Subsidy: ‘Nigeria pays daily for 24m litres of unaccounted fuel’
By Victor Oluwasegun and Dele Anofi, Abuja 22 hours 10 minutes ago
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Diezani Alison-Madueke

The House of Representatives Ad Hoc Committee on fuel subsidy regime yesterday learnt that Nigerians have been paying for 24million litres of petrol that were smuggled to neighbouring countries on a daily basis.
This was revealed when the management of the Petroleum Products Pricing and Regulatory Agency (PPPRA) and the Nigerian National Petroleum Corporation (NNPC) appeared before the Farouk Lawan-led committee.
PPPRA Executive Secretary Reginald Stanley said the payment and smuggling have been going on since 2006.
According to the agency’s figures, while Nigeria imports 59 million litres of fuel on a daily basis, only 35 million litres are consumed in the country.
Stanley said Nigeria pays subsidy on the 59 million litres imported on a daily basis.
According to him, until he assumed office, the system in place at the agency paid for all the fuel discharged. He said the discharged fuel from vessels and the volume consumed are two different things, because the country paid for the bulk.
“In the past, what was discharged was what was paid for. That is what I met on the ground,” Stanley said.
The PPPRA chief said the practice would soon end as he promised to introduce what he called “triple two system”. This, he said, would assist in tracking the volume of fuel consumed in Nigeria.
Stanley said the figures of consumed PMS since the beginning of the subsidy were arrived at through two different approaches of the actual or the Gross Domestic Product (GDP) growth.
He said: “In 2007, our GDP growth was 6.4. That was statistically sound, while in actual fact, what was recorded as our consumption on PMS was 26million litres per day as against 27million litres per day. The variance was very minimal.
“For 2011, the figure quoted 35million litres per day, while the GDP growth rate put it at 36.3million litres per day. So, the variance was also minimal. The projection for 2012 is 39.2 million litres per day. These figures cannot be faulted.
“Even if our GDP growth is driven by high crude prices, it means there will be more revenue for government to power its activities of infrastructural development and more macro-economic activities in the land.
“The apparent confusion was between what stock and consumption is. But based on what we have done, I think there is not much difference of opinion on the actual consumption vis-à-vis the stock. This is why we are advocating strategic stock, in case of supply shock in the event of glut.”
The PPPRA chief said he appointed an independent inspector, based on his experience in the oil sector, adding that there was no need for the Customs to verify the volume of imported fuel since no payment of duty is made on petroleum products.
Lawan bemoaned a situation whereby the consumption level of the country is known but certain people still import extra and pay subsidy on it. This is criminal, the lawmaker said.
He added: “Taking 2011, for instance, per day discharge was 59million litres and, consumption, from what was presented to us here, was an average of 35million litres per day. What that means is that there is a gap of 24 million litres per day being funded by Nigerians as subsidy that was not utilised by them.
“This, of course, amounts to overpayment; or, in order words, sharp practices, while we are paying for 59million litres per day instead of 35million litres per day. Someone, somehow, is being short-changed. That is, Nigerians, by 24million litres per day.
“The second implication of this is that smuggling is being encouraged by the system because if local consumption is 35million litres per day and we are paying for 59million litres per day, it means we are making available 24million litres per day for importers to smuggle out, because it cannot be consumed and this is on a daily basis for 365 days in a year.
“Moreover, it was being stated that we do not have enough storage capacity for this unaccounted for fuel that could possibly be used at the end of the year.”
NNPC Group Managing Director Austin Oniwon said at no time did he illegally take money out of the Federation Account for subsidy payment.
He said: “Let me put it on records that I have never taken money from the Federation Account. The same way this Act allows the NNPC to deduct cash call before the balance is paid into the Federation account, is the same way the Bill allows the NNPC to deduct subsidy before the balance is paid into the Federation Account.
“If we are not quarrelling about deductions of cash calls, which is allowed by the same law, I am always at a loss when I am being accused that I am touching the Federation Account.
“We don’t take money from the Federation Account. We take as provided for by the law. But the adequacy or inadequacy of what was provided for is a question I believe the Ministry of Finance will be able to talk about.
“So, I do not touch the Federation Account, I do not intend to touch the Federation Account and in a totally deregulated environment without subsidy, nobody would have any recourse to deduct anything at all.
“I only deduct what is authorised by PPPRA. Once they give me the certificate, after checking with all authorised inspectors and auditors, it is that value that constitutes what is deducted as per the Appropriation Act.
“I don’t go outside that. So, it is not for me to determine what is deducted from the crude’s value. Before I deduct, I write to the Minister of Finance that the PPPRA has approved it for me.
“That is the procedure I have been using and I believe that it is the same my predecessors used. I hope that everybody would join hands to ensure that we move towards a fully deregulated environment where subsidy is placed on production rather than consumption.”
On the differential between N360billion against N630billion claim as subsidy for 2008, Oniwon argued that NNPC at no time provided information to the Nigerian Extractive Transparency Initiative (NEITI) on its operation.
He said: “For NEITI, I don’t know how they arrived at that calculation. I have not communicated to NEITI; I never knew where the body got that figure from. I only heard the figure for the first time. We have that document for N630 billion. The N1.348 trillion was the reconciled figure between NNPC, PPPRA and Ministry of Finance.
He added that the corporation recovered N15 billion from oil marketers when the price of crude oil nosedived and the demurrage cost was built into the subsidy.
According to him, the amount paid as subsidy include the cost of five days demurrage and other cost elements on imported fuel based on the approval of the PPPRA Board.
Oniwon said: “It was the arrears of N250 billion for kerosene that was responsible. In the component of N1.3trillion that was presented, N250billion of that was for kerosene and there was kerosene arrears paid at different points, not stated in that document with you. The N1.09trillion was for PMS for the period under review, that is, 2011.
“Nigeria was declared a war zone by other exporting countries that forced vessels to pay high premium on insurance as well as on the vessels too. Secondly, the exchange rate to the dollar, whereby we buy in dollar and sell in Naira.”

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