Nto: Why Fuel Subsidy Should be Removed

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As the debate over the proposal for the removal of fuel subsidy resurfaces, Abia State Commissioner for Finance, Dr. Philip Nto, has maintained that the subsidy is not healthy for the Nigerian economy and stressed the need for its removal. He spoke to Obinna Chima

What is your assessment of the performance of the Nigerian economy in the first half of the year?

I will say the economy is not performing badly given the rebasing of the GDP which ranked Nigeria as the largest economy in Africa. Also, going by the things we can see because as an economist, I am always practical. Nigeria economy is a major attraction to foreign investors given our market size-because population of over 160m, arable land and untapped mineral resources.

When we are assessing an economy, we look at it from different perspectives.  If you look at the issue of industrialisation, you will notice that a lot of firms are coming into the country, you see a lot of inflow of foreign direct investment (FDI) and all these point to the fact that the Nigerian economy is not doing badly.

Consider the World Economic Forum (WEF) that took place in the country in the first half of the year, that would give you an idea that Nigeria is a major investment hub. Despite our security challenges, you still see foreign investors coming into the country.

Though the economy has some challenges such as the growing rate of unemployment, which is not something you can overcome within a short period given our growing population.

When a population is growing, it may not be easy to checkmate unemployment given that this is a third world economy and we know one of the characteristics of a third world economy is growing rate of unemployment because we don’t have adequate plan.

But with what is happening in terms of the reforms going on in the country, within a short period of time some of these challenges would be overcome. So the Nigerian economy is not doing badly.

Some have expressed concern that the rising rate of insecurity in some parts of the country as well as crude oil theft may affect the growth of the economy if not addressed?

The issue of security is a systemic problem. It is not a problem you leave for government institutions alone to handle. It is a problem all the stakeholders including the citizenry need to come together to handle.

It is not an issue you leave alone for President Goodluck Jonathan to handle, it is not something you blame the military or the police, it is something that everybody needs to come on board. Look at what is happening in the north-east that is gradually entering Abuja.

Those insurgents don’t mind whether you are a member of the All Progressive Congress (APC), PDP or APGA, they don’t care whether you are a Christian, Muslim or pagan. They don’t care about your educational background.

So it is something that all of us should come together to solve. The best approach I will say is the ‘know-your-neighbour’ approach. Know the person that is standing by your side, know the person that is with you, know the person that is working with you and if you see anybody that is strange, you report the person to the police or the nearest security agency.

Once you see any strange person, you call the police, if you see any strange object, you call the police or when you see any vehicle parked where it is not supposed to be parked, you call the police. That is what all of us should be doing to assist the security agencies.

The government as a matter of urgency should evolve communal and participatory approach in tackling the security problem. When we had kidnapping issue in Abia state, our governor mobilised the security agencies, the citizenry and everybody assisted the governor.

That was a major factor that assisted us in solving the security problem in the state then. If the people were not ready to assist, there is no way the governor will know everything.

So, without the people assisting the government, the government cannot do much as far as insecurity is concerned, since the criminals are not ghost. In the case of oil theft, it is also associated with our way of life.

There is no way you can solve the oil theft problem except people turning away from it. It is a clear case of sabotage to the Nigerian economy. If you see someone that is trying to break oil pipeline, you also report to security agencies.

The security agencies cannot be everywhere at the same time. But there is no way somebody that is involved in pipeline vandalism will move from one location to another without seeing some people.

So if you see somebody doing something that will undermine our national security, don’t think he is doing it against President Goodluck Jonathan or Governor, T.A. Orji, instead the person is doing it against the economy because when the economy is affected or jeopardised, it will affect everybody. If we lay a solid foundation in economy, we are protecting our future generation.

The issue of the removal of fuel subsidy which came up in the meetings of the committee of commissioners of finance, which you are a member, is now been debated. What prompted the recommendation that fuel subsidy, which has always been a contentious issue, should be removed?

Yes, that assertion is right. But the federal government is not sleeping over the issue. Pragmatic approach towards reversing such fears is on-going. But beyond that, let me tell you something.

Even before I was appointed the commissioner for finance, I was among those that always kicked against anything subsidy. Subsidy is not a healthy situation in any economic system. When you talk about subsidy, it means government paying for your expenditure.

