Showdown looms as Senate queries FG over unapproved subsidy payment

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The Senate is set for a showdown with the Federal Government over the alleged payment of N26 per litre to subsidise the pump price of Premium Motor Spirit, also known as petrol.
The Senate Committee on Petroleum (Downstream), which was on Thursday mandated to investigate the current crisis over supply of the product, on Friday, asked how the government was maintaining a pump price of N145 per litre when the landing cost of the commodity was now N171.
President of the Senate, Dr. Abubakar Bukola Saraki, had on Thursday directed the committee to cut short its recess and “immediately” convene a meeting with stakeholders in the petroleum sector over the current scarcity of petrol.

Chairman of the committee, Senator Kabiru Marafa; and Chairman of the Committee on Media and Public Affairs, Senator Aliyu Sabi-Abdullahi, who jointly addressed journalists on the matter in Abuja on Friday, stated that the Senate was set to move against anybody or organisation found to have caused the crisis.
Marafa said, “We were told that there is subsidy part of what we are going to ask is: If there is subsidy, who approved the subsidy? We are the only ones that can appropriate money (for government), nobody else. That is why the Senate spoke resoundingly before going on recess when they talked about taking $1bn (from the Excess Crude Account) to fight insurgency. Nobody can take any money without the approval of the Senate. If you do that, you are breaching the provisions of the Constitution.

“So, if you are going to provide for subsidy, you have to come to the National Assembly. We need to know and that is part of what (the questions) we are going to ask.

“Now, if they say there is subsidy, when the price (of petrol) rose to N145, the common belief by all Nigerians was that subsidy was gone and gone for the good. Now, they are telling us that the landing cost of petrol is N171 per litre.
“If it is N171, who approved the subsidy or payment of the remaining balance? Where is it buried? Who appropriated it? What are we going to do in the next few days, months and years to come? We need to address this issue squarely because a lot of Nigerians are misinformed about this subsidy issue.
“Between 2006 and the figures we have for 2016, Nigerian National Petroleum Corporation alone got N5.1tn for subsidy while marketers collected over N4tn. Put them together, we are talking of over N10tn spent on subsidy. I am asking, what is the impact of these monies that are being paid on our behalf to subsidise petroleum products? Why are we afraid? If we take the N10tn to the road sector or railway, power, agriculture, what are we going to expect?
“We need to ask some very honest questions. We should not be sentimental about these things.”
Marafa recalled that the lawmakers went on recess with the assurance by the NNPC that the crisis would be resolved soon.
“But unfortunately, this issue persisted. And looking at the way things are going and the complaints from everywhere, including our constituents, the Senate President called me to ask what the situation was and what the committee was doing,” he said.

The senator also said all stakeholders in the downstream sector of the petroleum industry had been invited to the “live public investigative hearing,” disclosing that letters had already been dispatched to them.

According to him, they include the Executive Secretary of the Depot and Petroleum Products Marketers Association, Executive Secretary of Major Marketers Association of Nigeria, President of Independent Petroleum Marketers Association of Nigeria, and the Department of Petroleum Resources, among others.
“While this problem is raging, we hear of accusations and counter-accusations from NNPC, IPMAN, DAPPMA, MOMAN, with letters flying all over the place about hoarding and sabotage,” Marafa said.
The lawmaker also hinted that the panel would seek a review of the supply policy adopted by the current administration.
He said, “You will all remember that this issue didn’t happen last year. Why do we have it today? We are going to look at the Direct Sale-Direct Purchase contract by the government. That is, the new policy introduced by this administration under the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu. It means direct sale of crude oil and direct sale of petroleum products.

“It was introduced to replace the former policy called “swap,” which was to give our crude and get the products back into the country, but it was fraught with a lot of irregularities and corruption. So, when this government came in, it (swap policy) was scrapped and DSDP was introduced. The whole idea of DSDP was to ensure steady supply of petroleum products since we are unfortunate not to have our refineries working.

“We will also look at the forex allocation to the marketers, why they are not importing and why NNPC is the sole importer of petroleum products.”

Mafara also dismissed the allegation of unapproved award of contracts worth $25bn by the Group Managing Director of the NNPC, Maikanti Baru, as contained in a leaked memo from Kachikwu to President Muhammadu Buhari.

While faulting the claim that the Senate’s ad hoc panel set up to investigate the allegations had allegedly “connived” with Baru to frustrate the probe into Kachikwu’s allegations, the lawmaker stated that, “there is no $25bn anywhere.”

He further said, “This $25bn we are talking about is what the nation earns from the sale of crude oil. Nobody got any contracts of $25bn or whatever billion dollars. Nobody! I am telling you here and I want it challenged by anybody who has any facts that there was something like that.”

When asked if President Buhari, being the holder of the portfolio of the Minister of Petroleum Resources, would be invited to answer questions on the fuel crisis, Marafa argued that the President had delegated the powers of the office to Kachikwu, who is also the Chairman of the Board of NNPC.

The senator also stated that Buhari had not breached any part of the law by appointing his Chief of Staff, Alhaji Abba Kyari, as a member of the NNPC board, noting that the President could appoint his family members into the board and the Senate would not be bothered by the appointment.

In his comments, Sabi-Abdullahi expressed the apology by the Senate to Nigerians for the hardships they had suffered during the crisis.

He said, “At all times, the 8th Senate will never fold its hands or stand aloof while Nigerians are in pain. I want to say it without any fear of equivocation that we have always stood on the side of the people because as their representatives, anything that touches them touches us.

