,000 each to between 30 million and 40 million poor Nigerians.

The N5000 transport palliative planned to be disbursed to 40 million Nigerians means the Federal Government will be spending a total of N200bn every month on the initiative. Since the government has said the initiative may last for 12 months, it follows then that the scheme will gulp N2.4tn in one year.

Meanwhile, impeccable sources in the Federal Ministry of Humanitarian Affairs, Disaster Management and Social Development, disclosed that the government had already identified 42 million poor people hence the sharing of the N5, 000 would not be cumbersome.

One of the sources explained that all the 36 states and the Federal Capital Territory sent a list to the ministry every month which is computed into the National Social Register.

The official, who wished to remain anonymous because he was not authorized to speak, said, “The 40 million that the Federal Government is referring to has actually risen to about 42 million. These are the poor people we have identified over the years. Their names were sent to us by the ministries of planning in the various states.

“They send updates to us every month and then we add the names to our social register. As of today, the figure is about 42 million and is expected to hit 43 million by next month.”

When asked how the beneficiaries are paid, the official said there were some remote areas that lacked Internet or financial facilities and so they were handed cash.

“The National Cash Office would identify some vendors that would then hand over the cash to these poor people. We know that there are some people who are so poor that they don’t own phones or have account numbers. We would not deny them of the cash because of their condition. This was how we handed them cash during the COVID-19 lockdown last year,” he said.

When asked if the identities of the beneficiaries would be revealed, the official said the policy of the Federal Government was that the identities of such people would not be revealed. He, however, said the states would be in the best position to answer the question since they were the ones generating the list.

“Our Minister, Sadiya Farouq, said during COVID-19 briefing last year that it would not be good to publish names of beneficiaries because of human rights issues. In any case, how would you even verify the identity of someone that was given money in Maiduguri? Would you travel there?” he asked.

In a related development, the Petroleum and Natural Gas Senior Staff Association of Nigeria on Thursday warned that increasing the cost of petrol without concluding the ongoing negotiations on the matter would create serious problems. It disclosed this in reaction to the statement made on Tuesday by the Group Managing Director of the Nigerian National Petroleum Company Limited, when he announced that petrol would sell for between N320 and N340 per litre from February 2022.

Speaking to one of our correspondents on Thursday on the matter, the General Secretary, PENGASSAN, Lumumba Okugbawa, said the country’s refineries must work before fuel subsidy would be stopped. He stressed that this was what PENGASSAN, through its affiliate, the Trade Union Congress, had been telling the government, adding that any attempt to remove subsidy without concluding these issues being negotiated would cause serious issues.

This came as the NNPC distanced itself from petroleum products’ pricing functions when contacted to speak on whether it had concluded negotiations with labour unions on matters of subsidy removal.

Asked whether the negotiations between the government and labour as regards subsidy removal had been concluded, Okugbawa replied in the negative.

He said, “They are talking with NLC (Nigeria Labour Congress) and TUC and we are affiliated to the unions. NUPENG is affiliated to NLC, while we are affiliated to TUC. We are all collaborating in the discussions to get a better understanding on this.

“So, no; negotiations have not ended. However, it is not a decision yet, rather they (government) are just planning. But definitely it is going to create serious issues if they do it.”

He said the move to hike petrol price to N340/litre was not welcome by oil workers and would be resisted if the government tries to implement it.

“Our position is simple, that it is not a welcome development. Is that the New Year gift they want to give to Nigerians? It will be resisted,” he stated.

On claims that the payment of subsidy had been burdensome on government, Okugbawa said this was why PENGASSAN had been calling on government to fix refineries.

He said, “We’ve said that an import-driven form of deregulation will create this sort of problem that they are talking about, and that what is necessary is local production-driven deregulation.

“We should not be listening to international monetary bodies and others before we take our own decisions. Let’s do what we should do by creating more functional refineries.“They’ve started a good job by carrying out rehabilitation at the Port Harcourt refinery although the job has not started as such. But we know that we will get there, and then build more modular refineries.”He added, “They should encourage more private people to be involved, because you will have to produce locally to handle this issue. Once you are not producing locally, the price will affect you as it is affecting us now.”

He further noted that when refineries work optimally, the cost of refined petroleum products in Nigeria would reduce and by then the debate for subsidy might cease.

Okugbawa said, “Prices will reduce very well because there are so many things tied to the importation of fuel such as landing cost, marketers margin and many other margins that are computed.

“But all those will be removed when we produce locally. Since a ship is not going to stay at the ports for days discharging products, all those associated landing costs will be reduced.

“So instead of paying all those, demurrage and others, you will cut them off and these are the factors. We know that when the international price of oil goes up, petrol price will also go up.

“But if we are refining locally and the price of crude oil goes up in the international market, it is to our own advantage. Nothing is too much to invest to ensure that we refine locally. We have been saying this since.”

When contacted to tell whether negotiations with labour had been concluded, the spokesperson of NNPC, Garba-Deen Muhammad, stated that the issue of petrol pricing was not the function of the oil firm.

He said, “I wouldn’t know because it is a policy meeting. As you know, since the coming of the PIA (Petroleum Industry Act), the NNPC is an operator and marketer.

“So I really don’t know the status of the discussion. In any case, price issues are policy matters. NNPC does not fix price, it has no mandate. It operates in the sector as a business concern governed by CAMA Laws.”

Meanwhile, the Senior Staff Association of Statutory Corporations and Government-Owned Companies has vowed to resist the removal of subsidy unless the government increases the national minimum wage to reflect the projected hike in fuel pump price estimated to sell at N342 per litre in 2022.

The union stated that it would not have issues with the planned removal of subsidy as advised by the International Monetary Fund, if the Federal Government increased the minimum wage by at least 300 per cent.

The Secretary-General, Senior Staff Association of Statutory Corporations and Government-Owned Companies, Dr Ayo Olorunfemi, said this in a telephone interview on Wednesday.

Olorunfemi argued that the planned fuel price hike would drive up the cost of goods and services by over 300 per cent, insisting that the government should be ready to increase the minimum wage to N200,000 from the current N30,000.

The SSASCGC scribe said, “If they (FG) must do this (increase the pump price), minimum wage must be increased by 300 per cent. That’s the least we can accept. If we do a thorough calculation, the minimum wage, based on the 2015 salary structure, should be N30,000.

“The increases that have occurred from 2015 to date and that’s the percentage increase that we should be talking about.

“If the prices of goods and services have increased by 400 per cent, then we should be talking about N120,000 minimum wage. And by the time they remove this subsidy, it would further increase by another 300 per cent. So, we should be talking about N200,000 minimum wage.

“If they are ready to do that, they can go ahead with the IMF directive but if they can’t do that, let’s remain the way we are.”

Olorunfemi, who is the Chairman, Trade Union Congress Political Commission, flayed the government for its lack of innovative thinking, adding that the FG’s cluelessness has wrecked the economy and push up inflation to record levels.

The union which has over 20,000 members further submitted that the FG has not put in place the necessary structures or meet the conditions that would make subsidy removal palatable to Nigerians.

According to him, the nation is still grappling with inadequate road and rail infrastructure, inadequate housing, stressing that the IMF advice would further impoverish Nigerians.

He asked, “Where is the rail to Lokoja or Okene? The only one they have done is from Abuja to Kaduna by the last administration. So many conditions will determine whether this thing (fuel subsidy removal) will work or not and I think it is time for this government to realise that they cannot be leading them by the nose to anywhere and they would continue to follow.

Speaking in the same vein, the National President, Association of Senior Civil Servants of Nigeria, Dr Tommy Etim, said the planned subsidy removal was not acceptable to his association.

PUNCH