2012 Budget: Finally, Fg Removes Fuel Subsidy, Proposes N4.8tr

Nigerian workers are about to get an extended vacation for free. Let he who has ears hear.

This subsidy issue has permanently damaged many a government.

Not even the could-care-less Abacha had two heads enough to remove petroleum subsidies.

http://www.sunnewsonline.com/webpages/news/national/2011/oct/05/national-05-10-2011-001.html
•To freeze overheads
•To focus on power, agriculture, education, others
From ADETUTU FOLASADE-KOYI, Abuja
Wednesday, October 05, 2011


L-R: Governor Murtala Nyako of Adamawa State, Mr. Femi Otedola, Chairman, Forte Oil, Mr. Aigboje Aig-Imoukhuede, Managing Director, Access Bank and former Managing Director of Zenith Bank, Mr. Jim Ovia, during a meeting of the Presidential Economic Team, in Abuja, yesterday.
Photo: Sun News Publishing 
More Stories on This Section

The Presidency has indicated plans to remove the controversial fuel subsidy as from 2012 fiscal year. The Federal Government claimed it was subsidising petroleum products by over N600 billion yearly.

If removed, critics of the fuel subsidy removal argued that the pump price of fuel may rise from its current N65 to between N120 and N150 per litre.
The removal may likely feature in the N4.8 trillion budget estimate President Goodluck Jonathan may present to a joint sitting of the National Assembly in November.
Although no date has yet been set for the budget presentation, the Federal Government is planning a freeze on allocations/overheads as from 2015.

Government is projecting total savings of N1.2 trillion, part of which would be deployed to providing “safety nets for the poor” in the society as well as provision of infrastructure through the Sovereign Wealth Fund (SWF) .
These proposals are contained in the 2012-2015 Medium Term Fiscal Framework (Medium-term revenue framework and medium-term expenditure framework) and Fiscal Strategy paper submitted by the President to the National Assembly, a copy of which was obtained by Daily Sun on Tuesday.

The MTEF was prepared by the Budget Office in the Federal Ministry of Finance.
In a September 22 covering letter to Senate President David Mark, President Jonathan noted that the submission of the 2012-2015 medium-term fiscal framework and 2012 fiscal strategy paper are “statutory requirements for submission to the National Assembly under the Fiscal Responsibility Act, 2007.”

The President equally noted that the MTEF was prepared against the backdrop of global economic uncertainties. 
Details contained in the MTEF show that a baseline benchmark oil price of $75 would be used for the 2012-2015 budgets with average exchange rate pegged at N153 to a dollar.

Exchange rate for the 2011 budget was N150. 
This would be the benchmark that would be used for annual budgets up till 2015 fiscal year while oil production of 2.480 million bpd, 2.500mbpd, 2.575mbpd and 2.600mbpd will be adopted for the 2012-2015 fiscal years.
The MTEF reads further: “Government will continue its strategy of fiscal consolidation by which expenditure, particularly on recurrent spending will be reined in and directed to its most productive and growth-enhancing use while efforts will be intensified to increase revenue.

“Although aggregate expenditure is expected to increase from N4.8 trillion in 2012 to N5.18 trillion in 2015, concerted efforts are being made to make savings from overheads as allocations will be frozen in 2015.
“Capital spending will increase marginally from N1.3 trillion in 2012 to N1.6 trillion in 2015 as government intends to leverage on PPP-type arrangements to supplement capital allocations from the budget.

“A major component of the policy of fiscal consolidation is government’s intent to phase out the fuel subsidy beginning from the 2012 fiscal year. This will free up about N1.2 trillion in savings, part of which can be deployed into providing safety nets for poor segments of the society to ameliorate the effects of the subsidy removal.
“The accrual to the SWF as a result of the withdrawal of the fuel subsidy will also augment funds for critical infrastructure through the infrastructure window of the SWF.”

In an overview of the performance of the 2011 budget, the MTEF noted that “NASS passed a budget of N4.972 trillion in March 2011, which was deemed too large and the resultant deficit of 4.23 percent of GDP…” 
Also, the report noted that although implementation of the 2011 budget is still on-going, “reports from the OAGF indicate that the FGN revenue fell below target by N231 billion as of August 2011, mainly due to shortfalls in non-oil revenue as oil revenue receipts were on target.”

Over the 2012-2015 period, government will focus a large portion of its spending on key sectors which include security, infrastructure (including power), agriculture, manufacturing, housing and construction, entertainment, education, health and ICT.
The MTEF and FSP are statutory documents which articulate government’s revenue and spending plan as well as its fiscal policy objectives over the period.