“So, on behalf of the 8th Senate, we want to apologise to Nigerians that this unfortunate episode ever happened. But we want to assure them that we are going to be on top of the situation. We will definitely see what we can do to help in bringing this unfortunate episode to a close.

“Even though we have seen some people going round (the country) and saying that they have found hoarders (of the product), the truth of the matter is that there is complacency and some people have abdicated their responsibilities.

“If they had been doing it on a routine basis, we should be getting reports on the fact that these sharp practices were taking place. That is what the committee will want to get down to.

“We want to assure Nigerians that this 8th Senate will ensure that nobody is spared. The moment that you are found complacent and found to be sabotaging government’s efforts; definitely, these issues will come to the fore and we will definitely ensure that justice is served.”

NNPC spends N81.9bn on petrol subsidy in three months.

Meanwhile, findings by Saturday PUNCH revealed that the NNPC had spent about N81.9bn as subsidy on PMS since October when it assumed the role of sole importer of the commodity.

It was gathered that the national oil firm commenced the sole importation of PMS in October, after oil marketers stopped importing the commodity, following a hike in its import price in the international market.
Marketers, as well as the GMD of the NNPC, Baru, confirmed that the current price of petrol in the international market had risen above the regulated retail price for which the commodity is sold at petrol stations in Nigeria.
Baru had revealed that the landing cost of petrol was N171.4/litre, which was also confirmed by the Executive Secretary, Depot and Petroleum Products Marketers Association, Olufemi Adewole.
“The landing cost moves with the CIF (Cost, Insurance and Freight) price of PMS. As of Friday, the CIF price was in the neighbourhood of $620 per metric tonne. With the official exchange rate of N305 to the dollar, the landing cost should be N171.40 per litre,” Baru had said.

Confirming the GMD’s statement, Adewole had also stated, “Current import price of petrol is about N170/litre. NNPC, which absorbs the attendant subsidy on behalf of the Federal Government, is the importer of last resort.”

Adewole further explained that marketers stopped importing petrol since October, leaving the NNPC as the sole importer.

Nigeria consumes an average of about 35 million litres of petrol daily, and if you multiply 35 million litres by 90 days (which is three months), it will give 3,150,000,000 litres. Since the difference between the landing cost of the commodity and its pump price at filling stations is about N26 per litre, therefore, Nigeria must have spent N81.9bn (3,150,000,000 litres multiplied by N26).

This implies that the NNPC must have spent about N82bn since it commenced the sole importation of PMS in October this year.
Adewole explained, “As it stands today, NNPC has been the sole importer of PMS into the country since October 2017 due to the following reasons. We all know that we presently run a fixed price regime of N145/litre for PMS or petrol without any recourse to subsidy claims. However, we also have no control on the international price of crude oil.
“Secondly, current import price of petrol is about N170/litre. NNPC, which absorbs the attendant subsidy on behalf of the Federal Government, is the importer of last resort. The international price of PMS went up during the hurricane Katrina and has not dropped below $600 per metric tonne.
“Exchange rate of the dollar to the naira is N306 for PMS imports and also the interest rate our banks charge is above 25 per cent. Landing cost of PMS in Nigeria, based on the scenarios explained earlier is above N145/litre, which means any of our members that imports would have to resort to subsidy claims, a policy already jettisoned by the Federal Government.”

Speaking further on some of the reasons for the current PMS scarcity, the DAPPMA spokesperson noted that it was on record that any time NNPC assumed the role of sole importer, there were always issues of distribution, because marketers own 80 per cent of the functional receptive facilities and retail outlets in Nigeria.

Adewole stated that DAPPMA empathised with all those going through difficulties at this time, as he noted that historically, members of the association imported about 65 per cent of the nation‘s total fuel consumption.

“Major Oil Marketers Association of Nigeria imports about 15 per cent and PPMC/NNPC import the balance of 20 per cent. However, this scenario changed drastically due to several challenges faced by marketers,” he explained.
It’s not subsidy but extra cost, says corporation
Commenting on the development, the Group General Manager, Group Public Affairs Division, NNPC, Ndu Ughamadu, however, stated that the extra money being spent by the corporation to ensure that the price of petrol remained at N145/litre was not subsidy but “extra cost”.

He said, “If you look at this year’s budget, there was no provision for subsidy. There is nothing like subsidy payment. What the GMD was referring to was the extra cost which the corporation was absorbing. As a national oil corporation, there are various ways of absorbing costs.

“The GMD never referred to it as subsidy; rather, it is the extra cost which the corporation is absorbing as the supplier of last resort when it comes to making the product available in the country.”

Ughamadu, however, noted that he could not provide the actual figure so far spent by the corporation as extra cost since the oil firm commenced the sole importation of petrol into Nigeria.

President insisted petrol mustn’t be more than N145/litre – Baru

Baru on Friday said President Muhammadu Buhari directed the NNPC to maintain the current price of petrol at N145/litre.

He stated this in an interview with State House correspondents shortly after Jumat Prayer at the Presidential Villa, Abuja

 When asked to address the issue of subsidy, he said, “Do you want me to remove subsidy? What I am saying is that the landing cost as should be sold at the pump without under-recovery should be N171.40.

 “However, Mr. President has directed that we should maintain all the parameters to ensure that it is sold at N145/litre and that is why we are selling at the depot at N133.28.”


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