The House of Representatives has again queried the N24bn which the Nigerian National Petroleum Corporation claim it incurs monthly on payment of subsidy on imported Premium Motor Spirit popularly known as petrol.
The lower chamber described the expenditure as “an act of illegality” as the funds are allegedly paid without appropriation by the National Assembly.
The landing cost of a litre of PMS is said to be N171, leaving a difference of N26, but the government-approved pump price is N145.
The price differential and other challenges, including allegations of smuggling by syndicates, leave a monthly subsidy bill of N24bn.
The Chairman, House Committee on Petroleum Resources (Downstream), Mr. Joseph Akinlaja, told SUNDAY PUNCH that a full-scale investigation into the “back-door return” of subsidy payment would start this week.
Akinlaja also confirmed names of officials that had been summoned to appear before the House probe panel.
He said the Minister of State, Petroleum Resources, Dr. Ibe Kachikwu; the Group Managing Director of the NNPC, Dr. Maikanti Baru; and the heads of the Pipelines and Products Marketing Company and the Petroleum Products Pricing and Regulatory Agency had been summoned to appear at the session.
Akinlaja reiterated the National Assembly’s stance that subsidy was neither captured in the 2017 budget nor in the 2018 budget still awaiting passage by the legislature.
He said, “What they (NNPC) is doing is illegal. We don’t know where the management got the approval to make the payments.
“They did not approach the National Assembly for any approval. That is why we say they have questions to answer. They need to tell Nigerians whether subsidy is back?
“We have an investigation to conduct and it will start next week (this week) for stakeholders to come and talk about this subsidy and other renewed challenges in our oil industry, particularly the supply chain in the downstream sector.”
Akinlaja recalled that the NNPC, a government corporation, had been the sole importer of products for several months after private importers boycotted importation.
He said reports at the disposal of the committee suggested that the Independent Petroleum Marketers Association of Nigeria; the Depot and Petroleum Products Marketers Association; and the Major Oil Marketers Association of Nigeria were collectively owed N800bn by the government for previous importation.
He added that as a result of the mounting debts, IPMAN, DAPMAN and MOMAN stopped importing products, leaving the NNPC alone to handle the challenge.
The lawmaker added that the “surprise” now was whether the NNPC was paying subsidy to itself, “but essentially doing so without authorisation by the National Assembly.”
He disclosed that the position of the committee had been that the executive should forward a supplementary budget, covering the N800bn, to offset the debts so that the marketers could resume importation.
Akinlaja also told SUNDAY PUNCH that the supplementary budget had yet to come while the NNPC hadn’t sought any approval from the National Assembly.
NNPC’s subsidy payments illegal, say senators
Also, some members of the Senate, who spoke to SUNDAY PUNCH, described subsidy payments by the NNPC as illegal as it was without the approval of the National Assembly.
Some of them however noted that there was no way the corporation could have maintained the official pump price of PMS at N145 per litre when the landing cost of the commodity had risen to N171 per litre.
A member of the Senate Committee on Petroleum (Gas), Senator Adesoji Akanbi, stated, “We all know that the landing cost is more than the regulated pump price. It means that the government must bear the cost of the differentials. And for the fact that the general election is approaching, the current administration will not want to raise the pump price.”
Another senator, who spoke on condition of anonymity, however, faulted the corporation for not seeking legal backing for the payments. “They just don’t want to do it,” he said.
The lawmaker asked why it was difficult for the Federal Government to use the differentials between the appropriated oil benchmark and the increasing crude oil prices to augment the gap between the landing cost and the pump price.
“It is indeed illegal and they should have quickly sought the approval of the National Assembly. I agree that it should not be illegal; there should be a way to go around it without breaking the law,” the senator said.
Even if FG pays N650bn debt, we can’t still import fuel –Marketers
Meanwhile, oil marketers in the country have said they will still not be able to import the PMS even if the Federal Government clears the N650bn debt it owes them.
On Monday, oil dealers, under the aegis of the Depot and Petroleum Products Marketers Association of Nigeria, suspended the 14-day ultimatum it issued the Federal Government to pay the N650bn debt.
DAPPMA had threatened to disengage oil workers if the government failed to comply, but suspended the move after the government made commitments to pay.
The Executive Secretary, DAPMMA, Olufemi Adewole, however, told one of our correspondents that despite the government’s commitment to clear the debt, petroleum product marketers would not commence PMS importation.
When asked if marketers had started importing PMS since the government had agreed to pay the N650bn debt, Adewole said there was no plan for such.
He stated, “Importing PMS is not as if you just go to the depot, load and come out. If you are importing PMS, you will agree with your supplier in Amsterdam or Europe or Russia; you nominate a vessel; they give you a date that you are going to load the vessel; you then load the vessel and it takes about two weeks for it to come to Nigeria.
“And first and foremost, the money has to be paid but right now, the money is still not there. We don’t have the money to do all that. We have suspended the ultimatum but marketers still don’t have the money to import. So on importation, that is off it right now.”
When probed further on whether marketers would import PMS once they get their payments from government, Adewole replied, “If the money is paid and the price is okay; in other words, if we bring it in and the landing cost is not above N145 per litre, then we can go ahead and import. Even if the money is paid today and the landing cost is above N145, we still cannot import.
“So many things came together and that is why we were boxed into a corner. At a point when they still owed us, we were still importing because the price was below N145 and we can still land and sell the product at N145. But when we could not get our money out, could not sell at N145, and were borrowing money to pay staff salaries, then, we just felt that what’s the point? We have been talking to them but they seem not to be doing anything.”
But the spokesperson for the NNPC, Ndu Ughamadu, said the rise in crude oil prices in the international market and the increase in the volume of PMS consumed across the country had contributed to the hike in the amount spent as subsidy on petrol.
Ughamadu, who insisted that the NNPC was not paying subsidy but making under recovery, stated that Nigeria’s petrol consumption jerked up from about 35 million litres per day to 50 million litres.
He said, “It was clearly stated in a presentation we made a few days ago to the Customs. In effect, the higher the crude oil price, the wider the landing cost of products and the larger the under recovery.
“All these factors depend on the consumption level. The higher the consumption level, the wider is the under recovery. It is important to state that under recovery is part of our credit management structure.”
The oil firm had announced last Sunday that it was spending N774m daily as subsidy on the 50 million litres of PMS consumed across the country every day.