Now, we don’t have good roads, we don’t have electricity, we have unemployment that is rising by the day. So why waste all these monies just to fund a small aspect of our expenditure? Even when government says it wants to fund the fuelling of our vehicles and our generators, they are widening the gap between the rich and the poor.

If you go to the house of a very wealthy man, you will see fleet of vehicles. Calculate how much a rich man that has five cars will be spending on fuel and calculate how much subsidy he gets when fuelling the five cars.

That will give you an idea of how much you are empowering the rich man with.  Then you now see a poor man whom we said we want to protect having only one tricycle and it means that you are only subsidising the man that has tricycle with about 10 litres of fuel while the rich man that has five cars with about 500 litres of fuel.

That shows that we are only empowering the rich more than the poor and by doing that widening the poverty gap. So, the rich will continue to get richer while the poor will continue to get poorer.

Another issue you will consider with the fuel subsidy is the relationship among the states. If you look at states like Lagos and some others, where we have the oil merchants, they are the ones that are empowered and are using the money that is supposed to accrue to Abia state’s federation account to fund them – Lagos, Rivers, Abuja and others.

You see, all these rich merchants, they pay their taxes in Lagos, they buy things in Lagos and they don’t do any transaction in Abia state, yet we are using part of the money that is supposed to come to Abia to fund Lagos state.

That is why some people say some governors are performing, while others are not performing, even when you are using monies that are supposed to accrue to some states to fund infrastructural development in some others.

That was why we said no; allow us to take our money so that we can formulate policies that will help to empower our people economically. Assuming you use N500 million to fund fuel subsidy, it means that is the amount that Abia state is losing to, maybe, somebody that is doing business in Lagos.

That N500 million, Governor T.A.Orji can use it to empower youths in state. Currently he has embarked on a lot of youth empowerment programmes and he uses his security vote to do that.

However, in a situation where we are able to get part of the funds which is being invested in fuel subsidy, we can empower more youths, we can embark on more road construction and on other developmental projects.

If actually, we want to go into real subsidy whereby we want the poor to be empowered, we go back to what we used to have during the military era where the poor will buy from particular filling stations and the rich from designated filling stations.

That is the only time you can say you are embarking on real principle of fuel subsidy. Apart from that, you are only widening the gap between the rich and the poor. So that was why we decided that the fuel subsidy should be removed. I was among those that kicked against fuel subsidy because it is not healthy for our system and it is not healthy for Abia State.

What is the Abia State government doing to tackle the challenge of ghost workers in some of its ministries?

About two months ago, we sent out circulars to all ministries, departments and agencies (MDAs) in the state. We asked the permanent secretaries and commissioners to supervise in personnel audit in their various establishments and the reports are coming into my office.

So once we are through with that, we shall go into actual data capturing. Before the governor took over the mantle of leadership of the state, we had a situation where anything goes and nobody was interested. But this is a governor that is on a fast lane to lay a solid foundation for the state.

He is going into all the facets of the state economy, including building a secretariat. Knowing the staff strength of the Abia state government, I can say authoritatively that Abia pays the highest amount of wage in the country because of this issue of ghost workers.

But once we are through with data capturing, it would be a thing of the past. It is not only in the state civil service, even in the pension board. I had raised an alarm to the governor that the amount we are paying as pension is far above what we should be spending.

We now decided to engage two banks to use electronic means of payment to pay our pensioners and not a situation where cash would be released to the sub-treasurers who will now instruct that somebody that died several years ago should be paid while those living would be neglected. So we have also set up a committee to find out the actual number of pensioners in the state.

They are working hard and very soon we shall be through with the issue of ghost pensioners and ghost workers. Hopefully, before the end of October we shall be through with that.

But what we want to do is to make sure that we don’t hand over any fraudulent institution to the incoming administration. We shall hand over a clean state to the next governor come May 29th, 2015.

What is Abia state doing to increase its internally generated revenue?

The state is moving at a high speed to hit our budgetary target. We have a high monthly target based on our budget, which is meant to consolidate the legacy projects of the administration. So we are working hard to meet up. The governor wants to leave a lasting legacy in the State.

