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[size=14pt]Senate: FG overspends subsidy fund by N1tr[/size]

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Written by Abdul-Rahman Abubakar Thursday, 13 October 2011 05:01
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[Senate President David Mark]

The Senate yesterday asked its committees to investigate how the Federal Government overspent the budgeted funds on fuel subsidy by up to N1.1 trillion since the beginning of the year.
About N240 billion was provided for the subsidies in the 2011 budget, but so far government agencies responsible for running the scheme have spent up to N1.3 trillion this year, the Senate heard through a motion moved by Senator Bukola Saraki yesterday.



The Federal Government has planned to stop the subsidies starting January, but this is facing criticism from labour unions, opposition politicians, lawmakers and many prominent people.

Ending the scheme would inevitably send petrol prices shooting up to about N150 per litre from N65 per litre.

In the motion co-sponsored by 13 other senators yesterday, Saraki said instead of spending N20 billion each month on fuel subsidy as budgeted, government spent up to N165 billion in one month alone in breach of the budget law.

Saraki said government has so far spent about N1.3 trillion on fuel subsidy this year, translating to 700 per cent above the budgeted sum.

He said reports by some prominent foreign economic journals and the Department of Petroleum Resources (DPR) has revealed how volume of fuel imported into Nigeria is inflated fivefold and then smuggled out and sold at higher prices in neighbouring countries after collection of large sums of money as subsidies from the government.

“Fuel subsidy as it is being managed today has become a risk to the entire economy. The implementation of the 2011 Appropriation Act will surely be in trouble waters if a variation of N1.2 trillion arises as a result of the level of expenditure incurred on fuel subsidy so far.

“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 N165 billion of which the Nigeria National Petroleum Corporation (NNPC) was N88 billion and the Independent Marketers was N77.7 billion.

“In the first three months of the year both 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,” Saraki said.

Speaking on the motion, Senate President David Mark said the scheme has been hijacked by a cartel operating like Mafia. “Whatever they do is completely exclusive to them. They are very few and 95 per cent of us don’t know what is happening. It is important to investigate the subsidy to know whether or not it has achieved the aim it is set out to achieve,” he said.

Saraki said illegal expenditure on fuel subsidy diminished the power of the National Assembly as the organ of government responsible for appropriation of all public funds.

Debate on the motion soon became a debate on whether to remove fuel subsidy or not.

In his contribution, Senator Ibrahim Gobir (PDP, Sokoto) opposed the proposal to remove fuel subsidy.

“The issue here is about misappropriation of funds in the management of the subsidy fund… I believe that if we look at the management of the fund, it may even be that we don’t need to remove the subsidy after all,” he said.

But Senator Heineken Lokpobiri (PDP, Bayelsa) said the time has come for fuel subsidy to be removed, as “subsidy has only benefitted a few people and it has to go. The people that it is meant to help have not benefitted from it. In my area fuel is sold far above the N65 approved rate.”

After the debate, the Senate asked it committees on Downstream Petroleum Resources, Appropriation and Finance to investigate the whole fuel subsidy scheme and report back.

Last week, President Goodluck Jonathan wrote to the National Assembly on government’s intention to stop subsidising cost of fuel in the country. State governors have already announced their support for the plan.

The outcome of the investigation launched by the Senate yesterday is expected to influence the position that it would take on fuel subsidy.

Fuel subsidies have been a long-standing policy for Nigerian governments to ease the cost pressures on the people.

Ending the subsidy has been met with widespread optimism by international investors, who believe it is inefficient, fuels corruption and holds back the country from reforming its downstream oil sector, Reuters news agency reported.

But many Nigerians view the subsidy as the only benefit they get from living in an oil-rich state and say they would like to see the government cut costs from wealthy politicians before asking more money from subsistence workers.

http://dailytrust.com.ng/index.php?option=com_content&view=article&id=145315:senate-fg-overspends-subsidy-fund-by-n1tr&catid=2:lead-stories&Itemid=8

The Senate yesterday asked its committees to investigate how the Federal Government overspent the budgeted funds on fuel subsidy by up to N1.1 trillion since the beginning of the year.
About N240 billion was provided for the subsidies in the 2011 budget, but so far government agencies responsible for running the scheme have spent up to N1.3 trillion this year, the Senate heard through a motion moved by Senator Bukola Saraki yesterday.

He said reports by some prominent foreign economic journals and the Department of Petroleum Resources (DPR) has revealed how volume of fuel imported into Nigeria is inflated fivefold and then smuggled out and sold at higher prices in neighbouring countries after collection of large sums of money as subsidies from the government.

