NEC Defers Decision on Subsidy Removal to June


THE National Economic Council (NEC) says it is yet to take a position on the removal of subsidy on petrol stressing that the decision will be made in June when the provision for its payment in the 2022 budget expires.

Vice President Osinbajo

The NEC, chaired by Vice-president Yemi Osinbajo, and composed of governors of the 36 states of the federation, had its first meeting in 2022 at the Conference Hall, Presidential villa, Abuja on Thursday, with the declaration that since the Nigerian National Petroleum Company (NNPCL) has become a limited liability company, it must be run differently.

Briefing State House correspondents on the outcome of the meeting, Nasarawa State governor, Abdullahi Sule, who was flanked by his Edo State counterpart, Godwin Obaseki, said it was understandable that the provision for the payment of the subsidy is made in the 2022 budget only until June.

Governor Sule stated that any decision on the removal of subsidy will be taken after the budget provision runs its course in June. He added that even though NEC has been having conversation on the matter, it was yet to take a position on it.

“We didn’t make any presentations on this because there has not been a decision. But in reality, all of us Nigerians know that there is now the Petroleum Industry Act. And NNPC has now become a limited liability company. So, NNPC will run differently. So if the Minister of Finance provides for six months, you probably can understand part of the reason for provision of six months before NNPC fully takes off and at that moment, that’s when decisions will be made.

“But I want to make the correction that it is not governors who are making recommendation. It is actually a NEC committee, you know, which comprises of all the other people that are looking at this and no decision has been made and probably by the time a decision will be made, you know, the Petroleum Industry Act would have fully taken charge, and it will not require any recommendation from anybody,” Governor Sule said.

Also responding to questions, Obaseki pointed out that petrol, which sells for N162-165 per litre in Nigeria, sells a hundred per cent higher in other countries. He noted that the federal government was spending about N2 trillion on petroleum subsidy, an amount, he said could have been used for other purposes.

The NEC, Governor Obaseki argued, therefore wondered whether that should be allowed to continue in a situation where only two-third of the states of the federation consume the subsidy.

“As you all know and aware, the issue of subsidy has been one matter that NEC has deliberated on, for more than a year now. There was an ad hoc committee, which was set up by NEC headed by Governor el-Rufai that included members of the executive arm of government that worked on recommendations as to what we should do about the costs of PMS locally because as you realize, as has been told us, the cost of PMS in Nigeria today is about N162 per litre, whereas every other country surrounding Nigeria is selling the same product at more than 100% of the cost in Nigeria.

“The country, as at last year, spent in excess of almost N2 trillion subsidising petroleum products. That is money that could have gone into building roads, money that could have gone into healthcare and education. And so for NEC, the arguments have been put out, should we continue this regime of spending money we do not have to subsidize the living standards of only those who have vehicles? And when NEC looked at some of the analysis last year, we then realized that less than one third of the states of this country consume two thirds of the subsidy. So the issue of equity also came up.

“All of these findings were presented to NEC and NEC has had several deliberations. And the deliberations are still on-going. So, no, NEC has not come up with any decision yet. I think recommendations have also been made to the President. That is what I am aware has transpired so far,” he said.

Asked if the complaints of governors on illegal deductions to pay subsidy was addressed, the governor said: “No, no, no, no! What was presented to NEC today was a document for us to note the decision that was reached by the FAAC – the Federation Account Allocation Committee. They had met; they had brought up the constitutional issue about deductions of 13% derivation, which should have occurred before any expenditure.

“So, this was a constitutional issue, which had been dealt with. And it was realized that refunds had to be made as a result of those unconstitutional deductions and it was agreed how those refunds should be paid back whether it was to be paid in three years or in four years or in five years. That was what was brought to NEC for noting.”

Asked how subsidy deductions were affecting states, the Edo governor said: “Well, I’ll put it very succinctly. As at last year, NNPC was supposed to contribute N200 billion a month to FAAC for distribution to the states. But because of the payment of subsidy, NNPC was unable to put that money into FAAC for distribution, which means less money going to the States and less money going to the federal government.”


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