Government to transfer oil subsidy to manufacturers

The Federal Government is currently considering the possibility of granting subsidies to manufacturers, who employ a large number of workers, as a cost mitigating measure.

The plan was hinted to the National Executive Committee of 37 labour unions and civil society organisations that attended a meeting on deregulation with government representatives in Abuja on Wednesday.

Mansur Muhtar, the Minister of Finance, who was part of the government's delegation to the two-day meeting, which began on Tuesday, said, "Government is considering a proposal to grant subsidies to manufacturers that employ large numbers of workers under the Free Energy/Electricity scheme, to cut down on the cost of running generators in their operations as a way of encouraging them keep people on the job."

The subsidy to manufacturers, which is still sketchy as he did not give more details, is apparently targeted at getting labour, which has been vehemently opposed to opening up the downstream sector to market forces to support the policy. But it backfired, as the meeting was stalemated again.

Government's argument for deregulation

Mr. Muhtar noted that the problems that informed the recent challenges have been on the long term, saying, "We have a dysfunctional system that we have been trying to fix in the past 25 years. It is unacceptable that Nigeria as a major producer of crude oil cannot meet the local demand for petroleum products."

He also blamed the Nigerian National Petroleum Corporation (NNPC), for failing to remit revenues accrued from the sale of crude oil and petroleum products into government's coffer over the years, adding that government can no longer afford the N50 billion fuel subsidy it pays monthly.

The Ministers for Petroleum, Rilwani Lukman; Labour and Productivity, Adetokumbo Kayode as well as the Minister of State for Petroleum, Odein Ajumogobia, who were part of the government delegation also argued in favour of deregulation.

Mr. Lukman urged the NLC to support government, saying that no responsible government will go out of its way to embark on policies that would bring pain to the people. He pointed out that the President Umaru Yar'Adua's administration is convinced that deregulation will remove the inefficiencies in petroleum products distribution in the country.

Mr. Lukman said the primary motivation for deregulation, "is to ensure adequate and steady supply of petroleum products," adding that the greatest challenge government has faced in the recent time, has been how to get enough money to finance the huge revenue short fall in the budget, as a result of the inability to meet revenue generation projections.

Other deregulation palliatives

In addition to the manufacturers' subsidy, Mr. Muhtar said government had already presented a supplementary Appropriation Bill to the National Assembly, to raise funds for some projects that will alleviate the negative impact of the deregulation policy.

Furthermore, he said government is also committed to discussing with Labour on plans to float a mass transit scheme to take care of workers transportation difficulties, and earmarking some money to support other mass transit schemes in urban cities, as well as the development of urban railway mass transit in Kaduna and Lagos States.

Mr. Muhtar also said that government is willing to provide for loans to support small and medium-scale enterprises through the Bank of Industry, to stimulate the growth of small businesses.

On the efforts to boost fuel supply capacity, Mr. Muhtar said apart from making efforts to get the nation's refineries to function optimally as well as encouraging private sector investment in new refineries, government is considering compelling the multinational oil companies to go into petroleum products refining as a condition for the renewal of their operational licences in the nation's oil industry.

"The NNPC and Ministry of Petroleum are looking at the possibility of making this part of the contractual arrangements with the companies," he said, adding that government will continue to encourage private sector participation in storage and distribution of petroleum products.

Justifying the need for deregulation, Mr. Muhtar, who is also the chairman of the committee on deregulation, said apart from spending a minimum of N50 billion monthly on petroleum products supply subsidy, which translates to over N2 trillion since the subsidy regime began, over N100 billion was charged by NNPC for storage and demurrage costs last year alone.

Need to shift debate

Rather than fighting deregulation, Mr, Muhtar argued that the debate should shift to demanding from government to be more accountable in the management of the petroleum resources, to ensure the excess revenue is channeled to the provision of more infrastructure to improve the living condition of the people as well as create more employment opportunities.

Government, he said, is committed to strengthening Vision 2010 budget by spending on the development of key infrastructure projects like railway system for which order for locomotives has been placed; and embarking on massive roads construction, adding that a lot of progress has been made on the development of the power sector capacity by redressing challenges in gas supply.

Labour is not convinced

But all of these proposals made no impression on the representatives of the labour unions and the civil society groups, as they said no to deregulation.

The NLC president, Mohammed Omar, told journalists afterwards that although the meeting was deadlocked, it however, afforded both parties the opportunity to express their concerns about the policy.

He insisted that workers are not against deregulation for the sake of it, but that it is important that a lot of issues have to be addressed before hand to ensure that its implementation does not have negative effect on the people, especially the workers.

Onikolasa Irabor, the Deputy President of the NLC, urged the government's team to go beyond the popular negotiation rhetoric and give a "guarantee that when the price goes up, there won't be scarcity."

"All we are saying is increase in price of petroleum product is anti-people. Now that the services are static, they are making huge profit from those who don't have. I don't want government to apply the amnesty approach of going to fix a deadline," he added.