“Fuel subsidy as it is being managed today has become a risk to the entire economy. The implementation of the 2011 Appropriation Act will surely be in trouble waters if a variation of N1.2 trillion arises as a result of the level of expenditure incurred on fuel subsidy so far.

efisher:

Smuggling and corrupt practices could have caused up to 80% of the total rise. Who knows?

There's where the strong argument for subsidy removal begins. And it's also the same reason why Nigerians maintain that the corruption in the system should be fought instead. According to Sanusi, "it is an economic decision" but I may add, with very strong political and social implications.

Already, the minister of finance, Dr Mansur Muhtar, is said to have made his position known to President Yar’Adua on the need to take the vital decision.
According to official figures, N255.74 billion and N290.47 billion were spent on subsidies in 2006 and 2007 respectively.
The subsidy payment in 2006 was about 50 per cent of the size of federal government’s capital expenditure while in 2007, the amount was 40 per cent, according to official sources. In 2008, N654.76 billion was spent on subsidies, representing 133 per cent of the size of the federal government’s capital expenditure, while N602.51 billion was spent on subsidies this year

The Federal Government is subsidising a litre of premium motor spirit (petrol) with N91, indicating a rise of N24.68 or 27.1 per cent over the N66.32 spent last February.

Over N650 billion, it was learnt, was spent by the Federal Government last year on fuel subsidy. This figure is expected to increase this year, following the rise in the price of crude oil in the international market where a barrel costs $112.

The Federal Government spent over N600billion on fuel subsidy in 2009 and over N1.2trillion between 2006 and 2008.

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iesusluvz:

@ jmaine:
Has Nigeria Population quadrupled?
Ans = No  (As a mater of fact our Annual Population Growth rate is about 3%)

Yes Nigerian population has increased which means more men are becoming responsible to bear kids and start a life . .this would lead to more gasoline intake either via providing power to his home or purchasing an automobile for family comfort in transportation and tending to business or going to work and children school

[quote author=iesusluvz link=topic=844077.msg9946000#msg9946000 date=1326324426]
@ jmaine:
Has Nigeria Population quadrupled?
Ans = No  (As a mater of fact our Annual Population Growth rate is about 3%)

Does everyone has four cars each?
Ans = No

Do people with more than one car drive them all at the same time?
Ans = No
So, it still boils down to population.

iesusluvz:

@ jmaine:

Has exchange rate to dollar quadrupled
Ans = No (In fact has only risen by just 6.7% since November 2010 http://www.exchangerates.org.uk/USD-NGN-26_11_2010-exchange-rate-history.html)

Did the price of crude oil increase
Ans = Do we buy crude oil?

iesusluvz:

@ jmaine:

Did the price of crude oil increase
Ans = Do we buy crude oil?

iesusluvz:

@ jmaine:

Will all this increase the amount of subsidy being paid?
Ans = By what amount?

Donalds N:

Guys who are ready 2listen 2voice of reason hv already listed all d reasons d subsidy snowballed in d last 1yr.can u count d no of times dia was fuel scarcity during obj's time coupled with irregular prices?Who can count d no of times dia has bn fuel scarcity since GEJ took over even at a regular price?What do u think was d magic dat cleared all d queues in our filling stations in d last 1yr?Definitely dia was increase in importation 2satisfy d huge demand of d product.

Again,when price of crude oil increases in d intl market,don't u think it would probably double or even triple d cost of d refined prod since dia is no regulatory body for d price of d refined products?won't dis cause increase in subsidy paid?(Note: 2yrs ago,oil was about $81/barrel but rose 2btw108-$128/barrel in last 1yr)

In devalueing Naira 4rm 120 to150 in d last 1yr,don't u think it wl increase d amnt of naira used in buying same qtty of fuel?Won't Increase in population&importation of fuel-engine cars&generators increase consumption&demand of d product?as u all no, increase in dd=increase in ss.den increase in supply won't it cause increase in subsidy paid?

