Adewale Sanyaolu

The decision of the Federal Government to set aside about $1 billion for fuel subsidy in the 2019 budget appears not to have gone done well with some Nigerians who expressed concern that similar provisions in the past  failed to address  the challenges of fuel availability in the country.

This was even as the Senate disclosed that the country spent an estimated  N11 trillion in six years on fuel subsidy payment.

President Muhammadu Buhari, had last December earmarked about N305 billion for petrol subsidy in the 2019 budget proposal.

‘‘We have earmarked N305 billion equivalents to one billion dollars for under-recovery by the Nigerian National Petroleum Corporation (NNPC) on premium motor spirit in 2019.

“Let me take this opportunity to address and clarify the under-recoveries on petrol. “In a period of economic challenges where purchasing power is weak, we must reduce some of the burden on Nigerians,” he said.

But, the decision to earmark about N305 billion for subsidy in the 2019 budget has pitched the Presidency against stakeholders in the oil and gas sector with the Nigerian Employers Consultative Association (NECA) and other Civil Society Organisations (CSOs) kicking against such provision.

Why subsidy

It is on record that the Buhari administration withdrew subsidy on petrol in 2016, forcing independent oil marketers to pull out of importation of the product.

Their withdrawal however left only the Nigerian National Petroleum Corporation (NNPC), as the sole importer of petrol, with pump price capped at N145 per litre as against a landing and supply cost of N185/litre.

Since then, the NNPC has been drawing from the Nigeria Liquefied Natural Gas dividend fund to cover the under-recoveries of about N40/litre on   imported petrol.

So far in 2019, the NNPC has utilised $1.05 billion or N320 billion of the fund to cover the under-recoveries, according to its Group Managing Director, Mr Maikanti Baru.

Only recently, the development drew the anger of the Senate, which believes the oil company lacked the legal powers to unilaterally spend the money without appropriation by the National Assembly.

But according to analysts, the provision for subsidy in the 2019 budget proposal will lay to rest the disagreement between lawmakers and the NNPC on the matter.

Buhari said the problem with subsidy in the past was abuse and corruption, especially by independent oil marketers.

“Today, the government-owned NNPC is the sole importer of PMS, and therefore the under-recovery is from the NNPC trading account.

“This means the possibility of some oil marketers filing bogus claims is removed.

“We will continue working to bring it (subsidy) downward to ensure such revenue sources are freed up to meet the developmental needs of our people,” the president said.

NECA, BudgIT insist on subsidy removal

Only recently, the Nigeria Employers Consultative Asssociation (NECA),  expressed concern over the resurgence of fuel scarcity across the country, and the return of fuel subsidy debate, saying NECA was disturbed at the corruption-ridden fuel subsidy regime and the increasing debt profile of Nigeria.

Timothy Olawale, Director General of NECA, while giving insight into how Nigeria could end the fuel subsidy regime and unsustainable rise in the nation’s debt profile, said government should do the needful by immediately putting in place a process and enlightenment machinery that would lead to the deregulation of the downstream oil sector and a deliberate disengagement from the debt burden.

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He said: “Like a sore that has refused to heal, the recurrent issue of fuel scarcity has reared up its ugly head again. We are where we are today because, despite past sound counsel, the government has not been faithful with the deregulation of the PMS market in the downstream sector.

Let us ponder and ask ourselves where the non-deregulation of the petroleum sector has led our economy:, because  continued dependence on imported petroleum products, supply shortage of petroleum products, loss of productive man-hours as a result of endless hours spent at filling stations, massive and unimaginable corruptions in the management of the subsidy dispensation, among others”. These, he averred, are not sustainable. Remove fuel subsidy now after years waste. It insists

For its part, BudgIT expressed worries that over the last decade, the country has spent over N9 trillion on fuel subsidy, about N15.5 trillion on capital expenditure, N2.1 trillion on health and about N3.9 trillion on education.

This, it said, was a misplacement of priority and shows that critical developmental items such as education, health and infrastructure have suffered due to the expenditure on fuel subsidy.

“By and large, the fuel subsidy regime has succeeded in creating phoney and emergency billionaire at the expense of millions of pauperised Nigerians.

