2022 Oil Subsidy Payments Padded By N600bn

The Group Managing Director of Nigerian National Petroleum Corporation (NNPC) Limited, Mele Kyari Monday stirred controversy with the disclosure that the current oil subsidy payment may have been padded by as much as N600 billion.

Kyari said that N3.4 trillion was actually required as the oil subsidy for the 66.7 million litres of Premium Motor Spirit (PMS) daily consumption but the federal lawmakers approved N4 trillion in the revised 2022 Appropriation Act.

Kyari speaking at the resumed investigative hearing into the subsidy regime from 2013 to 2021 at the instance of the Ad-hoc Committee chaired by Hon. Ibrahim Mustapha painted a sorry picture of the industry which is now characterised by oil theft and pipeline vandalization, which has forced oil output which hitherto was 2.3mbpd prior to Covid-19, to between 1.6mbpd and 1.2mbpd, lower than the 1.8mbpd approved by OPEC. 

The National Assembly had in the run-up to the approval of a revised budget of N17.3 trillion for the 2022 fiscal year, increased the budget deficit by N965.42 billion to N7.35 trillion and also increased fuel subsidy for the 2022 budget by N3.557 trillion, from N442.72 billion to N4 trillion.

The approval follows the request by President Muhammadu Buhari to the lawmakers to approve an additional N3.55 trillion to the hitherto approved N442.7 billion for PMs subsidy in 2022, noting that the PMS subsidy was not duly appropriated for in the national budget beyond June.

Giving an insight into what could now be seen as a huge scam, the NNPC helmsman noted that the joint venture partners are entitled to about half of the total production, and of which some have declared force majeure, while ExxonMobil has shut in and Shell also planning to follow suit.

Kyari who was represented by the company’s Chief Financial Officer, Umar Ajia said: “We have about 1.6 billion litres incoming, land and marine. This is what is the minimum level we have to maintain, especially as we approach winter. Most of the refineries that we procure are actually shutting down their operations because of the clamour for green energy and COP26 compliance.

“Even gas that is transition fuel is being given eight years which we do not agree because, with the PMS outlook, we won’t be closing each and every month with a two billion stock. That is the only way you can sustain petroleum so that the marketer does not see some slack and take advantage by beginning to hoard products and create artificial scarcity. 

‘There is a huge arbitrage to move products outside even though we are not saying that the bulk of the product is smuggled but the reality is that there is no study to validate the actual consumption. What we are reporting daily is what the authority, which is the regulator publishes. They are represented at every depot in Nigeria.

“Since the exchange rate has been moving steadily from N195.5 per dollar to N390.6 to a dollar, on average, then the subsidy scheme is in the forex subsidy and price.

“The shipping cost has doubled, therefore, the landing cost of PMS has moved from N87 per litre in 2015 to about N327.68 per litre today. When you compare it to what we are selling, you have N209 on every litre. When you multiply the N209 per litre by an average of 66.7 million litres, you are talking about the N3.4 trillion subsidy for the year. 

“The reality today is that when one takes statistics of the number of vehicles in Nigeria, the tricycles (Keke Napep) and the pumping machines, we have about a million Keke, and if each uses four litres per day, it comes to four million litres in one city.
“We have not done a study to validate the figure but people are saying that we are evacuating 66 million a day, that is the reality. Some days, what is evacuated can go as much as 100 million a day, while some weekends, we do zero. 

He said that Oyo and Ogun states even consume more than Lagos State, leaving one to wonder if they have more vehicles than Lagos. 
‘The fact is that these are states with porous borders and it explains why this bulk evacuation is going out of Oyo and Ogun States, to probably neighbouring countries.”

While responding to a question on the huge allocation of PMS to states near border towns, the NNPC helmsman lamented that previous efforts made by PPPRA to install the Aquila facility with a view to forestalling illegal transportation of PMS across illegal borders failed.

He, however, averred that: “If you have N5 million, you can cross the borders with trucks laden with PMS because of their porous nature despite having Nigerian Customs manning them.
 
“PMS crosses to Cameroon through the North East, Nigerian PMS gets to Upper Volta, Mali; our neighbouring countries hardly import PMS; in fact, some of them do not even have the LC cover to back up imports.

“Cameroon refinery got burnt sometime last year or so, since that time, they have not imported PMS but they still use PMS’.
“If you go to Niger, you will find that PMS is sold in bottles just like Coca-Cola because of its cheaper source, and as such would not want to waste their foreign exchange… so what it means is that we are subsidizing petrol for our neighbours’.

He also informed the lawmakers that the Company resolved to extend the Direct Sales Direct Purchase (DSDP) contract which was billed to end in August 2022 to avert fuel scarcity in December and during the 2023 general elections.

“It is a very dangerous period to begin to retender for that because we are facing the winter, these are the difficult ‘Embers months’ that we normally avoid fuel scarcity.

“You know the scarcity in Nigeria is really associated with the Christmas period so if you now tender, the tendering process will take one or two months. So, what the Board approved we do is to extend the contract for six months such that we have passed the winter and we have passed the election, otherwise we could have problems during elections,” he said.

The committee chairman, Mustapha said the report of the committee by the 7th Assembly that investigated the oil subsidy regime established that 31.500 million litres of PMS were being consumed daily in 2012.

“We are now being told that we have 66 million litres, and one will wonder what increase of consumption is it that within 10 years we have over 100 per cent increment. How can we justify it? if 1,500 trucks were discharged from various depots into the country, it will at least take between 5 to 12 hours to arrive at their final discharge point and also take more hours to discharge…

“So how come that these trucks will discharge and return back the same day and also be able to load to maintain the 64 or 66 million consumption daily? 

“And then the second issue, if you look at this your table, gasoline price across West African countries per naira per litre. Maybe you will help a layman like me that probably we are simply subsidizing for West African region, even in the Niger Republic it is sold for N536, in Mali, N577, in neighbouring Benin, N389, in Ghana N589 and in Togo N470, in Chad N362, and in Cameron N423 whereas the landing cost plus incidentals, profit and whatever as you projected here is N462 in Nigeria and we subsidise it to N162 or N165 or thereabout.

“Don’t you think we deliberately choose to sink the country for the benefit of others? What justification can we say we have to justify this to Nigerians? these are some of the key issues we will like to hear from the horse’s mouth,” Hon. Mustapha noted.