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OIL SUBSIDY QUAGMIRE: Nigeria spends N18.39bn daily on petrol subsidy – Zainab Ahmed, finance minister

•Economy’ll collapse if we continue this way –Yusuf, ex-LCCI DG

By Linus Aleke
The Federal Government yesterday disclosed that it is currently paying N283 as a subsidy on every litre of premium motor spirit (PMS) imported into the country by Nigerian National Petroleum Corporation (NNPC) Limited.

The Minister of Finance, Budget, and National Planning, Zainab Ahmed, made this disclosure at the resumed investigative hearing into the Ad-hoc Committee investigating the payment of the controversial fuel subsidy payment between 2013 and 2022.

The committee, which is chaired by Ibrahim Aliyu, picked holes in the minister’s presentation on the projected N18.39bn fuel subsidy payment per day.

She said, “Fuel subsidy is the difference between the pump price which is now fixed at N169, and the landing cost which we are projecting at an average of N448 per litre in 2023, even now the cost is around that.

“So, the PMS subsidy we are carrying today in the nation is around N283 per litre, that is what we are carrying, so it is the difference between the pump price and the landing cost of petroleum products in the country,” she told the lawmakers.

In his intervention, Aliyu queried the rationale behind NNPC’s deduction from the source the sum of N1.66trn against the sum of N1.15trn paid to oil marketers in 2021, leaving an excess of N500bn by fiat.

Hence, the Committee requested documentary evidence of the beneficiaries of the N500bn paid by NNPC.

In a swift reaction to the minister’s submission, Aliyu, who contested the formula for the computation of the fuel subsidy, said, “The N6.7trn required for 2022, why I’m disturbed is because the 2023 financial year is approaching September, we will be expecting Mr President’s budget submission, and the MTEF is already before the National Assembly.

“You see, if you look at the average daily truck-out quantity latest, 64,964,400, in 2012 there was a report and the total consumption was put at 31,500, so it’s very difficult to imagine how you can have a near 100 per cent increment in consumption within 10 years.

“And then going by the permutations or calculations, Hon. Minister, if you are using a 42,000 litres capacity truck, if you divide it by the 64,964,400 litres you arrive at 1,547 trucks daily. And if you take an average, simple division by 37 states, including Abuja, you have 41 trucks of 42,000 litres capacity given to those states, maybe my state being a smaller state in terms of consumption may be requiring less maybe 10 trucks.

“So, what I’m saying in essence hon. Minister, we are talking of daily consumption, Monday through Sunday and Monday again, with no public holidays, in fact during COVID-19 when there was lockdown, and limited movement the consumption rate remained the same. So, I wondered how the Ministry can accept this kind of figure. You see it’s difficult.

“You see, Nigerians are seeing all of us here, not only you on the other side, we in the Parliament as if maybe we are coming into an agreement to short-change the country and Nigerians. if you look at the subsidy itself, who is it for, is it for the common man? This subsidy is for me, you, and some of us that own cars or motorcycles, but the subsidy is not for the common man that only needs a few litres to go back to the farm.

“But to be honest, this figure is overblown and I think the Ministry should have done the due diligence to be able to arrive at a relatively acceptable consumption rate,” he noted.

Speaking earlier, the Minister observed that the Medium-Term Expenditure Framework has been submitted to the National Assembly leadership before embarking on the two-month annual recess.

“One thing that stands out in the Medium-Term Expenditure Framework (MTEF) was that if the nation holds on to fuel subsidy as it is designed now, we will be incurring from January to December subsidy cost of N6.4trn. But we suggested to the federal executive council, and the council approved that maybe we could look at the option of

“So, if we did that then the cost will be N3.35trn, which is half of the N6.7trn. FEC approved the second option, that’s the option that was conveyed by His Excellency, the President, to the National Assembly.
“But Let me also say that even though this is a reduced option, it would mean that we are borrowing more than we’ve borrowed, in 2022 we are carrying the cost of subsidy throughout the whole year. Recall that the initial MTEF and approval by the parliament was for us to exist subsidy by June of this year.

“But during the year, assessing the difficult fiscal challenges in the economy and the hardship and high inflation and other challenges we were asked to resubmit our plans and review them to include provision for fuel subsidy throughout this year.

“That’s how we came back to parliament with an incremental expense from N443 billion which we had planned to up to N4 trillion subsidy expense in 2022.

“The situation is not desirable and it’s not sustainable, it’s putting the country in a very serious, dire, financial situation and we do hope that we will be able to exit this subsidy regime in the shortest possible time.