The MTEF and FSP is comprised of the macroeconomic framework which gives an analysis of key macroeconomic trends of recent years and provides insight on future policy direction.
The FSP outlines fiscal strategy, analyses expenditure and revenue figures for the years under review, details the assumptions underlying these projections, reviews the previous budget and gives an overview of consolidated debt and possible fiscal risks.

Interesting.

Meen! theres problem o!

GEJ cannot remove fuel subsidy. How will the common man survive? In Nigeria, once the fuel prices increase, it is IMMEDIATELY followed by hyper-inflation. So what is the point of the new minimum wage?? The Poor will be poorer, the middle class will be poor and the elites(politicians and their friends) will certainly get richer! GEJ knows he just cannot do this. The industrial action that will follow suit will consume the country.

Removal of subsidy will be a spark that will ignite a revolution in Nigeria. Quote me on this next year!!!

The Rich will always find other means of filling up their pockets. What I worry is will the poor man be able to fill his generator? Will he be able to cook 2 meals a day? Will he still be able to catch that bus ride?

What I've just read is a beautiful outline. The so-called fuel subsidy goes straight into a few fuel importers pockets anyway; after which some promptly drive their tankers at top speed into Niger, Chad, Cameroon or Benin Republics. . . Double killing at the expense of wider society.

The crux of the plans lie below. The bolded must not fail:

“A major component of the policy of fiscal consolidation is government’s intent to phase out the fuel subsidy beginning from the 2012 fiscal year. This will free up about N1.2 trillion in savings, part of which can be deployed into providing safety nets for poor segments of the society to ameliorate the effects of the subsidy removal.
“The accrual to the SWF as a result of the withdrawal of the fuel subsidy will also augment funds for critical infrastructure through the infrastructure window of the SWF.”

For the first time, it would seem that Nigeria is actively considering some sort of welfare scheme for the less privileged. Better the money is paid out to the poor than going into some "I don't phucking care about almajiri's" alhaji's pocket; the equivalent in the South would be those who don't give a damn about the omo ota's in Lagos. We've had enough of that wicked outlook to life, maybe Nigerians can truly learn to smile at last.

They want 1.2 Trillion in savings?? Why not first get rid of the multiple craft in the Presidential fleet? Remove all the myriad of SSAs, SAs? Get rid of the hundreds of bulletproof limousines? Save the nation a few hundred Billion by simply cutting down the number of federal ministrys to max 18 and compelling states to "fight" for the substantive senior posts on merit basis? Cut down legislators emouluments and even get them to serve on part-time basis? Tighten the borders to reduce smuggling etc? I can imagine dozens of ways that would amount to same figure being saved to the benefit of many and loss of few.

But self-sacrifice is NOT our way, is it? It seems better to push the pain on the down-trodden masses and yet, people expect such as boko haram to keep quiet while watching their little kids starve amidst plenty! And of course, MEND thugs get paid more than consistently serving civil servants of 20 years standing.

What is to come is definitely going to be worse than what has passed! I foresee GEJ being the first serving president who will be stoned in public & I wager the culprits won't be apprehended because they'll have the moral support of his own guard

Beaf:

What I've just read is a beautiful outline. The so-called fuel subsidy goes straight into a few fuel importers pockets anyway; after which some promptly drive their tankers at top speed into Niger, Chad, Cameroon or Benin Republics. . . Double killing at the expense of wider society.

The crux of the plans lie below. The bolded must not fail:

For the first time, it would seem that Nigeria is actively considering some sort of welfare scheme for the less privileged. Better the money is paid out to the poor than going into some "I don't phucking care about almajiri's" alhaji's pocket; the equivalent in the South would be those who don't give a damn about the omo ota's in Lagos. We've had enough of that wicked outlook to life, maybe Nigerians can truly learn to smile at last.

All these noble schemes in Nigeria have been proposed before, all ending in abject failure.
Please remind us of the reason why the billions we had in the Excess Crude Account were shared out to the Governors. Did they not claim that the money would be used to massively improve their states and provide a better life for the common man? Yet the money has since been completely embezzled!

At times when you blindly defend these nauseating plans, I wonder if you even realize that this is the same country that your children will inherit as their own.

^
So you want me to condemn without reason?
I can't even understand why you are equating the Sovereign Wealth Fund to state govts, they are very different things with no relationship between them.

Good news. . . .

The breakup of Nigeria is on schedule.

Role on 2015

I usually support GEJ and his government, but on this I must disagree. There is no condition under which this is a good idea. The so called subsidy is not there for economic reasons, it's there for social reasons. Whatever the cost the people deserve it. If people gain from it, then stop them. Anyone who opposes this has my support. It is another idea in the class of IBB's devaluation of the Naira that we have not recovered from.