Organised corruption by officials of our petroleum regulatory agencies also contributes 2d matter.these officials enable some oil marketers falsify documents claiming 2have imported fuel wen it hadn't so as 2collect subsidy.wen d subsidy is collected&d demand persists,d govt,unaware of d fraud,den demands 4more importation which increases d subsidy.U all know how porous our borders are cos of dis same organised corruption, these powerful marketers smuggle d subsidized fuel in2 oda countries dat pay more 4fuel.(note: even In US, smugglers stil infiltrate dia borders wit contraband) Dia are many more factors y subsidy must discontinue dat i can't be able 2post here now.But remember, u can't deregulate a sector and stil set prices for dem, only d market forces do.i once bought mtn sim 4 N27000,bt nw it sells 4 N250.dats hw it wl be in dis sector

Nice one bruv   . .

honeric01:

The Seun Kuti man asked some good questions

a) At what rate are our local refineries really working? I heard some days ago from Jonathan Goodlucks own mouth that all 3 are running at ~90%. However,Nigeria is still importing about the same amount, even more, as it did back when the reports had the refining rate at 30%?

b) Also, Why is locally refined fuel selling at the same rate as imported fuel?
Like · · Share · Yesterday at 10:04am

Donalds N:

Guys who are ready 2listen 2voice of reason hv already listed all d reasons d subsidy snowballed in d last 1yr.can u count d no of times dia was fuel scarcity during obj's time coupled with irregular prices?Who can count d no of times dia has bn fuel scarcity since GEJ took over even at a regular price?What do u think was d magic dat cleared all d queues in our filling stations in d last 1yr?Definitely dia was increase in importation 2satisfy d huge demand of d product.

Again,when price of crude oil increases in d intl market,don't u think it would probably double or even triple d cost of d refined prod since dia is no regulatory body for d price of d refined products?won't dis cause increase in subsidy paid?(Note: 2yrs ago,oil was about $81/barrel but rose 2btw108-$128/barrel in last 1yr)

On March 5, 2008, OPEC accused the United States of economic "mismanagement" that was pushing oil prices to record highs, rebuffing calls to boost output and laying blame at the George W. Bush administration.[26] Oil prices surged above $110 to a new inflation-adjusted record on March 12, 2008 before settling at $109.92.[27] On April 18, 2008 the price of oil broke $117 per barrel after a Nigerian militant group claimed an attack on an oil pipeline.[28] Oil prices rose to a new high of $119.90 a barrel on April 22, 2008,[29] before dipping and then rising $3 on April 25, 2008 to $119.10 on the New York Mercantile Exchange after a news report that a ship contracted by the U.S. Military Sealift Command fired at an Iranian boat.[30]

On June 6, prices rose $11 in 24 hours, the largest gain in history due to the possibility of an Israeli attack on Iran.[31] The combination of two major oil suppliers reducing supply generated fears of a repeat of the 1973 oil crisis. The mid-July decision of Saudi Arabia to increase oil output caused little significant influence on prices. According to the oil minister of the Islamic Republic of Iran, Gholam-Hossein Nozari, the world markets were saturated[32] and a Saudi promise of increased production would not lower prices.[33] Several Asian refineries were refusing Saudi petroleum in late June because they were over priced grade.[34]

On July 3, "the Brent North Sea crude contract for August delivery rose to $US145.01 a barrel" in Asian trade.[35] London Brent crude reached a record of $145.75 a barrel, and Brent crude for August delivery peaked to a record $145.11 a barrel on London's ICE Futures Europe exchange, and to $144.44 a barrel on the NYMExchange.[36][37] By midday in Europe, crude rose to $145.85 a barrel on the NYME while Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange.[38][39]

In devalueing Naira 4rm 120 to150 in d last 1yr,don't u think it wl increase d amnt of naira used in buying same qtty of fuel?Won't Increase in population&importation of fuel-engine cars&generators increase consumption&demand of d product?as u all no, increase in dd=increase in ss.den increase in supply won't it cause increase in subsidy paid?

Organised corruption by officials of our petroleum regulatory agencies also contributes 2d matter.these officials enable some oil marketers falsify documents claiming 2have imported fuel wen it hadn't so as 2collect subsidy.wen d subsidy is collected&d demand persists,d govt,unaware of d fraud,den demands 4more importation which increases d subsidy.U all know how porous our borders are cos of dis same organised corruption, these powerful marketers smuggle d subsidized fuel in2 oda countries dat pay more 4fuel.(note: even In US, smugglers stil infiltrate dia borders wit contraband)

phuck_NL:

my own response to your questions. P.S i do not support anyone so please no bashing.
a) Demand has risen drastically in recent times. Even at 100% capacity, our 3 refineries can not satisfy our demand.

b) Since locally refined fuel can not meet demand, they have to sell at a rate that will not hinder people from importing. If they sale way lower than international rates, marketers will not import. By the time we are able to build enough refineries to meet demand, marketers will not need to import, they will simply buy from our local refineries. This is why NNPC has to "fix" prices in order not to hinder importation and thus return us to long queues.

Please oo, i do not support anyone. This is just my understanding of the situation. No need for unnecessary abuses.