Buhari To Remove Oil Subsidy

President Muhammadu Buhari

President Muhammadu Buhari plans to totally remove fuel subsidy and use the proceeds for the provision of free and compulsory primary/secondary education across the country. The administration is also said to be working on unbundling the Nigerian National Petroleum Corporation, NNPC, to make it more efficient in the production and delivery of products to Nigerians. These proposals form part of the strong recommendations made by the transition committee raised by Buhari to work out a blueprint for his administration.

Vanguard report continues:

Asked if the proposal for total subsidy removal had been discussed with labour, the source said that members of organized labour in the country were consulted by the committee and they made presentations on what should be done over the matter.

The source said: “ Labour is part of the decision; they have accepted the proposal of fuel subsidy removal.

“A committee is likely to be set up by the federal government to work out the modalities of what is to be done in that respect.

“But the truth is that total removal of fuel subsidy has been recommended with adequate provisions for palliatives on free education and social welfare for the unemployed”, a member of the transition committee said.

The source pointed out that unlike in the past, the Buhari administration is considering the provision of free meals for students to serve as incentives for them to enroll in school.

The source explained that the committee also recommended the unbundling of NNPC to reposition the agency to serve the needs of Nigerians better.

According to him, 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.

Corruption

He said that the era of allocating more crude than any refinery in Nigeria can process was over, as it was discovered that the policy encouraged corruption and diversion of funds.

In a tone that suggested that the Buhari administration might probe the operations of the NNPC, the committee member further disclosed that the federal government was set to block all channels of fund leakages in the corporation.

He said: “The federal government is keen on plugging all areas of leakages in the corporation and whoever must have caused them must be made to account for such unpatriotic wastages. We don’t know whether that is what you call probe or not”, he said.

It could not be established as at last night whether such decisions of the officials were influenced by the planned beaming of search light on the operations of the government agency.

FG to pay the controversial N160 billion subsidy claims

Meanwhile, hopes for resolution of outstanding subsidy issues hampering normal supply of petroleum products across the country appear kindled as the special investigation team on subsidy claims verification recommends payment of the controversial N160 billion claimed by oil marketers.

As a result, bankers have resumed credit lines to the sector while importation by marketers have resumed though it is still on cautious notes.

The supply shortages witnessed across the country since last month was as a result of a disagreement between the federal government and oil marketers over the subsidy claims resulting in the marketers’ refusal to import more products under the subsidy programme.

In the last week of ex-president Goodluck Jonathan’s administration, the finance ministry had paid a part of the subsidy claims totalling about N131 billion in the wake of the supply crises arising from this disagreement.

The former Minister of Finance, Dr Ngozi Okonjo-Iweala, had doubted the additional N160 billion claims ascribed to exchange rate differential and interest rate charges on banks’ funding for the petroleum products imports.

She had subsequently set up a special investigative team made of representatives of Petroleum Products Pricing Regulatory Committee (PPPRC), Central Bank of Nigeria (CBN), the Debt Management Office (DMO) and the finance ministry to investigate the claims before she can approve the payment.

The team couldn’t conclude their assignments before the expiration of ex-president Jonathan’s government and exit of the minister, hence validating the allegation of some of the marketers that the investigative team was designed to provide escape for the ministry from the agreement they had reached on subsidy payment. The marketers had also wondered why the setting up of the team whereas this assignment has always been done by PPPRC without any issues.

Return of confidence

Bankers who spoke to Vanguard last week said that their confidence was gradually returning to the oil marketing sector which they had classified as ‘high-risk’ in the wake of the subsidy claims disagreement, indicating that some of them have resumed granting loans to the sector.

The disagreement had put about N300 billion banks’ risk assets (loans) in danger of default, escalating the industry non-performing loan ratio to almost 4.0 per cent with the worst performing banks hitting above 8.5 per cent aggregate and over 40 per cent on the oil sector. The industry red line is 5.0 per cent at which any bank’s exposure would be dangerous and unacceptable.

Top executives of the oil marketers’ associations told Vanguard that they have information that the investigative team has validated the marketers’ claims in their report to the finance ministry two weeks ago.

However, they said that actual payment is waiting for the settling down of President Mohammadu Buhari’s government, a situation which they also said cannot last for too long otherwise the renewed confidence of their funding banks may wane.

One of the marketers informed that following a meeting with the permanent secretary, Ministry of Petroleum Resources two weeks ago, some of them have begun importation of products on a low scale while helping the Nigerian National Petroleum Corporation (NNPC) to distribute its stock to lessen the supply crises. The focused cities are Abuja and Lagos which according to him has been very successful.

He added that the agreement reached with the ministry was just a palliative to welcome the new government of Mohammadu Buhari, adding that eventually they will have to address the issue in a more lasting policy.

The marketers associations, according to him, are unanimous in pushing for removal of subsidy, but probably they will recommend a phased programme lasting not more than six months.