Overdue.

I hope GEJ has plans to deal with labour, those people may start their fighting for the masses BS.

Beaf, are you in Nigeria? Are you Nigerian?

Masses, masses, masses!! Kerosene is already deregulated, so if the masses are not dying on the road because of that, what will change. Diiesel is already deregulated, so those who travel by luxurious bus and those who transport food have nothing extra to pay. Not saying it won't make things more difficult, but we should argue in a more focused and economic manner.

they should recover loot from kalu, odili, bafarawa et all to get the savings.

fresh foul air indeed

until the govt becomes accountable/ build refineries, no amount of bribe to NLC officials will make the masses agree to such

COMPAQ:

Masses, masses, masses!! Kerosene is already deregulated, so if the masses are not dying on the road because of that, what will change. Diiesel is already deregulated, so those who travel by luxurious bus and those who transport food have nothing extra to pay. Not saying it won't make things more difficult, but we should argue in a more focused and economic manner.

If you are a drinking man I would have bought you TWO cold ones, most of us just adopt cliches and kneejerk responses.

i luv this thread , Nigeria might soon break up,this absolute nonsense,who are they planning for the masses or their pocket, we are wiser now , they shd hav done this in the late 70's when everybody trusted the government,now nobody trust the holiest of the govt, they shd pocket their plan and just leave the subsidy ,or else this country wil boil, they think they can sweet talk us to accepting this useless plan of theirs, absolute rubbishhhhhhhhhhhhhhh
@beef ur are not a nigerian or probably u are a politician that stand to gain in this last episode of ANIMAL FARM ;

darkhand:

I usually support GEJ and his government, but on this I must disagree. There is no condition under which this is a good idea. The so called subsidy is not there for economic reasons, it's there for social reasons. Whatever the cost the people deserve it. If people gain from it, then stop them. Anyone who opposes this has my support. It is another idea in the class of IBB's devaluation of the Naira that we have not recovered from.

No O. You must never disagree with GEJ; everything he does is filled wisdom and unparalleled love for Nigerians. This is a major part of the transformation agenda that will make more billionaires in Nigeria and probably reduce the lifespan of 10s of millions of Nigerians that have a hand-to-mouth existence at the moment. You must continue that support O- it is all about FRESH AIR and TRANSFORMATION!

Why do people find it so easy to sell lies in Nigeria & with a straight face too?

How many Nigerians directly use diesel? How many directly use Kerosene? Convince me that 2 million of use use diesel or that 20 million use kerosene today!! Now please convince me that there are 1 million who will NOT feel the bite if PMS becomes a problem!

Why can't we just stop the "turning truth on its head scams"?

The removal of fuel subsidy can lead Nigeria to revolutionary, can't we construct new Refineries to stop importing clean products from overseas. I think the only solution in this country is construction refineries. enough is enough the subsidy is enough to build refineries, but there are people who doesnt want this country to grow.

It will be fight to finish, they should be ready for us. This is our opportunity for revolution people, be ready

We are not tackling the main issues, what happened to fixing the refineries or privatizing them. Let the forces of demand and supply determine the prices. No body is against removing subsidy, as long as we have steady power supply, good roads, add rail network to it . I am sure that if private firms build refineries, we will be paying less than the N65 . Just lik OBJ did to the telecom sector. Power, rail and refinery shld be privatised

Agent Okonjo Iweala!


As directed, ma.

Messiah. I dey laugh oo.

What about trillions of Abacha loot that was recently paid into Federal Government's Account by the Swiss bank, what about the increase in the price of crude oil during libya's war.

Anytime there is plenty the elite, PDP and GEJ barons share it all alone, but when there is problem Sanusi, Okonjo calls it a name that the poor man can nt interprete and share the burden on the masses. GEJ is a cause on NIG.

@ BEAF

Who are the owners of these Petrol tankers? (certainly not the masses). WHo gives them exist from Nigeria borders? (certainly not the masses). Then why should they be the one to suffer despite paying for everything the masses use through there nose. Certainly this is a invitation to the First Revolution in Nigeria by the BadLuck Ebele Jonatief Government. Why has this thief failed to concentrate repairing and building more refineries, when he can dash the movie industry billions. Certainly this guy gast no head.

They should try it and get more than has happened in Libya, Egypt and Tunisia

mrjingles:

If you are a drinking man I would have bought you TWO cold ones, most of us just adopt cliches and kneejerk responses.

Mr Jingles, I can take you up on that next time i'm in Lag o!!!! Lol!!

