The Role Of The State Governors In The Removal Of Fuel Subsidy!


. The Billions That Will Accrue To Each State

Nigerians woke on January 1, 2012 to the sudden and unannounced fuel subsidy removal. Since then, many Nigerians have protested and taken to the streets as a result of this announcement, which many think is unfair. The blame and dissatisfaction have been heaped on President Goodluck Ebele Jonathan and his cabinet. Yet many Nigerians seem not to fully appreciate the intricate web of political interests underlying the removal of fuel subsidy and the attendant nationwide protests and industrial action, and the role of the State Governors in this plot. This piece tries to throw some light on this.

Recall that the President had shortly before the April 2011 Elections signed the Minimum Wage Bill into Law, an action that Statutorily fixed the Nation’s  minimum wage @ N18,000 a month. Given the timing of the introduction of the minimum wage, one could suspect that it was a political strategy by the President and State Governors to garner votes at the Polls. The reality, however, was that the Federal Government was not in a position to fund such a wage increase, much less the State Governments given the state of their finances at the time.

Shortly after the election, the President declared that the Federal Government could not pay the minimum wage. The State Governors quickly followed suit. Even former NLC President and Governor of Edo State, Comrade Adams Oshiomhole, who had earlier boasted that he would implement the minimum wage reneged on his promise. Quite naturally, organised labour took to the streets in protest of the seemingly orchestrated deceit by the different tiers of Government. At the end of the protracted crisis and negotiation, the Federal Government only implemented the wage increase for Junior Staff Workers (GL 01-07), while Senior Staff Workers (GL08-17) got a nominal increase of 1,000 (One Thousand Naira Only). Most State Governors, even Edo State, where a foremost Labour Leader holds sway, followed the same pattern.

The State Governors consistently argued that they will not be able to pay the new minimum wage and simultaneously fund capital projects. What they did not say, however, was that implementing the new minimum wage would mean curtailing their excesses.  The Governors’ dilemma was further compounded by the establishment of the Sovereign Wealth Fund (SWF), which put an end to the illegal excess crude account and its slush funds. Hitherto, the slush funds of the excess crude account were shared between the three tiers of Government, at the discretion of the President.

Then again, most State Governments had raised bonds worth billions of Naira from the Capital Market. Because these bonds are normally securitised by an Irrevocable Standing Payment Order (ISPO) in favour of the Bond Trustees, the CBN and Ministry of Finance would deduct the bond servicing fee, which is usually a huge chunk of the State’s Monthly Allocation, at source. This leaves the State with little or nothing at the end of the day.

So, caught between the prospect of a potentially disastrous increase in personnel costs, a drastic reduction in revenues as a result of the abolishment of the Excess Crude Account, and the rising cost of servicing Bonds and Loans, the Governors had to make strategic decision – i.e. find a way to collectively swim or perish together.

Their strategy was incredibly slick and deceitfully simple! They unanimously opposed the proposed Sovereign Wealth Fund (SWF). It is important to note that the SWF is set up to help the country profitably invest in capital projects from excesses saved from crude oil sales. Their argument was that: the Sovereign Wealth Fund violated the principles of Fiscal Federalism as enshrined in the Constitution. The Governors, led by Gov Rotimi Amaechi of Rivers State, and Chairman of the Governor’s Forum, threatened fire and brimstone, should the Sovereign Wealth Fund take off as planned. They also blackmailed the President and indicated their readiness to seek legal redress against the Federal Government’s infringement of the Constitution.

Having successfully boxed the President into a tight corner, the Governors went into negotiations with the Federal Government with a view to getting a ‘political solution’ to the crisis. In the course of high-wired politics and horse trading, the Governors made it clear that the only way they will support the Sovereign Wealth Fund, was for the Federal Government to remove the fuel subsidy. That way, they can attenuate the potential adverse effects of a drop in revenues occasioned by wage increase and the scrapping of the excess crude account. Simply put, while the Federal Government got its Sovereign Wealth Fund, the State Governors succeeded in removing fuel subsidy so as to share the much touted ‘savings’ from fuel subsidy removal. As the saying goes, its politics, stupid!

So, all the arguments about deregulation of the downstream petroleum sector and the provision of ‘palliatives’ are diversionary.

In fact, a perusal of the blueprint of the Subsidy Reinvestment Fund Programme (SURE) that was prepared in the last quarter of 2011 reveals a startling information. The ‘savings’ from the removal of fuel subsidy had already been shared between the Federal Government, States and Local Governments as follow:

2. AKWA IBOM – N43,406,713.87
3. DELTA- N40, 965, 476.92

4. BAYELSA – N33, 839, 652. 09

5. ONDO –  N12, 554, 345. 28

6. KANO – N11, 210, 304. 04.
7. LAGOS – N10, 126, 514. 01

8. EDO – N9, 432, 709. 30

9. KADUNA – N8, 944, 553. 13
10.  IMO – N8, 729, 126. 56

11. KATSINA- N8,525,402.69

12. BORNO – N8, 451, 350. 27
13. BAUCHI – N8, 309, 773. 31
14. NIGER –  N8, 294, 895. 04

15. OYO – N8, 283, 911. 05
16. JIGAWA – N7, 848, 086. 61.

17. CROSS RIVER -N7,718,686. 26

18. BENUE – N7, 659, 631. 38

19. ABIA -N7,460,062.24
20. SOKOTO – N7, 395, 670. 79

21. ANAMBRA -N7,164,697. 14

22. KEBBI –  N7, 131, 000. 67

23. KOGI – N7, 113, 202. 30

24. ADAMAWA -N7,093,217. 24

25. TARABA – N7, 005, 145. 87

26. ZAMFARA -N6,973, 520. 31

27. PLATEAU – N6, 956, 827. 74

28. YOBE  –  N6, 952, 382. 78

29. OGUN –  N6, 932, 554. 10

30. ENUGU – N6, 692, 449. 99

31. OSUN – N6, 575, 162. 77

32. KWARA –  N6, 482, 037. 63

33. GOMBE – N6, 291, 166. 08

34.NASSRWA – N6,073, 343. 25

35. EKITI – N5, 931, 760. 50

36. EBONYI – N5, 880, 552. 17

TOTAL = N411, 034, 176. 00.

(Source: the SURE document of the Federal Government)

Against the backdrop of the foregoing, it is apparent that the bulk of the ‘savings’ accruable from the removal of Fuel Subsidy will end up in the coffers of the State Governments. A closer look at the numbers in the distribution chart above reveals an interesting fact – legislators from the top four beneficiaries were the most vocal supporters of the removal of fuel subsidy during the Emergency Session convened by the House of Reps to debate the issue on Sunday the 8th of January 2011. The top four states are:  RIVERS-N44,628,272.62, AKWA IBOM – N43,406,713.87, DELTA- N40, 965, 476.92 & BAYELSA – N33, 839, 652. 09. Obviously, the legislators from these States were motivated by pecuniary considerations and were promoting the political agenda of their State Governors.

Given the foregoing analysis and the political intrigues underlying the current crisis bedevilling the Federal Government’s policy of Subsidy Removal, the Federal Government has been called upon to revisit the removal of fuel subsidy. While we support a deregulation of the downstream petroleum, which involves, but is not limited to the removal of subsidies, we are of the reasoned opinion that Transparency, Accountability and Integrity are critical success factors and must be institutionalised in the proposed deregulation. One way to do this is to encourage the State Governors to put in place visible and verifiable “palliative” plans to cushion the likely effects of the fuel subsidy removal on the citizenry, especially those at the greatest risk of vulnerability.

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