The federal government yesterday told the International Monetary Fund (IMF) that it would ensure fuel subsidy on petroleum products does not return in Nigeria at the end of the coronavirus pandemic.
It said it would revert to its planned medium-term fiscal consolidation path, which includes increasing revenue to 15 per cent of gross domestic product (GDP) through further Value Added Tax (VAT) reforms, rise in excises, and removal of tax exemptions, once the crisis passes.
The federal government told the Fund that they would commit to undergoing a new safeguards assessment conducted by the IMF in line with the Fund’s safeguards policy.
The IMF had been asking the Nigerian authorities to remove fuel subsidies and increase revenue generation through aggressive tax mobilisation.
The assurances to the Fund were contained in a letter of intent from the federal government to access the IMF’s $3.4billion Rapid Financing Instrument (RFI) that was approved last Tuesday by the Breton Wood institution.
The credit facility was approved for Nigeria to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.
The letter that was jointly signed by the minister of Finance, Budget and National Planning, Hajiya Zainab Ahmed, and governor of Central Bank of Nigeria (CBN), Godwin Emefiele reads in part: “The recent introduction and implementation of an automatic fuel price formula will ensure fuel subsidies, which we have eliminated, did not reemerge.
“In line with the Fiscal Responsibility Act, this will allow us to reduce the federal government deficit to under 3 per cent of GDP and eliminate recourse to central bank financing by 2025.”
The federal government also said it was moving to full cost-reflective tariffs in electricity by 2021.
It stated: “In addition to the external borrowing sought, we are also increasing our domestic borrowing limits in the supplementary budget so that we can make use of our favourable low domestic yields, particularly since the results of the last domestic bond auction showed strong demand. The existing stock of overdrafts held at the CBN will also be securitised.
“We will create specific budget lines to facilitate the tracking and reporting of emergency response expenditures and report funds released and expenditures incurred monthly on the transparency portal, publish procurement plans, procurement notices for all the emergency response activities—including the name of awarded companies and of beneficial owners—on the Bureau of Public procurement website.
“And publish no later than three to six months after the end of the fiscal year, the report of an independent audit into the emergency response expenditures and related procurement process, which will be conducted by the Auditor General of the Federation—who will be provided the resources necessary and will consult with external/third party auditors”.
Federal government also promised not to introduce measures or policies that would exacerbate the current balance-of-payments difficulties.
“We do not intend to impose new or intensify existing restrictions on the making of payments and transfers for current international transactions, trade restrictions for balance-of-payments purposes, or multiple currency practices, or to enter into bilateral payments agreements which are inconsistent with Article VIII of the IMF’s Articles of Agreement,” the letter further stated.
The federal government said they had authorised the IMF staff to hold discussions with external auditors and provide the Fund’s staff access to the CBN’s most recently completed external audit reports.
The government said it was determined to meet the immense challenge the COVID-19 pandemic was posing to the country.
Meanwhile, the immediate past secretary-general of the Arewa Consultative Forum (ACF), Mr Anthony Sani, has said that reducing fuel pump price to N60 per litre was not a good option.
Sani, who was responding to calls by the Nigeria Labour Congress (NLC) for fuel pump price to be reduced to N60 per litre in order to reflect the fall in oil price, said that decision would be too expensive for the government.
“When I read reports credited to the president of the Nigeria Labour Congress (NLC), Comrade Ayuba Wana, to the effect that the Nigerian government should adjust the price of fuel downwards to N60 per litre in order to reflect the fall of price of petroleum, I could not understand the wisdom,” Sani said.
According to the ACF scribe, NLC cannot ask for many things like full employment, for high quality education, for improvement of security situation across the country, for welfare of Nigeria without considering the sources of revenues needed for such quests to find expression.
“If the price of petroleum has made it possible for the NNPC to import petroleum at cheaper rate leading to improvement of revenues from the importation of fuel, then they should advise the government on how best such revenues can be deployed among socio-economic sectors for the good of all,” Sani said.
He recalled that the late General Sani Abacha, increased the price of fuel from N3.50 to N11 per litre and used the increased revenues to improve infrastructure such as roads, health facilities and education through Petroleum Trust Fund (PTF), adding that PTF’s contributions had visible impacts on the socio-economic development of Nigeria.
“Reduction of fuel price to N60 per litre is not a good option. More so that the prices will change whenever the world conquers COVID-19 which will stimulate demands for oil and, thus, increase the price, “Sani added.
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