Joda Committee Ask Buhari To Remove Fuel Subsidy
The Presidential Transition Committee has reportedly asked President Muhammadu Buhari to work out “detailed and coordinated” plans to remove subsidy on premium motor spirit (PMS), otherwise known as petrol.
The committee, led by Alhaji Ahmed Joda, whose report is expected to influence the policy direction of the new government, also recommended that kerosene subsidy be scrapped immediately.
The committee, in its report, according to Cable.com, also asked Buhari to privatise the nation’s four refineries by adopting the Nigeria Liquefied Natural Gas (NLNG) model.
Nigeria LNG is jointly owned by the Nigerian National Petroleum Corporation (NNPC), 49 per cent on behalf of the Federal Government; Shell Gas B.V, 25.6 per cent; Total LNG Nigeria Limited, 15 per cent; while ENI International, owns a 10.4 per cent stake.
This, the report said, would “eliminate waste and redirect resources to fuel development, growth and job creation.”
Fuel subsidy has been a very volatile issue in Nigeria’s political economy since the mid-1980s, leading to riots and demonstrations, because of the resultant increase in pump prices of petroleum products. But with dwindling oil revenue, ballooning subsidy claims and growing national debt, there is an emerging consensus that the expenditure can no longer be sustained.
Attempts by the administration of former President Goodluck Jonathan to remove the subsidy in 2012, were greeted with nationwide protests amidst allegations of scam in payments to marketers running into trillions of Naira. Jonathan eventually reversed the policy.
The Federal Government currently owes oil marketers over N200 billion, a development that recently resulted in a nationwide fuel crisis as they cut down on importation.
With another N400 billion owed in salary arrears to federal workers, the Joda committee according to cable.com, wants Buhari to pay arrears of salary and fuel subsidy, “failing which it could lead to mass labour unrest which could undermine the goodwill of the Administration.”
The committee recommended that all outstanding subsidy liabilities should be audited and the verified claims paid to marketers to “ensure PMS is readily available in the market to avoid further fuel queues.”
Other key recommendations concerning the oil and gas sector, cable.com reported, include: Reviewing all operations and agreements of the Nigerian Petroleum Development Company (NPDC), especially the Strategic Alliance Agreements executed with third parties. This is to recoup any unearned royalties, taxes and any potential over-lifting under these agreements. This is one of the issues raised in the recent KPMG audit of NNPC.
There is also the need to review all pioneer status granted and tax waivers and renegotiating or revoking concessions granted in order to recoup unpaid taxes. The Nigerian Investment Promotion Council (NIPC) was recently accused of indiscriminately granting pioneer certificates, which led to an estimated loss of $20 billion revenue over five years.
There is also the call to begin a full scale re-organisation and restructuring of NNPC and its subsidiaries to reposition it as a globally competitive national oil company and “significantly enhance reserves, output and revenues while creating major linkages with other sectors of the Nigerian economy.”
Also recommended is the need to incorporate the existing joint ventures (JVs) and reducing Federal Government stake to 49 per cent “which should be listed on the Nigerian Stock Exchange”. This is expected to raise significant revenue from asset sale, relieve the government of the burden of cash call obligations and facilitate investment for accretion of reserves.
The committee also wants government to audit of all Offshore Processing Agreements and Crude Swap Agreements entered by NNPC, to identify and claim any reimbursements for excess crude lifted vis-a -vis products delivered based on a fair and transparent audit process.
The committee equally recommended the provision of relevant security hardware and personnel to eliminate vandalism to critical pipeline infrastructure and unauthorised offshore vessel loading.
The Joda committee submitted its report on June 12, recommending, among other things, that Buhari should reduce the number of ministries to 19 from the current 28.