Subsidy removal, a must – NACCIMA, LCCI, others

The organised private sector has thrown its weight behind the call on the Federal Government to remove fuel subsidy.

National Vice President, Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture, NACCIMA, Mr. Billy Harry, yesterday, supported the scrapping of subsidy on petroleum products, saying subsidy has failed to benefit ordinary Nigerians over the years.

Also, the Director General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf in a statement said: “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 “For several years, the economy suffered severe bleeding from this phenomenon. Although it is not clear whether there has been any policy pronouncement on whether or not to retain the subsidy regime, the truth is that it is not sustainable. It is in the overall interest of the economy and citizens for it to be discontinued.”

Speaking in the same vein, Dr Godwin Ichimi, a Research Fellow at the Nigerian Institute of International Affairs, NIIA, disclosed that fuel subsidy is not economically sustainable, especially with the activities of a “callous cartel.”

According to him, in the analysis of fuel subsidy removal, the question that should be asked is: how will the removal impact the average Nigerian and what will be the benefit to Nigerians?

But the Nigeria Labour Congress and Trade Union Congress, however, warned President Muhammadu Buhari that their members will resist any attempt to remove fuel subsidy.

The leaderships of the Trade Union Congress, TUC, and the Nigeria Labour Congress, NLC stated yesterday, that any attempt by the President Buhari-led government to remove subsidy will lead to a serious unrest in the country.

Stating the position of the private sector, Mudal said: “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 was N91.03 billion. Evidently, the numbers would be much more than this even before the first half of the year.

“One of the critical elements of the oil and gas sector reform, particularly the downstream sector,” according to Mudal, “is the complete deregulation of the sector. This will create a number of advantages for the economy.

“It will free resources for investment in critical infrastructures such as power, roads, the rail systems, health sector, education sector etc. The deficiency in all of these infrastructure areas are phenomenal. Fixing infrastructure will greatly improve productivity and efficiency in the economy and impact positively on the welfare of the people.

“It will boost private investment in the downstream oil sector especially in petroleum product refining. This will ultimately reduce importation of petroleum products and ease the pressure on the foreign exchange market as well as foreign reserves.

“It will eliminate the rampant patronage, rent seeking activities and corruption that currently characterise the downstream oil sector. It will create more jobs for the teeming youths of the country in the downstream oil sector as investment in the sector improves.

“Having said that, it is desirable for a clear policy pronouncement to be made in order to give a clear direction to investors. There is still so much policy uncertainty with regard to the downstream oil sector and this is creating lots of problems for investors.”

According to Harry, who is also the Chairman, National Oil and Gas Trade Group, the subsidy regime had served as a hidden agenda by some unscrupulous individuals to further enrich themselves.

He said: “Let us clearly define what the petroleum product in Nigeria should be, how much it should be sold, refined and how much it should be sold to the ordinary Nigerians on the streets. Now this clearly will define where we are.

“If you look at the last few years, we have bought petrol for as high as N250 per litre, and you wonder, who are the people causing this? The President and his team in the Presidential Villa have a Total filling station that is packed with petrol for them at no price. There is just no benefit for the ordinary Nigerian.

“In the period of scarcity, it is the ordinary Nigerian that suffers and this is, therefore, draining scarce resources that ordinarily should be put into growing the economy in the small and micro businesses.

“Think about it, if you needed 1,000 litres to run your light in say for one month and you have already bought fuel for say N250 per litre, that means you have spent N250, 000 which could have already bought some little machines, make a bakery or do something that could make an impact in the economy by feeding Nigerians and also creating wealth and employment.”

He further called for transparency in the Nigeria’s oil and gas sector, stating that the country should consider extending the subsidy programme in the agriculture sector to the oil and gas sector and other sectors of the economy.

He said: “There is no need for subsidy to stay; it should be removed. Let petroleum marketers import products genuinely or go into refining agreement with the Federal Government with clearly defined transparent cost of crude oil sold, transportation and logistics for refining and actual landing price that will be affordable by Nigerians.

“I am not saying that they should regulate the price but I am saying that the process by which crude oil is exported or sold or refined or product imported should be put on a very clear platter of transparency.”

Meanwhile, the organised labour has told President Buhari not to accept the recommendation of the Transition Committee that advised him to remove subsidy from the petroleum products and promised to resist any such policy from the government.

The leaderships of the Trade Union Congress, TUC, and the Nigeria Labour Congress, NLC, yesterday in an interview said that any attempt by the President Buhari-led government to remove subsidy will lead to a serious unrest in the country.

Also commenting, the factional National President of the NLC, Comrade Ayuba Wabba, said it will be an ill advice to the president to remove subsidy.

Wabba said: “I also hope that it is not these same cabals that have held all of us to ransom that are bringing these recommendations, because those cabals have also been responsible for sponsoring people to elective positions.

“These are facts we are aware of. In fact, they are the major donors to campaign purse. I hope it is not this same cabals that are also canvassing at this point in time.

“Whatever you do to increase the price, it will be at a cost to ordinary Nigerians. Many Nigerians today cannot have three square meals at their table, it will be additional hardship on them if the essence of removing subsidy is to increase the price.

“But if on the contrary removing subsidy will not increase the price, I think we will be in for it. But the major point is

that we will not support any policy that will further make Nigerians suffer for it.”

On if the government decides to go ahead to implement the recommendation, Wabba said: “Certainly, we will engage the process because removing it without taking into cognisance those issues we have raised, those concerns we have raised, where Nigerians will then suffer more and pay more, certainly people will react and certainly labour will go with the majority of the masses in reacting to this.”