This is the Reuters News report on the proposal:

ABUJA, Oct 5 (Reuters) - Nigeria plans to end costly fuel subsidies in the 2012 fiscal year to release funds for infrastructure projects and to create jobs, while overall spending next year is likely to rise, according to plans sent for lawmakers approval.

Subsidising the cost of fuel, mainly diesel, petrol and kerosene, costs the government 1.2 trillion naira ($7.5 billion) in lost revenues but removing the support will be unpopular with many Nigerians who see it as the only benefit they gain from living in an oil-rich country.

Previous efforts to remove subsidies have resulted in nationwide strike action in Africa's most populous nation, where most people live on less than $2 a day. There have been several protests this year in anticipation of deregulation.

"A major component of the policy of fiscal consolidation is the government's intent to phase out the fuel subsidy beginning from 2012 fiscal year," said a 2012-2015 Medium Term Fiscal Framework (MTFF) and Medium Term Expenditure Framework (MTEF) paper.

"This will free up about 1.2 trillion naira in savings, part of which can be deployed into providing safety nets for poor segments of society to ameliorate the effects of the subsidy removal," the federal government document said.

The document is with the national assembly. How quickly lawmakers pass the plans will give an indication of how soon and the next budget will be ready for implementation.

The 2011 budget process was chaotic after lawmakers inflated spending plans before the president reduced them again, finally passing the budget in May.

Finance Minister and Coordinator of the Economy, Ngozi Okonjo-Iweala, has pledged to avoid the problems of the 2011 budget by getting the spending plans organised earlier.

$30 BLN 2012 BUDGET

The fiscal strategy paper hints that the government will forward a 4.8 trillion naira budget for 2012 to the national assembly later this month, up from around 4.5 trillion in this year's budget passed in May.

Nigeria only spends around a quarter of its budget on capital expenditure, meaning most of the billions of dollars it earns in oil revenues are spent keeping its government running.

However, capital expenditure looks set to rise slightly to 1.32 trillion naira in 2012 as a component of the overall budget, while this should improve as overhead allocations are to be frozen until 2015, the documents showed.

"Although aggregate expenditure is expected to increase from 4.8 trillion in 2012 to 5.18 trillion in 2015, concerted efforts are being made to make savings from overheads as allocations will be frozen till 2015," it said.

Okonjo-Iweala will need to persuade lawmakers to get the budget passed when it arrives at the national assembly but they have previously fought hard to defend recurrent expenditure levels, some of which make up their large wages and expenses.

The former World Bank chief has pledged to keep the fiscal deficit under 3 percent and if the MTFF is adhered to the deficit would be reduced to 2.69 percent next year.

"The Increase in capital expenditure is a welcome development, given the excesses of the recent past, in which recurrent spending was increased greatly, to the detriment of Nigeria's oil savings and wider macroeconomic stability," said Razia Khan, Head of Africa Research at Standard Chartered.

"Even more positive is the proposal to remove the fuel subsidy put to national assembly. The subsidy was expensive, responsible for significant distortions and rent-seeking opportunities in the Nigerian economy, with little overall benefit."

The 2012 budget will be based on the assumption of an ambitious average oil production of 2.48 million barrels per day and a benchmark price LCOc1 of $75 dollars per barrel.

Nigeria's current oil output is around 2.5 million bpd and the projections leave little room for manoeuvre should Nigeria suffer outages, common in the past, while global economic uncertainty by no means guarantees oil prices will stay high. ($1 = 159.300 Nigerian Nairas) (Additional reporting and writing by Joe Brock; editing by Ron Askew)

I am not against the removal of the subsidy in principle because much of the money is siphoned off by the Nigerian elite and their cronies.  The problem lies with the implementation.  I would feel much better if the World Bank oversees the implementation of infrastructure spending plans the details of which should be made public, with timelines.

Dis is d most untimely period for d govt to b thinking of fuel subsidy removal,dere are so many combustible groups waiting to b unleashed and roaming free in d nigerian state,subsidy removal may jst b dat fire waiting to stoke d flames.Dere is so much discontent in d land and my fear is dat GEJ has yet to come to grips wt d onerous task of statehood for now,to stabilise d polity wen all d negative forces are unleashed @once as may hapen wt dis proposal;he shd ignore anybody advising him on dis path,no matter how gud intentioned;d ramifications of it @dis unfortunate time in our history goes far beyond what many of dem can c.

IMF dictate

Roll on another round of impoverishment of the masses.

This would surely be followed by another round of devaluation.

When would we Nigerians finally say enough is enough instead of smiling and suffering

God help us all

Lets wait and see