Thursday, October 20, 2011

Governors make U-turn on subsidy removal

Governors may have made a volte face on the planned fuel subsidy removal, it was learnt yesterday.
Sources said the governors, who initially endorsed the Federal Government’s plan to remove the subsidy, are rethinking their position.
They have constituted a six-man panel headed by their chairman and Rivers State Governor Rotimi Amaechi to finetune their stand on subsidy and the Sovereign Wealth Fund (SWF), which was launched on Tuesday by the Federal Government.
The panel, it was gathered, met in Abuja last night.
It is expected to submit its report to the Nigerian Governors Forum (NGF) which may meet in Abuja next week.
After a meeting of the National Economic Council (NEC) presided over by Vice-President Namadi Sambo on October 6, the governors backed the planned subsidy withdrawal.
Subsidy removal, they said then, was part of the difficult decisions that leaders must take to impact on the people.
The gains of the removal, they argued, would outweigh the pains.
“One of the most important issues that we canvassed and decision reached on was the support for the Federal Government’s move to remove subsidy because we believe it is in the interest of the country.
“We will save money for the development of the economy and at the end of the day, we will provide opportunity for the greater number of people”, they said.
They, however, did not reach consensus on the SWF, saying it was a constitutionally wrong for the Federal Government to contemplate operating the Fund with money expected to be shared by all tiers of government from the Federation Account.
The governors position on subsidy attracted condemnation nationwide, especially since many of them are claiming that they cannot pay the N18,000 minimum wage.
Workers are on strike over the wage for which the governors are seeking a review of the revenue allocation formula to enable them pay.
The governors, it was learnt, may have make a U-turn on subsidy following the public outcry against their support for its removal.
A source said: “The governors complained of being under pressure over fuel subsidy and some of them are afraid of the backlash from the condemnation of their action”.
They have, however, listed four conditions to be met before backing the SWF.
The conditions are: transparency in oil revenue receipt; adjustment of revenue allocation formula to set aside a percentage for SWF savings; stoppage of deduction of shares of states from the Federation Account to fund SWF; and all sectors of the economy that benefiting from the budget should contribute to the SWF.
The presidency and the governors may still meet again in two weeks to iron out the grey areas in the operation of the SWF.
It was learnt that the decision of most of the governors not to go to court informed why the Minister of Finance, Dr. Ngozi Okonjo-Iweala, launched the Fund on Tuesday with a seed capital of $1billion.
Another top source said: “Following mutual discussions between the President and the governors, all the 36 states have shelved the planned court action over the SWF.
“So, a political solution is being worked out in such a manner that it will not hurt either the presidency or the states.
“I think in the next two weeks, the Federal Government and the states would have reached common ground on how to make the SWF work.”
Responding to a question, the highly-placed source added: “All the parties have agreed that the SWF is desirable and good for the nation’s economy.
“The states are however opposed to deductions from their monthly allocations from the Federation Account to fund the SWF. Instead, they are asking the Federal Government to allow all the sectors to contribute to the SWF.
“They want the SWF to be funded like the Universal Basic Education scheme, the Education Trust Fund; Ecological Funds; and derivation funds.
A governor, who confided in our correspondent, said:  “We are the SWF. Totally opposed to it. But the Federal Government begged us to part with the $1billion seed capital already deducted from the Excess Crude Account pending the time we will resolve issues around SWF.
“They said if we do not allow them to use the $1billion as seed capital, it will have adverse effect on the investment climate that they are trying to create.
“We told them that as far as the SWF is concerned, they have every right to use part of their own share of the Federation Account to do that.
“In principle, they accepted our right not to be part of the SWF. They however wanted to appear to be in control, that was why they went ahead to announce to the public that they have kick-started it.
“Until this six-man panel completes its assignment, it is too early to talk of our position on the withdrawal of fuel subsidy and the SWF. The presidency has not come with concrete terms to the negotiation table on these issues.
Another governor however said: “There is no point dissipating energy in court when we can all sit down and address grey areas in the implementation of the SWF.
“We want transparency adopted for the management of the SWF. As I am talking to you, no governor can say exactly how much the nation is earning from its crude oil export.
“Our position is that we have been financially overstretched by the new minimum wage policy, it will be difficult to fund SWF from deductions from states’ shares from the Federation Account. We feel that all Nigerians should have a stake and sacrifice for the SWF.
“The impression out there is that states are wasteful whereas the reverse is the case.”