He wants to bequeath a legacy for the incoming administration. The governor approved that all payment of any kind of fee or levy in the state must be through designated bank accounts.

You have a situation whereby in the past, we used to have agents moving round the whole of Aba, harassing traders coming to buy goods at Ariaria market, Aba and before you move from Ariaria to Port Harcourt, we used to have close to 20 toll gates mounted by touts who claimed to be working for the state government.

But when the governor discovered that, he dissolved all of such and directed that all payments of levies and fees must be through banks. Not only that, most of these traders and businessmen lamented that so many fees and levies were being collected and based on that, the governor set up two committees.

The first committee was to harmonise all the fees and levies collected in the state with the intention of stamping out multiple taxation. We all know the implication of multiple taxation in our economy. When there is multiple taxation, the confidence of investors would be eroded.

Nobody likes to invest in a system where you don’t have an idea of the cost of doing business. Based on that, the governor directed that we should harmonise these levies. The committee has submitted its report and the governor is going through it and once the report is out, I know it would be a humane tax regime.

It would be something that would be acceptable by everybody. Not only that, there is also another committee which I am heading because the governor said tax policy should not be decided by the government alone. We want to evolve a participatory approach where tax payers and the government would interface to chart a new roadmap on adequate tax procedure.

So, both the government and the people will decide on what should be paid. Currently, nobody is collecting any form of fee or levy until after the convocation of the revenue summit.

What is the level of the implementation of the state’s 2014 budget?

The 2014 budget was prepared based on the International Public Sector Accounting Standards (IPSAS). The reason was to ensure transparency and accountability in the performance of the budget. Not only that, the foundation was laid on the principle of the medium-term expenditure framework. In that case, it is not a situation where you say the capital projects must be completed in a fiscal year.

It is a budget that will last from 2014 through 2016 using 2012 budget as the base year. The essence of preparing the budget based on IPSAS and MTEF is to ensure high performance of the 2014 budget.

That is the extent of the medium-term expenditure framework. In the past we used to have so many abandoned projects because if a budget is prepared based on a particular fiscal year, once that year is over, you see so many abandoned projects. So, the governor said no because it was not in the best interest of a growing state like Abia.

So this year’s budget was prepared under the medium-term expenditure project so that there will not be abandoned projects. So I may not state categorically the extent of budgetary performance in the state, all I know is that the budget is performing. You know the budget is divided into two – the income and expenditure.

Even the expenditure is divided into two – recurrent expenditure and capital. Nobody is complaining that the government owes and by implication the recurrent expenditure is performing. Then if you look at the other aspect of it, the government is running, which is another aspect of recurrent expenditure.

All our MDAs are running at full course. The only aspect I may not speak categorically on is the extent we have performed is the capital expenditure, which was why I explained the principle of the medium-term expenditure. For example, if you look at a project like the new government house, it is not a project you can finish within one year.

Some of the projects will terminate this year, some will go beyond this year and all these will provide solid foundation for the take-off of the state. The state government is doing a lot to reposition the state and also to attract investors. The first thing you must consider when you want to attract investors in a state is security.

Today, Abia is the most secured state in the country. Moving the industrial timber market to a more expansive area, moving the Umuahia market to a larger area are all geared towards making the state attractive to investors. We have been signing a lot of MoUs because the government has created the enabling environment for investors to come in.

Youth unemployment is a major challenge in most states. What is the government doing to tackle this issue?

There is a youth empowerment scheme in the state which is running without any budgetary allocation. The governor is funding it from his salary and security vote. The state’s financial records are there for people to go through. You can never see that the governor collected any amount to buy vehicles or assets to empower the youths.

That is also an aspect the governor is using to control criminality in the state. When somebody is gainfully employed or engaged, there is no way he will indulge in criminal activities such as kidnapping, armed robbery and others because he can take care of his basic needs.

If the entire governors in Nigeria could be behaving like that, I don’t think we would have Boko Haram in this country. If the youths in some of those states were engaged, we would not be talking about terrorism in this country. Currently, more than 3,000 vehicles have been distributed to the youths. All these have helped to gainfully engage the youths in Abia State.

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