Reps fault N18.37bn daily subsidy payment, N448 per litre as PMS landing cost in 2022, 2023

The Federal Government, on Thursday, 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. Dr Zainab Ahmed, who disclosed this at the resumed investigative hearing into the Ad-hoc Committee investigating the payment of the controversial fuel subsidy payment between 2013 and 2022, chaired by Hon Ibrahim Aliyu, who picked holes in the Minister’s presentation on the projected N18.397 billion fuel subsidy payment per day.

She explained that “fuel subsidy is the difference between the pump price which is now fixed at 165 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, Hon Isiaka Ibrahim queried the rationale behind NNPC’s deduction from the source the sum of N1.66 trillion against the sum of N1.15 trillion paid to oil marketers in 2021, leaving an excess of N500 billion by fiat.

Hence, the Committee requested documentary evidence of the beneficiaries of the N500 billion paid by NNPC.

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

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“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 a period of 10 years.

“And then going by the permutations or calculations, Honourable 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 giving to those states, maybe my own state being a smaller state in terms of consumption may be requiring less maybe 10 trucks.

“So, what I’m saying in essence honourable Minister, we are talking of daily consumption, Monday through Sunday and Monday again, no public holidays, in fact during COVID-19 when there was lockdown, 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 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 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 months 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 N6.4 trillion. 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 N3.35 trillion which is half of the N6.7 trillion. 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 course of the year, making assessment of 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 N3.35 trillion in the approved MTEF, that’s now before the National Assembly for consideration, could’ve been funds that will apply to other vital sectors of the economy such as health, 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.

“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 of course the general public. Therefore, engagement with critical stakeholders such as this forum provides us 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. In the report, it shows the amount that was deducted on 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 N1.774 trillion has been paid to independent oil marketers as PMS subsidy from 2013 to 2016.

“The total sum of N6.210 trillion 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.

“The instrument was approved by the then President in 2010. It is also important to note that we have instances where funds are transferred from the consolidated revenue fund to the domestic excess crude account for subsidy payments. For 2015, N31 billion, again same year N106.1 billion transferred from the CRF in another instance to the domestic excess crude account.

“In 2016 there was another transfer of N40 billion from the CRF to the same account for the purpose of settling PMS subsidy to oil marketers.

“There was also the sum of N413.363 billion which was provided through short-term funding by the Central Bank of Nigeria. The details by the President for the approval of this funding is also attached to the document submitted to the committee.

“With respect to transfer of funds by NNPC and its affiliates to the treasury single account the ministry has obtained evidence as enclosed in annexe 9 of the report. The ministry is also not in the position to provide statement of account of NNPC and its affiliates. The parliament should ask for this directly from them,” the Minister said.