Charles Soludo, Governor of Anambra State, has asked the Federal Government to stop imposing the cost of petrol subsidy on states
According to the governor, petrol subsidy is a policy of the Federal Government and should therefore be borne by the Federal Government alone and not the federation.
This is as the World Bank on Tuesday projected that Nigeria’s petrol subsidy could cost as much as N5.4 trillion in 2022 alone, which the bank observed is higher than all the resources that are allocated for health, education and social protection put together.
Soludo, speaking during the launch of the World Bank Nigeria’s Development Update in Abuja, noted that petrol subsidy currently gulps up to N3 trillion and each state commits at least N50 billion naira from its revenue for ‘unsustainable subsidy ‘.
The former governor of the central bank, while insisting that the petrol subsidy be removed as quickly as possible, noted that the policy has not had any effect on ordinary Nigerians, adding that more citizens were falling into poverty every day. He noted that the fiscal deficit would continue to rise as revenue from oil shrinks further.
“Last month, zero was what we received from the federation account coming from oil; we have reached the end of the road. The petrol policy is a Federal Government policy; the Federal Government decided that it wants to subsidise petrol, why do you have to charge it on the sub-national, they should charge it on the revenue of the Federal Government, not on the federation.
“Spending on security is for the whole country but borne by the Federal Government, the federation government makes policy for humanitarian services that benefit the whole nation and they bear it. There is a clear difference when the Federal Government decides to pursue a policy, then it pays for it not as a federation for Nigeria. If you want to do that, then it has to be a decision taken by the federation of Nigeria but in this case, it is not. It is taken arbitrarily by the Federal Government and charged on us,” Soludo stated.
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“If you continue with the subsidy, the central bank will continue to give money and it’s a cycle. Fiscal deficit will continue to rise and for the Federal Government to pay bills, it has to resort to other ways and means, and the ways and means continue to fuel inflation and continue to depreciate exchange rate,” Soludo further said.
Zainab Ahmed, minister of finance, budget and national planning, however, argued that fuel subsidy should not be borne by Federal Government alone because petrol is consumed by Nigerians across the country. She, however, said the best solution is to remove the subsidy completely and urged the National Economic Council (NEC) to push further for its removal.
The minister hinted that the Federal Government has designed another programme which has gotten its first level of approval and is implementing some reforms to increase oil revenue. She said: “If we can take all the subsidies away that will be a huge benefit for the country, it has put huge fiscal pressure on the Federal Government.”
While addressing concerns on how the money from subsidy will be utilised, the minister pointed out that the Federal Government currently borrows to pay subsidy and it not only comes from the revenue of the Federal Government. “This subsidy is not just revenue from government, it is money we are borrowing, so if we don’t have this subsidy on the budget, we don’t need to borrow,” she said.
Marco Hernandez, the lead economist for Nigeria at the World Bank during the presentation of the report projected that federation transfers to states will come down in 2022 in nominal terms compared to last year.
“The only state that is actually expected to receive higher Federation transfers is Lagos, all the other 35 states will on average lose 10 percent,” he said.
According to him, Nigeria has recorded some growth from non-oil which is boosting economic growth but the oil sector is dragging the economy.
Dakuku Peterside, a former member of the House of Representatives, said petrol subsidy removal was one of the recommendations of the Nigeria Economic Summit Group (NESG) 25 years ago, but Nigeria has not made any headway. “We have to be careful whether as a regulator or institution in charge, we have to go behind the numbers otherwise you end up financing fraud. The biggest consumption of foreign exchange in terms of goods and services is petrol. If you are in charge of something be bold enough, to tell the truth, and the fact to the government,” he said.
“Is it fair that Lagos consumes the largest share of the subsidy and the poorest of the poor in the north pay for rich consumers in Lagos? Government is robbing the poor to make the rich richer, let’s call a spade a spade,” he added.