“The N3.35trn in the approved MTEF, that’s now before the National Assembly for consideration, could’ve been funding that will apply to other vital sectors of the economy such as health, and education. We are carrying a burden, that as citizens we have to access whether it’s beneficial for us to continue to do so.

“I want to move on to the document that has been circulated to the committee. In response to your letters to give information to the committee, for detailed information on petroleum subsidy in Nigeria for the period 2013, to 2022.

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“Let me start by commending the National Assembly and this special committee in particular for undertaking this investigative hearing. The issue of subsidy is of great interest to this administration and course the general public. Therefore, engagement with critical stakeholders such as this forum provides us the opportunity to share information and provide clarification on this critical national issue.

“I’m going to address issues as highlighted by the lawmakers in the letters sent to us. Deduction of PMS under recovery shortfall by NNPC for the period 2013 to 2022 we are reporting that there’s a total sum of N4.436 trillion, which was deducted as PMS under-recovery by NNPC for the period January 2013 to December 2021. The report shows the amount that was deducted during the period under review.

“Also in the report is the summary of subsidy that has been paid to independent oil marketers from 2013 to 2016 and in this report, we are reporting the sum of N1.774trn has been paid to independent oil marketers as PMS subsidy from 2013 to 2016.

“The total sum of N6.21trn was expended from PMS under-recovery by NNPC and payment to independent oil marketers from 2013 to 2021.

“On the funding of subsidy payments to independent oil marketers for 2013 to 2016, payments that have been made to them were directly from domestic excess crude account through the deduction of Sovereign Debts Instruments (SDI).

“They are negotiable short-term instruments that were issued by the government at the time to enable marketers to access financial support from their banks for the importation of PMS.”

•Economy will collapse if we continue this way- Yusuf, ex-LCCI DG
Meanwhile, the former Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf, said Nigeria must phase out subsidies to survive.

Reacting to the ongoing probe by the parliament, Yusuf said the structure of pricing is predisposing the whole ecosystem to a lot of leakages.

Yusuf, who was a guest on Channel TV ‘Politics Today’, monitored by ThisNigeria, said, “I think the finance minister was quoting the NNPC- that is the amount that is being brought into the market, but whether that is the amount of fuel we consume within this economy is a completely a different matter.

“The structure of pricing as it predisposes the whole ecosystem to a lot of leakages. Leakages first, from the point of corruption that is associated with this phenomenon, then there are also leakages from smuggling, our borders are so porous.

“This issue is not easy to monitor, no matter what we do, it is not easy to monitor, because there are too many loose ends to police. The only way out is just to phase it out.”

While recalling the previous probe into the subsidy matter, the former D-G said, “We have seen this kind of probe before, it was this kind of probe that consumed the former member of the House of Representatives, Faruk Lawan, I think he is in jail as we currently speak.

“It was this same subsidy investigation in the house that sent him to jail. So, there is so much corruption in the ecosystem, and this corruption is extremely difficult to deal with. And the only solution to it is to remove the platform completely.

“Yes, politically it is not expedient but sometimes, we have to face the reality. We don’t want the ship to sink and everybody to get drowned in the process. I am not saying that we should remove it entirely, but gradually, we should phase it out and we should expedite action on the rehabilitation of the refineries. At least, we have been promised that at the end of the year, we would begin to see some results or so, that is also a window out of it.

“The Dangote refinery and other private refineries that are coming up, whatever we can do to support them, let us do so that we can get out of this conundrum. Because it will continue to hunt us, especially now, that the economy is bad, by the time we add these subsidy claims to the debt servicing, how much is left for the government?

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“Yet, we have a personnel cost to pay, we have the capital budget to deal with and then, we have the issue of ASUU, and all of that requires very serious funding, how are we going to manage it?”

Claims doubtful –Tella
Also, a professor of Economics at Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Sherrifdeen Tella, said the N18.39bn daily subsidy claims by the finance minister were doubtful.
He said to date, it is not clear what the actual figure of barrels of crude exported from Nigeria is.

Besides, Tella pointed out that the non-functional refineries were a deliberate ploy to continue to perpetuate the subsidy scam.

He said, “How did the government arrive at the figure? They just give us corruption figures wherein there is no basis for arriving at it. How many millions of barrels per day give us that?

“They refuse to build refineries to be able to profiteer from the subsidy. When the Accountant General, the man holding the purse of the nation, is a big thief, whom can we trust again?”

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