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Issues In The News

The N1.3 trillion fuel subsidy: Scam or Senate sophistry – Vanguard News

October 14, 2011

By Emmanuel Aziken, Political Editor

THE chicken has come home to roost and so it seemed last Wednesday as the Senate debated a motion on the illegal utilisaiton of an alleged N1.3 trillion on fuel subsidy this year.

How a monthly N20 billion budget to supposedly cushion the price of imported petrol shot up to N165 billion this August was an outrage that fazed many Senators.

In fact, a visibly enraged Senate President, Senator David Mark was to castigate a cartel he claimed exists in the petroleum sector of draining the national commonwealth. “My belief is that there is a cartel within the petroleum industry and whatever they do is just exclusive to them.

Ninety per cent of people outside do not know. We must find out how much is spent on subsidy, who are the beneficiaries? Has subsidy benefitted us? These are salient points and we cannot run away from them,” Senator Mark said at the end of the debate on what has now become the most topical issue in the country.

While the contentious issue of subsidizing the prices of petroleum products remains a burning issue, the Senate’s concern last Wednesday was on the propriety of the expenditure of N1.3 trillion on subsidizing the imported fuel products without legislative approval.

The debate was upon a motion brought forward by Senator Bukola Saraki, PDP Kwara Central on the issue. The well researched motion which first came on the notice paper about three weeks ago remarkably came to the floor at a time the nation is engulfed in the argument over whether or not to abolish the subsidy regime in the pricing of petroleum products.

The latest template from the Petroleum Product Pricing Regulatory Agency, PPPRA the body responsible for managing the subsidy regime indicates that a liter of petrol should ordinarily cost N143 at the pump station. But that price is allegedly brought down to N65 a liter as a result of government subsidy.

Components of the pricing regime include demurrage, freight, traders margin, lightening expenses (cost of transferring products from big tankers to lighter vessels), NPA fee, product fee, thruput charge (fee for discharging the fuel), depot charge among others.

These costs in the opinion of some strike at one point: the inefficiency of the Nigerian National Petroleum Corporation, NNPC to produce fuel domestically and thereby compelling Nigerians to rely on imported fuel products.

Senator Saraki’s motion was ably co-sponsored by 15 other Senators. The thrust of the motion was a prayer to cause an investigation into how the subsidy regime was allowed to balloon from a monthly N20 billion to N165 billion as at the month of August.

Presenting his motion on Wednesday Senator Saraki, himself the immediate past Governor of Kwara State and through that position the Chairman of the Nigerian Governors Forum, NGF, said:“In furtherance to the implementation of the fuel subsidy in 2011 appropriation, the sum of N240 billion (N20 billion monthly) is budgeted. Of the N20 billion monthly allocated, N11.2billion was allocated for domestic fuel subsidy (NNPC) and N8.8 billion for domestic subsidy (market) as stated in the Appropriation Act 2011.

“Although, N20 billion was set aside for subsidy on a monthly basis in the Appropriation Act 2011, in August 2011, the total figure expended was N165bn of which the NNPC was N88 billion and Independent Marketers was N77.7 billion.“In the first three months of the year, both the NNPC and the Independent Marketers did not exceed N62 billion monthly but within the last three months, figures have ranged between N150 billion and N186 billion.

“With this trend, by the year-end, we will have a fuel subsidy bill of over N1.2 trillion as against the N240 billion budgeted in the Appropriation Act. The implementation of 2011 Appropriation Act will surely be in troubled waters if a variation of N1.2 trillion arises as a result of the level of expenditure incurred on fuel subsidy so far.”

The thrust of Senator Saraki’s motion was essentially on the illegal expenditure over and above what was approved in the management of the subsidy regime. Whereas the National Assembly provided a total of N240 billion on a monthly ratio of N20 billion, the Petroleum Products Pricing and Regulatory Agency, PPPRA was believed to have spent an estimated N1.1 trillion as at present on the scheme.

Subsidy regime

The question that agitated many Senators was on who approved the funds utilized by the PPPRA in the management of the subsidy regime.Though it was quite easy given the ongoing debate on the desirability of subsidy for the debate to be turned into whether or not subsidy on petroleum products should continue.

It was Senator Abdul Ningi (PDP, Bauchi) who was at one time the Leader of the House of Representatives for the succinct points in the Saraki motion to be fetched out.“This motion is not about the desirability or otherwise of subsidy but about the flagrant abuse of the subsidy fund, which is against Section 80 (3) of the constitution that deals with the need to properly appropriate funds before withdrawing it from the treasury.”

Noting that the National Assembly appropriated N240 billion for fuel subsidy in 2011 he said that the government was now about expending N1.3 trillion. “The question is who authorised the withdrawal of the difference and who benefited from the payment?”That is a question that has put the PPPRA and the Nigerian National Petroleum Corporation, NNPC the two agencies at the heart of the whole imbroglio would have to answer.

The PPPRA which maintains the subsidy scheme would have to defend itself against public criticism of being out of touch with the citizenry and chanelling billions of naira of public funds to the hands of a handful of unidentified persons. Who are the beneficiaries of the subsidy? That is the question the PPPRA would have to answer.

The NNPC which has campaigned for the abolition of the subsidy would surely be put to task to defend itself against criticisms of lack of accountability and corruption. The corporation since the era of Julius Gaius-Obaseki at the turn of the decade has failed to give an explanation of its finances.

About TransformationWatch

TransformationWatch is an online news site founded by Henry Omoregie It is focused on keeping tabs on the Transformation Agenda set out by the Nigerian leadership in the Local, State and Federal Governments. My mission is to observe, analyze and report milestones or slowdowns in promised service delivery in all the facets of governance in Nigeria (2011 and beyond). Readership is open to all Nigerians and friends of Nigeria alike, regardless of Tribe, Religion or Political divide. We are all in this together

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