House rejects Jonathan's plan to remove fuel subsidy

The lower chamber

President Goodluck Jonathan’s plan to cut fuel subsidy suffered a major setback today with the House of Representatives flatly rejecting the policy in a bi-partisan resolution, describing it as “premature”.

The House decision came as part of a sweeping consideration of Mr. Jonathan’s three-year medium term expenditure framework presented to the National Assembly nearly a month ago.

If backed by the senate, the decision would be a severe blow to the administration’s hope of  garnering support for one of its most criticized and debated policy targets – the stoppage of the purported N1.3 trillion annual government subsidy on fuel products by January 2012, and a market deregulation which analysts say might drive petrol pump price to N200 a litre.

Mr Jonathan has repeatedly claimed that the savings made from  the policy would be channeled into funding critically needed  infrastructural projects across the country.

But the plan has received stiff opposition from the public and the National Assembly. Members have repeatedly questioned the proposal privately, while awaiting an official position earlier referred for committee considerations.

At a series of meetings with the president in the last two weeks, the leadership of both chambers reportedly made it clear to Mr. Jonathan that the legislature might not support the plan.

After debates on Thursday on the recommendations of four of its committees on the government’s spending plan, the House approved the resolutions advising the president to jettison the plan, and urged the executive to rather seek budget funding elsewhere.

“The proposal that on fuel subsidy removal as contained in the revised fiscal strategy paper is premature,” the lawmakers resolved in plenary, exactly as suggested by the committees on Finance, Appropriation, Legislative Budget and Research and National Planning.

“Sources other than relying on savings from proposed subsidy removal, as part of financing items for expected deficit, should be explored,” they added.

Insiders in the committees told Premium Times the adjective “premature” was carefully chosen so as not to foreclose the possibility of reversing the resolution in future.

Under the Fiscal Responsibility Act 2007, the medium term expenditure plan is to highlight government’s economic plan for three years, with clearly articulated expenditure and funding targets.

Mr. Jonathan’s proposal covered a four-year period, proposing a fixed oil price benchmark for the period as well as plans to significantly limit recurrent expenditure.

The lawmakers urged the president to limit the plans to three years as stipulated, and review the oil price benchmark from $75 to $70 per barrel.

“The original presented benchmark price of $75, though reasonable, is considered too optimistic,” they said.



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