Fuel subsidy removal: FG saves N283.5bn in six months

The Federal Government said it has saved N283.5billion from removal of subsidy more than six month ago.

Speaking at a KPMG Breakfast Meeting with Chief Financial Officers in Lagos on Monday, the Minister of Budget and National Planning, Senator Udoma Udo Udoma, stated that “we have reduced losses to the treasury arising from the fuel subsidy regime. It will be recalled that premium motor spirit (PMS) otherwise called petrol was liberalized on the 12th May, 2016.”Immediately this was announced, consumption dropped by about 30 per cent, resulting in a saving of $4.5million daily (N1.6billion) from the elimination of false subsidy claims.”

At an exchange rate of N350 to a dollar, the government would have saved N283.5billion in six month.

He said 2016 is a very tough year for the government due to decline in revenue. “We have been unable to achieve our 2016 budget production target of 2.2 million barrels per day. Indeed at some point, we were barely able to produce 1.1mbpd.

“The fall in crude production has affected the level of foreign exchange earnings. Since 95 per cent of our foreign exchange earnings come from oil sector, this has impacted adversely on the level of non-oil revenues.

“In short, oil revenues are down, non oil revenues are also down. This is because much of our non-oil sector is consumption-driven and relies on foreign exchange earnings from oil sector and other capital inflows which also depend largely on fortunes of the oil sector,” he said.

However, Senator Udoma reiterated government’s efforts at restoring sanity to the oil and gas industry.

“We have just renegotiated a new arrangement with our joint venture partners in which we are exiting cash calls. This will lead to enhanced and improved oil production.

“With this major reform which will become operational by January 2017, we should be expecting over $15billion worth of investment in the oil sector,” he said.

In his own contribution, the Group Chief Financial Officer, Jagal Group, Mr. Richard Turner, argued that except the bill that will guarantee reforms in the oil sector is passed, the government may find it difficult to implement those proposed policies.

“We need to pass the Petroleum Industry Bill (PIB) for the proposed reform to work. My company has invested over $500million in Nigeria and ready to invest more. But the non-passage of PIB stalls projects that are supposed to come to us. My heart breaks whenever we have to disengage some workers due to absence of work.

“Nigeria Content is fundamental to investment in Nigeria. We want to keep the investment in Nigeria going and continue to engage more workers,” he said.

Meanwhile, Federal Government has disclosed its readiness to unveil a new four years economic road map known as Nigeria’s Economic Recovery and Growth Plan (NERGP) 2017-2020.

Minister of Budget and National Planning, Senator Udoma Udo Udoma, made this disclosure in Lagos on Monday during a Breakfast Meeting for Chief Financial Officers (CFO) organized by KPMG.

He noted that the draft document of the economic plan will be available in early December and formally launched by President Muhammadu Buhari before the end of the year.

Sharing his thought on the 2017 budget and also taking reactions and input from stakeholders, he emphasized that the federal government reforms and initiatives which will be reflected in the 2017 Budget, are being brought together in a single document, that will present a coherent summary of Nigeria’s short and medium term economic plans for the period 2017-2020, specifically by putting government strategies, directions, policy priorities and intended initiatives in one place, that will enable other stakeholders to take their own strategic economic decisions.

The minister, who said he cannot speak on the 2017 Budget because it has not yet been submitted to the National Assembly, explained that “the good news is that the budget is almost ready. We are almost through with our consultations with the National Assembly on the Medium Term Expenditure Framework, and the outlines of the 2017 Budget, and will soon be submitting it to the National Assembly for their consideration.

“Without giving anything away I can assure you that the Budget will be targeted at stimulating private sector investment. This Government believes that it is only by partnering with the private sector that we can propel the economy out of recession and onto the path of sustainable growth.”

He pointed out that the NERGP will focus on five broad areas, which include: “macroeconomic policy, economic growth and diversification, competitiveness, social inclusion and jobs and governance and enablers.

On whether the proposed new economic policy will not go the way of others, Senator Udoma noted that “this will not be just another plan. There will be a major emphasis on implementation, monitoring and evaluation of this NERGP. Given the current challenging economic environment, it is planned to set up a special delivery unit to drive implementation of the NERGP.

“As part of process of finalising the plan, a retreat was held on November 10-11, 2016 to review specific initiatives which could be considered in the report. To further enrich the plan, additional consultations with various stakeholders such as state governments, development partners, the National Assembly and the private sector are ongoing,” he said.