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‘Senate provided for subsidy in 2015 budget’

By Mathias Okwe (Abuja) and Roseline Okere (Lagos)
01 May 2015   |   2:45 am
CONTRARY to insinuations in some quarters that there is no provision for fuel subsidy in the 2015 budget, Chairman of the Senate Committee on Finance, Ahmed Markarfi, yesterday clarified that the scheme is accommodated in the appropriation

Makarfi-pix-17-1-15•Stakeholders support fund removal
• Ministry pays marketers N156 billion
• 11 ships arrive in Lagos with petroleum products

CONTRARY to insinuations in some quarters that there is no provision for fuel subsidy in the 2015 budget, Chairman of the Senate Committee on Finance, Ahmed Markarfi, yesterday clarified that the scheme is accommodated in the appropriation.

Meanwhile, stakeholders in the oil and gas industry have backed fuel subsidy removal to curb wastages and corruption in the sector. And “in line with the Federal Government’s commitment to prioritise payment to marketers in spite of revenue constraints, the Federal Ministry of Finance has paid the sum of N156 billion to oil marketers.”

No fewer than 11 ships laden with petroleum products have arrived at the Lagos ports, the Nigerian Ports Authority (NPA) said yesterday. According to Shipping Position, a daily publication of NPA, the vessels conveyed petrol, kerosene and base oil.

It said two other ships with rice consignment haves also sailed into the ports. It added that the remaining five ships would arrive at the ports with petroleum products, which would include diesel and petrol.

Speaking to reporters in Abuja yesterday Markarfi added that there is a provision for petroleum subsidy and blamed the misrepresentation in the media as unfortunate because the scheme was not markedly spelt out but provisioned under some certain revenue items.

In fact, he disclosed that the sum of N100 billion is provisioned for the subsidy on petrol while another sum of about N43 billion was approved for kerosene.

He, however, expressed regret that the figure presented by the Executive may have been underestimated in the face of the current situation where in April the Government was talking of paying oil marketers about N150 billion in claims.

Markarfi also expressed concern on some fiscal issues in the country, including salaries and emoluments of political office holders, which he said was unsustainable.

He further stressed the need for the Federal Government to further diversify its sources of revenue generation, particularly non-oil sources to protect the country from the oil price volatility and supply shocks.

He spoke further on the subsidy matter: “There is a provision for subsidy in the budget, people need to understand where to look for an issue. If you look at the main appropriation, there are so many cost components.

You will not see cash call in the main appropriation, you will not see subsidy in the main appropriation. There are expenses in the main memoranda items that you are not going to see in the main appropriation.

For you to see them, you have to go through the revenue profile. In this year budget, N100billion was provided for Premium Motor Spirit (fuel) N43 billion for DPK (kerosene).

“But if what I read that N156billion would be paid to marketers, it means there is an under estimation calculation already and this is part of the problem because if we under calculate in order not to give a true picture of our financial position, what happens in the system.

We should calculate everything to the correct position as possible so that we can know our true financial position to help us address these issues. There is subsidy provision, it may not be adequate, but again, the constitution has made provisions where if there are inadequacies they can be addressed.

The budget process is essentially an executive function whereas the appropriation aspect is a process which commences after the budget process has ended and the budget had been laid before the National Assembly,” the senator declared.

He expressed the need for efficient management of subsidy in the face of dwindling revenue so that there is value for money so that Government doesn’t end up paying for the level of subsidy that it shouldn’t be paying, adding that there was also need for greater accountability from the NNPC now ever than before. Markarfi equally expressed worries on the huge differential in the salaries of political officer holders and other categories of workers, including civil servants.

He disclosed that as far back as when he was governor, he had told the Revenue Mobilization , Allocation and Fiscal Commission [ RMAFC] that the public officers’ perks was not sustainable and advised the incoming Gen. Muhammadu Buhari led-administration to address the anomaly particularly in the face of dwindling revenue for the country.

In a statement by Mr. Paul Nwabuikwu, Special Adviser to the Coordinating Minister and Minister of Finance, he added: “The payment has two components. The first consists of the cash backing of the N100 billion IOU which the marketers were given in March. The second is N56 billion in interest payments for the marketers according to the PPPRA template.

