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Fuel subsidy: Nigeria Federal Government adjusts 2012 Budget
THE recent removal of the subsidy on the Premium Motor Spirit (PMS) better known as petrol which subsequently led to an increment of the pump price of petrol from N65 to N97 after much hue and cry from the public must have forced the Federal Government to reconsider certain figures in the 2012 budget proposal it had earlier forwarded to the National Assembly late last year.
The N4.7trillion budget proposal currently before the National Assembly has no provision for fuel subsidy, owing to the government's original plan to phase out the subsidy regime.
The Minister of State for Finance, Dr. YerimaNgama, told the House of Representatives Ad Hoc Committee investigating the subsidy regime last Thursday that government would have to rework the 2012 budget.
He said this was to make provisions for subsidy not included in the proposal already before the legislature.
Ngama, who is the Chairman of the Federation Account Allocation Committee (FAAC), however, explained that the review of the budget would be done after the convening of another FAAC meeting to agree on the issue.
He stated that at the last FAAC meeting preceding the withdrawal of subsidy, all the parties had agreed that no funds would be taken from the Federation Account to subsidise fuel.
Ngama added that since events had overtaken the position of FAAC, the members would have to meet and agree to approve funds for subsidy.
"he Federal Government will have to submit another budget to the National Assembly after the meeting of FAAC.
"At N97 per litre of petrol, it means there is going to be partial subsidy," Ngama said.
New figures underway
The Minister of Finance, Dr. NgoziOkonjo-Iweala, who made a second appearance before the committee same Thursday, confirmed that the total amount spent on subsidy in 2011 up to December 31, was N1.4trillion.
As of October last year, she said the figure was N1.3trillion.
Okonjo-Iweala also confirmed that the budget would be reviewed to include a vote for subsidy.
According to her, government will now do a "partial" implementation of the Subsidy Re-Investment and Empowerment programme since it has to budget for subsidy.
She, however, did not say how much of the government's share of the N1.4trillion would be put in the budget to offset the difference between N141 and N97 petrol prices.
The Chairman of the House committee, Mr. Farouk Lawan, put a direct question to Okonjo-Iweala in a bid to resolve the controversy surrounding the deduction of crude oil sales by the Nigerian National Petroleum Corporation (NNPC) to pay itself for the products it imports.
The NNPC deducts its share of subsidy on imported products before remitting the balance of crude sales to the Federation Account.
When asked who authorised such deductions, the minister replied that she did not know.
"We have not been able to answer how they get authorisation. This was a practice that was kicked in; I am afraid I can't tell you," she stated.
In 2011, the NNPC deducted N673.9billion to pay itself for subsidy, while the total subsidy deduction for 2006 to 2011 was N1.5trillion, covering 46billion litres of products it imported within the period.
The Group Managing Director of the corporation, Mr. Austin Oniwon, had told the committee last Wednesday that it was allowed under the Appropriation Act and the NNPC Act to deduct for subsidy.
The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, claimed same Wednesday that it was the Ministry of Finance that authorised the payments after the Petroleum Products' Pricing Regulatory Agency (PPPRA) had verified the products imported.
But, Okonjo-Iweala insisted that the NNPC actually deducted its subsidy share before bringing the balance of the crude sales to the notice of FAAC.
However, she said she was not the minister when the deductions in question took place.
She also informed the committee that her ministry did not play any role in the approval of contracts for fuel importation.
Senate tasks MDAs
To reduce wasteful expenditure, the Senate, has mandated all Federal Ministries, Departments and Agencies (MDAs) to submit their expenditure profile which outlines how funds would be expended as from the 2012 fiscal year to the National Assembly.
This directive was contained in the report of the Joint Committees on Finance, Appropriation and National Planning, Economic Affairs and Poverty Alleviation, which considered the 2012-2015 Federal Government Medium-Term (MTFF) and Fiscal Framework and Fiscal Strategy Paper (FSP).
It would be recalled that President Goodluck Jonathan last October, presented the MTFF and FSP to the National Assembly for consideration in compliance with the Fiscal Responsibility Act of 2007.
SenatorBasseyOtu, chairman of the Committee on Finance, during the presentation of the report, noted that the MTFF and FSP outlined the principal components of proposed government revenue and expenditure plan for 2012-2015.
The Senate subsequently approved the committee's recommendations that "the MDAs should submit their expenditure pattern with clearly defined performance action plan, concrete milestone and measurable performance indicators to the National Assembly.
"With the partial deregulation of the downstream sector of the petroleum industry, all savings accruals must be captured in safety net for targeted expenditures and appropriated by the National Assembly."
It also directed that there should be a freeze on "increase in allocation to government overhead expenditure throughout the aforementioned period."
New oil benchmark
The Senate also made it known that it will adopt a $75 per barrel oil price benchmark in the 2012 budget, up from the $70 proposed by the finance ministry, which would give the government more money to spend and leave less for savings.
Nigeria saves money into an Excess Crude Account (ECA) over the benchmark price in its budget to cushion Africa's second largest economy against potential oil price shocks. Oil prices were trading on Friday at around $100 per barrel.
President Goodluck Jonathan attempted to remove fuel import subsidies on Jan. 1 but had to partially reinstate them under intense pressure from the public, which staged 8-days of strikes and mass street protests.
Raising the benchmark price would help meet the unaccounted for costs associated with the fuel subsidy but leaves less money in the ECA and for a recently set-up sovereign wealth fund.
The ECA contained more than $20 billion in 2007 but despite a period of record high oil prices since, the account has been drained and only contained $3 billion at the end of last year.
The Senate made its recommendation on the benchmark oil price in a review of the government's 2012-2015 medium term fiscal framework, which was submitted to lawmakers in October last year. The Senate approved the other major figures proposed in the government's fiscal plan.