Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, yesterday, insisted that the federal government would commence a phased removal of petrol subsidy from June next year. Ahmed said provision for the removal of the subsidy had already been made in the 2023-2025 Medium-Term Plan.
Speaking at a media briefing at the close of the 28th Nigerian Economic Summit (NES#28), themed, “2023 and Beyond: Priorities for Shared Prosperity,” Ahmed described fuel subsidy as a double jeopardy for the Nigerian economy, which must be removed.
The minister’s comments followed an earlier advisory by World Bank Country Director for Nigeria, Mr. Shubham Chaudhuri, who maintained that subsidy remained the white elephant contributing to Nigeria’s macroeconomic woes.
Speaking during an interactive panel session on the, “Future of Fiscal Policy,” Chaudhuri said restoring the health of fiscal policy was key to actualising the country’s full potential. He said phasing out fuel subsidy could provide additional revenues for the government to fund its deficit.
The World Bank country director said the country currently required an “emergency operation,” adding, “Nigeria has to stop bleeding now.”
He also said Nigeria needed to spend more on the right things, raise more revenues and spend better so as to inspire the citizens to pay their taxes willingly.
Meanwhile, the federal government assured states that they would receive the last tranche of the performance-based grants, including N1 billion withheld by the Central Bank of Nigeria (CBN), through the naira exchange deficit under the World Bank-assisted States Fiscal, Transparency, Accountability and Sustainability (SFTAS) programme.
Ahmed disclosed this at a dinner in celebration of SFTAS’ achievements and presentation of awards to best performing states.
The minister said at the closing media briefing for NES#28 that the government needed to do more to properly educate Nigerians on the need to stop the subsidy regime, particularly by highlighting its negative effect on the economy and what they stood to benefit from its removal.
She pointed out that the country had been borrowing to fund petrol subsidy, adding that this has become unsustainable amid the present fiscal challenges.
Specifically, she said fuel subsidy was a fiscal drain, stressing the need to improve public finance management.
The minister also said the government would strengthen its dialogue with citizens, especially the civil society organisations and labour unions, to get their support preparatory to phasing out the fuel subsidy regime.
Analysts at the summit also proffered solutions to the country’s foreign exchange challenges.
In a breakout session, with theme, “Monetary Policy Management in Challenging Times,” Group Managing Director, Parthian Partners, Mr. Oluseye Olusoga, urged Nigeria to return to the path of productivity in order to address the foreign exchange crisis.
Olusoga said the solution to the problem could not be achieved by shifting blames among government agencies, but called for synergy between the monetary and fiscal policies that will ensure that the nation focused on increased local production.
He said the pressure on Nigeria’s forex occurred when foreign investors came in to buy securities and, in the bid to repatriate their money, demand for forex, which is often more than the amount they invested in the economy, thus, causing distortions in the forex market.
Executive Secretary/Chief Executive, Nigerian Investment Promotion Commission (NIPC), Mrs. Saratu Umar, stressed the need for Nigeria to channel investment to the non-oil sector for massive forex inflow. Umar argued that diaspora remittances should be channelled into the non-oil sector, stressing that portfolio investment has never helped the country in any form.
She said, “Nigeria has abundant cash crops of cocoa, coffee, cotton, groundnut cassava hides and skins, among others, that if well tapped and processed are capable to increase the nation’s foreign exchange earnings that will impact positively on the country’s foreign reserves and by extension, Gross Domestic product (GDP).”
On his part, the erstwhile President, Manufacturers Association of Nigeria (MAN), Mr. Mansur Ahmed, said the COVID-19 pandemic affected manufacturing all over the world, but the intervention of the Central bank of Nigeria (CBN) helped the industry achieve some degree of resilience.
According to him, without the government’s intervention, the sector would have witnessed more troubles.
FG to Disburse Last Tranche of Word Bank-assisted Grants to States
The federal government assured that states would receive the last tranche of the performance-based grants, including N1 billion withheld by the Central Bank of Nigeria (CBN), through the naira exchange deficit under the World Bank-assisted States Fiscal, Transparency, Accountability and Sustainability (SFTAS) programme.
Ahmed, who disclosed this at a dinner to celebrate SFTAS’ achievements and present awards to best performing states in the successive Annual Performance Assessments (APAs) conducted over the last three years.
The four-year programme (2018-2022) was designed to establish a system of performance-based grants to states, conditional on sustained implementation of fiscal management plans.
The sum of N471.9 billion had so far been disbursed as grants to states, which met the Disbursement Linked Indicators (DLIs) and Eligibility Criteria.
Ahmed said, “Your Excellences, I am pleased to inform you that in the next few weeks, your states will receive the last tranche of performance-based grants, including the sum of N1 billion withheld by the central bank through the naira exchange deficit, thus, bringing to a close the performance for results grant, even though the technical assistance component will continue to be delivered by implementing agencies and partners till June 2023, when the programme will finally wind down.”
Many state governors, development partners, top government functionaries, and other dignitaries attended the award dinner.
The minister noted that since inception, the programme which enjoyed very high political visibility, had continued steadily with strong performance and demonstrable high-level of ownership by states and non-state actors, especially the civil society and the media.
The primary objective of the programme, she said, was to instil a common set of fiscal behaviour and standards and facilitate the widespread adoption of good practices in fiscal and public financial management across the states, while respecting their fiscal autonomy.
She stated, “These good practices include preparation of citizen-based budgets, timely preparation and publication of annual budget and audited financial statement, as well as adoption of National Chart of Account, amongst other Disbursement Linked Indicators (DLIs).
“There is no gainsaying the fact that over the years, SFTAS has achieved its set objectives and recorded significant milestones in improved fiscal transparency and accountability; increased domestic revenue mobilisation; increased efficiency in public expenditure; and strengthened debt management in line with the already imbibed ideals.”
Ahmed said these important milestones called for celebration, and explained that she was of the belief that with the resounding success recorded, especially the wholesale adoption of the SFTAS Charter by all the 36 state governors, the programme ideals already entrenched in the fiscal governance space at the sub-national level would continue to enjoy a place of pride in the conduct of fiscal governance, even in the absence of any further fiscal incentives.
In his remarks at the event, Chaudhuri described SFTAS as a flagship programme, which lived up to expectation.
While commending the deep involvement of both the federal and state governments, and underscoring the need to cement the relationship between both levels of government in order to deepen accountability and transparency, he said, “states are where the action is. The states are closer to the people. Fiscal management is the beginning; then other things follow”.
On his part, Sokoto State Governor Aminu Tambuwal, who is also Chairman of the Nigeria Governors’ Forum (NGF), said SFTAS grants were very useful. Tambuwal added that states had begun to streamline their operations, cut cost, publish their accounts, and deepen citizen engagements.
Tambuwal also stated that the release of N1.2 billion to states to fight the COVID-19 pandemic was timely and vital. He said many states had reviewed their laws to improve tax payments, while deliberate efforts were made to bolster internally generated revenues and publish performance report every quarter.
He said states had signed a fiscal responsibility charter and were willing to work with partners and stakeholders to move forward.