He explained that the issue of fuel subsidy has a lot of implications especially economic implication as all businesses being small enterprises were being driven by individuals through their own personal efforts because the national grid was not functioning effectively.

He said: “Therefore, once you increase the price of petroleum product through a process of deregulation, you are allowing marketers to determine prices at their whims and caprices.

“This has happened almost two weeks ago where they decided on their own, to hold all of us to ransom and we have seen the consequences on the economy of our country even on our national security. Because the national security of the country at that point was also threatened.

“I will remember as an organised labour, we made our positions very clear, that first, let us address the inherent corruption in the system. You must do the first thing first, we are not saying you cannot look at the issue of deregulation, but first, let us look at the issue of inherent corruption which has been established.

“It is obvious that the issue of corruption in the oil and gas sector has been established from the last episode of 2012 where the government unilaterally tried to withdraw the subside or what they termed as partial withdrawal of subsidy which is also a flute.

“With the recent happenings of the last one month, you should also know that it is not a one jacket approach issue. Diesel has been fully deregulated, but in the last one month when marketers ganged up and came up with the issue of wanting to be paid subsidy, the issue of diesel was also affected.

“In fact, diesel price skyrocketed from about N146 per litter to over N200. Diesel has been fully deregulated and therefore it is a clear example that we cannot at this point in time, contemplate removing subsidy hook, line and sinker without looking at the implications.

“So, as an organised labour, certainly, we are not going to succumb to those polices that will have serious implication on our economy as a country. In fact, the implication will better be imagined if those issues come to play and they have come to play just in a month back.

“It is equally an eye opening to us, recently IPMAN addressed a press conference to say that the entire process of the subsidy issue is a fraud and therefore they also gave options.

“If insiders who are also part of this racketeering who have also benefited at this point in time will come and give us this credible information, I think that is what government needs to look into.

“Our first option is let us clean up the system and also show that people are going to refund money because it is very clear from the episode of 2012 that a lot of people have been paid money they have not worked for.

“People just helped themselves and they got money that they have not worked for. So, the first thing is let us draw a line and clean up the system and even understand the economics of importation of the product.

“How much does it cost to import refined product that is even in the interim because as a long term measure, NLC has canvassed over years that successive government must be able to have the capacity to develop and build our refineries so that we can be able to refine our products for our domestic use.

“Is it not an irony that over 30 decades when these very important commodity and resources have been discovered that we have not made any efforts to try to have capacity internally for domestic use.”

Speaking in the same vein, Mr. David Adonri, Chief Executive Officer, Highcap Securities Limited, said: “The amount of money used by the Federal Government for fuel subsidy every year is almost equal to amount borrowed.

“Removal of the subsidy will materially reduce borrowing and could lead to fiscal consolidation. As a result, interest rate will decline, leading to boom in the productive economy. Any consumption subsidy at this stage of development is bad economic policy.”

On his part, Dr Godwin Ichimi, a Research Fellow at the Nigerian Institute of International Affairs, NIIA, said fuel subsidy is not economically sustainable, especially with the activities of a “callous cartel.”

According to him, in the analysis of fuel subsidy removal, the question that should be asked is: how will the removal impact the average Nigerian and what will be the benefit to Nigerians?

He said: “What are the social safety nets that would be put in place to cushion the attendant hike in the standard of living of Nigeria? To me, if the government remove subsidy and tinker with some of the country’s macro-economic indices, this will ensure a win-win for everyone.

“However, with President Buhari’s credentials, I am hopeful that in removing the subsidy, he will ensure that the revenues saved are ploughed back into growing the economy and ensuring that citizens benefits.

“It is also hoped that the Buhari administration will block all the leakages while a myriad of safety nets should be put in place to cushion the effect of the increase in petroleum products prices and other commodities on the lives of ordinary Nigerians.”

A cross section of Enugu residents on their part called for proper overhaul of the refineries before the proposed removal of oil subsidy. Some of the residents, who spoke with the News Agency of Nigeria (NAN) in Enugu, yesterday, decried the current state of refineries in the country. A civil servant, Mr Emeka Nebo, advised the government to ensure that the refineries were functional before the removal of subsidy on petroleum products.

“If at all the government is insisting on removing oil subsidy, all our refineries must be put in good shape so as to serve the people effectively. I strongly believe that if the Warri, Port-Harcourt, and Kaduna refineries are working as they ought to, we will not be complaining about fuel scarcity,” he said.

Another civil servant, Mr Donald Odenigbo, urged the government to be ready to increase workers’ salaries as soon as it removed the subsidy. “You cannot remove oil subsidy without increasing salaries of workers to cushion the negative effect.

“There is no palliative measure than that, because prices of everything in this country will definitely increase,” he said.

Mrs Phina Nwosu, a lawyer, said that the government should not discuss anything on subsidy removal because it would pose a serious threat to the people.

“Government should not discuss removal of oil subsidy now because it will increase the suffering of the people. The past administration wanted to do that but it received knocks from labour and the opposition. Why now?” she queried.

Nwosu joined the call on the Federal Government to urgently put the refineries in order for sustainability. A petroleum dealer, Mr Solomon Amalu, said that he believed that the removal of oil subsidy would make fuel available in every filling station.

Uju Okoye, a student complained that removal of oil subsidy would amount to increase in prices of goods and services. According to her, if it is done, school fees, prices of books, transportation, food and everything will increase astronomically and people will suffer.

“I am calling on all Nigerians to get ready for hard times,” she said.