“This leaves a balance of N98 billion certified by PPPRA as the amount owed the markers.   “The N156 billion is the latest in a series of significant payments made to the oil marketers within the last five months.

These include over N300 billion in two installments in December last year and N31 billion in interest differentials recently. In all, oil marketers have received over N500 billion within the past five months.

“The Coordinating Minister for the Economy and Minister of Finance has urged the marketers to appreciate the efforts being made by the Federal Government to meet up with their payments and reciprocate with some understanding of the situation of Nigerians who should not suffer more. She urged the marketers to sustain the distribution and supply of fuel to end the suffering of Nigerians at fuel stations.

“The Federal Government has made maximum effort, in spite of the well-known fact that the fall in oil prices has significantly reduced national revenues, to prioritize payments to marketers.

For the sake of Nigerians who are bearing the brunt of fuel scarcity, the marketers should reciprocate in the spirit of dialogue and cooperation in which we have always tried to engage them, she said.”

Analysts, who expressed convergent views on the matter are Research Professor of Technology Management, at the Obafemi Awolowo University (OAU), Ile-Ife, Francis Eniterai Ogbimi, Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, Energy Consultant, Goody Duru-Oguzie and President of the Nigeria-Vietnam Chamber of Commerce and Industry, Prince Oye Akinsemoyin, and first President of Polymer Institute of Nigeria, Chief Kunle Ogunade.

They all identified the need for the Federal Government to completely remove subsidy on Premium Motor Spirit (PMS) and deregulate the downstream sector of the oil and gas business.

In fact, they believe that the money the Federal Government is currently spending on subsidy should be directed towards other areas of the economy, even as they insisted that subsidy was a curse to Nigerians.

They, therefore, called on the Federal Government to invest in the construction of at least 30 refineries to meet the nation’s PMS needs. Speaking with The Guardian yesterday, Ogbimi described as a disgrace, Nigeria’s continued importation of petroleum products when it can effectively refine its crude oil.

He stressed the need for the incoming administration to focus on building new refineries to put a stop to fuel subsidy regime. Ogbimi advised Nigeria’s economic managers to take a clue from Venezuela, which refines its products to take care of domestic needs.

Also, Duru-Oguzie said that it is high time the Federal Government removed subsidy on petroleum products. “In business,” he said, “one must be prepared to square up with the worst case scenario as is now playing out on the Nigerian fuel importation companies, who, for a long time, had a field day squeezing, screwing and scamming Nigerians.

“In the prevailing circumstance, my opinion is that the presidency should tidy up its table before the managers leave office; (the president should) do his utmost best to effect payment to importers who he has all along been supporting and save Nigerians from the pains occasioned by the present long fuel queues.

The burden is on the President to resolve this issue and not play to the gallery or transfer the problem to the incoming government. “This is because, prior to the election, the APC government made clear its rejection of the charade associated with the President Jonathan-led government’s fuel subsidy regime in view of the noted corruption linked to it.

It will therefore be wrong for President Jonathan and Nigerians to expect the President-elect to inherit this problem. The President should take proactive steps to settle all outstanding payments to the importers before leaving office on May 29, 2015.

Only by such action would he truly earn the status of a statesman.” For Yusuf, the biggest hole in the finances of government in the country today is related to subsidy payments.

“There are two components of this: The first is the actual subsidy, which is the differential between the pump price and the landing and other costs of fuel.

The second [and more disturbing component] is the corruption inherent in the fuel subsidy regime,” he added. He further explained that the country has suffered severe bleeding from subsidy regime. “Although it is not clear, whether there has been any policy pronouncement to retain the subsidy regime or not, the truth is that it is not sustainable. It is in the overall interest of the economy and citizens for it to be discontinued.

“The budget provision for PMS subsidy in 2014 was N971.14 billion, while the figure for kerosene subsidy was not disclosed. In the 2015 draft budget from the Executive, the provision for PMS subsidy was N200 billion while that of kerosene subsidy was N91.03 billion. Evidently, the numbers would be much more than this even before the first half of the year,” he said.