- overhauls NNPC
President Muhammadu Buhari will soon announce major economic reform programmes of his administration among which include total removal of petrol and kerosene subsidy.
The reform, which will involve restructuring of nation’s strategic infrastructure, is aimed at reducing the cost of governance in view of the current dwindling revenue from crude oil sales and mounting debts at both tiers of government.
Sources within the presidency told Nigerian Pilot Sunday at the weekend that part of the upcoming economic measures are: the complete removal of the contentious petrol and kerosene subsidies, pruning down of federal ministries, overhaul of the Nigerian National Petroleum Corporation, NNPC and sale of the nation’s existing refineries.
Fuel subsidy, which gulps billions of dollars every year, 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.
On the one hand, while kerosene is officially fixed at N50 per litre, the end users pay as much as N150 despite the existence of subsidy, a case of double jeopardy for the government and consumers, but a source of massive income for marketers and fuel import contractors.
Other planned actions by President Buhari include: complete overhaul of the Nigerian National Petroleum Corporation, NNPC and its subsidiaries, as well as pruning down of the existing 28 federal ministries to about 25.
These economic reform programmes are contained in the report of the All Progressives Congress (APC) transition committee led by former super permanent secretary Alhaji Ahmed Joda, which submitted its report on June 12 to the President.
The transition committee had in its report advised Buhari to work out “detailed and coordinated” plan to remove subsidy on premium motor spirit, PMS, otherwise known as petrol.
The advisory body, whose report is expected to influence the policy direction of the new government, also recommended that kerosene subsidy should be scrapped immediately.
The committee’s report which was made public, at the weekend, by an online medium ‘The CableNews’, also asked Buhari to privatise the nation’s four refineries by adopting the Nigerian Liquefied Natural Gas, NLNG, as a model.
NLNG is jointly owned by the Nigerian National Petroleum Corporation, NNPC, 49 per cent, Shell Gas B.V. 25.6 per cent, Total LNG Nigeria Ltd 15 per cent and Eni International 10.4 per cent, but it is not managed by the Nigerian government, unlike the nation’s refineries which are solely managed by the NNPC.
According to the Committee, these recommendations are intended to “eliminate waste and redirect resources to fuel development, growth and job creation”.
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 has asked 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 include reviewing all Nigerian Petroleum Development Company, NPDC operations and agreements 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. Reviewing 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. Commencing 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.”
Incorporating the existing joint ventures, JVs and reducing federal government stake to 49per 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. Commencing an 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.
Also recommended is government providing relevant security hardware and personnel to eliminate vandalism to critical pipeline infrastructure and unauthorised offshore vessel loading amongst others.