LCCI, stakeholders kick against fuel subsidy in 2019 budget
... some say it will elevate corruption Rewane-led minimum wage committee to weigh risks of review on economy
Stakeholders the downstream sector of the Nigerian oil and gas industry have kicked against the provision of fuel subsidy in the 2019 budget.
They say including subsidy in the budget will elevate corruption in the sector to the highest level and will not allow for any transparency in the sector.
According to them, this is going to serve as an avenue to raise the level of corruption in the sector.
Many of the operators in the downstream sector of the petroleum industry who spoke with BusinessDay but do not want their names mentioned for fear of intimidation, advocate for complete deregulation of the sector so that there can be sanity and transparency in it operations.
They say NNPC as government agency is the only one that will administer the subsidy, and express doubt if there can be any transparent in in its dealing, as the corporation may not be able to resist pressures from government officials who want supports for their surrogates through the subsidy exercise.
Subsidy they say attracts fraud, and in this time of election part of the money may be shared to briefcase oil operators cum politicians who are working for the re-election of the present government through inflated volume of petroleum products brought into the country.
They cite the claim by the NNPC that the country is consuming about 60 million litres daily as grossly over inflated figure meant to remove money from the system.
They want the government to channel the money for the subsidy to Education, Health and roads, among other things.
They however agree that whatever negotiation the government is doing with the organised labour on wages if it fails to take into consid- eration that there will be increase in price of petrol by whichever party that wins the election, will render all the efforts useless.
Because, according to them, increasing the price of fuel without the necessary palliatives to cushion the effect of the increase will make any wage increase now useless.
Muda Yusuf, directorgeneral, Lagos Chambers of Commerce and Industries (LCCI), says: “Perhaps, the biggest fiscal burden on the economy today is the petroleum subsidy regime. It is a big hole in the finances of government. It puts tremendous pressure on the foreign reserves and the foreign exchange market, just as it exerts immense stress on the nation’s treasury.”
He says it remains a cause for concern that the subsidy regime has subsisted, especially at a time when the economy is facing unprecedented fiscal challenges; at a time when productivity in the economy is constrained by acute infrastructure deficit; at a time when public institutions are finding it hard to pay salaries. There cannot be a better example of resource misapplication, he says.
According to Yusuf, there are two components of this: “The first is the genuine 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 transparency problems inherent in the fuel subsidy administration, including the petroleum equalisation policy. For several years, the economy suffered severe bleeding from this phenomenon.”
He says one of the critical elements of the oil and gas sector reform, particularly the downstream sector, is the complete deregulation of the sector. This is the spirit of the Petroleum Industry Bill, which regrettably, has again got stuck in legislative process. The reform of the oil and gas sector will create a number of advantages for the economy.
The Bismarck Rewane committee appointed by the Federal Government will not be recommending any particular minimum wage for the federation but would instead study and recommend ways that an agreed minimum wage can be implemented with the barest disruption to the economy, Businessday has learnt.
The Technical Advisory Committee on the Implementation of an Increase in the National Minimum Wage was inaugurated by President Muhammadu Buhari on Wednesday and many began to claim that it was up to the team to be led by leading economist and CEO of Financial Derivatives Company, Rewane, to come up with an acceptable minimum wage for Nigeria.
However, our correspondent who has been given insight into the work of the committee reports that the way the work of the committee has been structured, it was clear that the committee would be concerning itself with determining what level of revenue gap will ensue on the basis of the implementation of the national minimum wage and how this will impact on the nation’s revenue structure.
The committee, once it has determined the resulting revenue gap, will aim to figure out how to fund this gap, whether by debt, asset sale, or other means.
According to a senior government official, the third area of work for the committee is to “to study the impact of the possible revenue gap on Nigeria’s macroeconomic stability and how the issue of a national minimum wage can be leveraged to link productivity measurement as well as other measures of efficiency in government”.
Fourthly, the committee members will also come up with how “the identified revenue impact could play out in the time of oil price collapse so that the nation does not assume a false sense of security at a comfortable oil price level”.
Organised Labour and the Federal Government have been at loggerheads over a new minimum wage. Current minimum wage is N18,000 ($50) and has remained so since 2011 when it was last reviewed. The Nigerian Labour Congress (NLC) and other labour unions are asking the Federal Government to increase the minimum wage to N30,000.
The minimum wage issue has divided the tiers of government, with state governors saying they would not be able to pay the N30,000 minimum wage. They are pressing the view that states should be permitted to determine their own minimum wage outside the parameters to be set by the Federal Government in the proposal it plans to send to the National Assembly on or before January 23.
There are also concerns about how to ensure adoption of the new national minimum wage by the private sector, especially given the different layers and sizes of the private sector organisations.
The committee has four weeks within which to submit its report and it is working with global experts from professional firms like PWC and KPMG, who will be helping to validate some of the assumptions and data that the committee may want to use.