Government insists on oil subsidy removal

President Goodluck Jonathan

Government insists on oil subsidy removal

Opponents of fuel subsidy removal may have lost the battle, with President Goodluck Jonathan hinting yesterday that it will go next year.

 
This is in his administration’s four-year financial outlay made available to the National Assembly.

Opponents however, say the removal of fuel subsidy will automatically send fuel prices rising. This, they note, will affect the cost of other goods and services.

“a huge fraud”

Besides, many believe the idea of subsidy is “a huge fraud” which allows some privileged few to steal.

But the government maintains that the subsidy is of no benefit to the poor. If it is removed, says the government, the cash will go into rebuilding infrastructure.

In separate letters to the Senate and the House of Representatives, read on the floor by the presiding officers – Dr Jonathan said the funds saved from the subsidy removal would be spent on safety nets for the poor.

Labour vows challenge

The plan to remove the subsidy has been greeted with condemnation by organised labour.

The Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) have vowed to challenge the move through strikes and other lawful means.

But the President, who last week said he was no maximum ruler, is pressing ahead, as evidenced by the content of his letter to the National Assembly.

It was gathered that the Federal Government may propose over N4.trillion as expenditure for the 2012 fiscal year based on a proposed oil baseline bench mark of $75 per barrel.

Jonathan wrote: “Although aggregate expenditure is expected to increase from N4.8trillion in 2012 to N5.18 trillion in 2015, concerted efforts are being made to make savings from overheads as allocations will be frozen from 2015.”

Funds for the critical infrastructure

He added: “Capital spending will increase marginally from N1.32trillion to N1.84trillion in 2012 to N1.64 trillion in 2015 as government intends to leverage on Public Private Partnership (PPP) arrangements to supplement capital allocations from the budget.”

“A major component of the policy of fiscal consolidation is government’s intent to phase out the fuel subsidy, beginning from 2012 fiscal year. This will free up about N1.2trillion in savings, part of which can be deployed into providing safety nets for poor segments of the society to ameliorate the effect of the subsidy removal.’’

Jonathan said the accrual from the Sovereign Wealth Fund will be used to augment funds for the critical infrastructure.

Baseline bench mark

He said the fiscal deficit wss expected to follow a declining and sustainable path from 2.69 per cent of GDP in 2012.

Jonathan said oil revenue was expected to increase marginally from N2.37trillion in 2012 to N2.47 trillion in 2015 as the bench mark price of US$75 would be maintained throughout the period while oil production wss projected to rise from 2.48mpd to 2.6mpd.

The budget also expects a substantial decrease in both domestic and foreign debts.

Jonathan said: “On the revenue side, the strategy of adopting an oil price based fiscal rule and accrual of windfall oil savings will continue.

A baseline bench mark oil price of $75 is proposed for the 2012-2015 period while oil production of 2.480mbpd, 2.500mbpd, 2.575mbpd and 2.600mbpd will be adopted to the 2012-2015.”

NP/Uche Iheanacho/Hajia Sani