We are concerned at the growing debt stock of the nation with a huge percentage of the budget, in the last decade going to debt servicing. Borrowing could have been permissive, given the state of the economy in 2015 but not to the clearly humongous level it has turned out to be. Incurring debt for developmental purposes is not in question, but the over N24.39 trillion debt stocks taking over 20 per cent of the annual national budget to service should be enough source of worry.

 IMF, FG disagree on subsidy removal

But, despite intense pressure from the International Monetary Fund (IMF), that it was not feasible now for it to remove subsidy on petrol as canvassed by Bretton Woods financial institution.

The government said that until remedial measures were put in place to cushion the effects of the removal of fuel subsidy on Nigerians, it would not jump into adopting the policy.

Former Minister of Finance, Mrs. Zainab Ahmed, who spoke in April at a briefing by the Nigerian delegation on the outcome of meetings with investors and institutions at the IMF/World Bank meetings in Washington DC, said that the IMF’s advice to remove fuel subsidy was in order, but declared that it would do more harm to the people if implemented now.

Among such side effects cited by the government in its opposition to the IMF proposal, was spontaneous panic buying of the products in the country. The government also admonished Nigerians to refrain from panic buying because there is adequate fuel in the country. The current official pump price of petrol is N145 per litre, which the Muhammadu Buhari government has sustained since it hiked it from N86 per litre at the inception of the administration in 2015.

Mrs. Ahmed said: “There is no imminent plan to remove subsidy. IMF said that fuel subsidy is better removed so that we can use the resources for other important sectors. In principle, it’s a good suggestion, but in Nigeria, we don’t have any plans to remove fuel subsidy at this time because we have not yet designed buffers that will enable us to remove the subsidy and provide cushions for our people. “So, there is no plan to remove fuel subsidy. We will be working with various groups to find an alternative if we have to remove it. We are not yet at the point of removing fuel subsidy yet,” she declared.

N11trn subsidy in 6 years worries Senate

The Senate, on May 30, revealed that the Federal Government spent a whopping sum of N11 trillion, being payments made to oil marketers as subsidy in the last six years.

It warned that the subsidy must be stopped or it could kill the nation’s economy. The apex legislative chamber made the revelation while considering the report of its Committee on Downstream (Petroleum Sector) on Promissory Note Programme and Bond Issuance for Oil Marketers’ Outstanding Claims. While presenting the report, the chairman of the committee, Senator Kabir Marafa, told his colleagues that Nigeria spent over N11 trillion to pay outstanding subsidy claims in the last six years.

The revelation came just as the lawmakers approved the payment of additional N129 billion subsidy claims to 67 petroleum marketers. The Senate had, earlier, approved the payment of N68.9 billion as subsidy claims to 20 petroleum marketers. Part of the report reads:

“That due to scarcity of forex within the period, oil marketing companies were allowed to source forex outside CBN rate to enable them meet the country’s petroleum products demand. That NNPC Retail get their petroleum product allocation directly from PPPMC at already subsidised rate and so does not require forex to transact its business.

Some of the oil marketers and the amount approved for them include: Total Nigeria Plc. N13.7 billion; Northwest Petroleum N11.4 billion; Masters Energy N10 billion; MRS Oil PLC N8.8 billion and Sahara Energy N8.4 billion. Others are: MRS Oil & Gas Limited N6.3 billion; Nipco Plc. N4.2 billion; Forte Oil N3.9 billion; DEEJONES Petroleum & Gas N4.1 billion; Emadeb N4 billion, among others.’’

However, before approving the payment, the legislators berated the Federal Government for paying subsidy to oil marketers over the years without the Senate’s approval.

Contributing to the debate on the report, Senator Barnabas Gemade expressed serious concerns that the Federal Government and the anti-graft agencies had failed to convict any of the oil marketers who were indicted in the illegal subsidy claims.

He noted with regret that the government had not done enough in bringing the owners of the affected 50 oil firms to justice many years after their prosecution. “What has happened to those who defrauded the nation? I believe that the 9th Senate will do justice to know what has happened to this money,” he said.