Kerosene Subsidy Debate

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Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria, refutes claims by the Nigerian National Petroleum Corporation, that there is subsidy on kerosene which currently sells at between N130 and N150 per litre as against the regulated price of N50

By Anayo Ezugwu  |  Feb. 24, 2014 @ 01:00 GMT

IS IT true that there is kerosene subsidy in Nigeria? If there is subsidy at all, why does the price of kerosene continue to rise? These are the questions many Nigerians have been asking following the on-going altercations between the Central Bank of Nigeria, CBN, and the Nigerian National Petroleum Corporation, NNPC, over kerosene subsidy. Although the regulated price of kerosene is N50 per litre, most petrol stations sell it at between N130 and N150 per litre. For instance, a five-litre gallon of kerosene is sold at between N700 and N750 instead of N250 which is the regulated price. The NNPC said the $10.8 billion it allegedly failed to remit to the federation account was not missing but was, instead, spent on Nigerians.

Andrew Yakubu, group managing director, NNPC, said if the fund was missing, then it was missing in the pockets of Nigerians. According to him, the biggest chunk of the $10.8 billion is the subsidy claims incurred on petrol and kerosene. “The $10.8bn is not missing; if it is missing, then, it is missing in the pockets of the beneficiaries, who are you and I. This is part of the NNPC’s quarterly allocation, which it is to provide petroleum products to the country, especially for petrol. The NNPC is the only importer and producer of kerosene in Nigeria. The corporation brings in kerosene and sells it at less than N50 at designated depots, and the landing cost of this is over N150. Now, we compute these numbers on monthly basis and that amount plus the subsidy on the petrol, which we all know, amounts to about 80 percent of this $10.8 billion that we are talking about,” he said.

The NNPC boss maintained that the corporation was shouldering a lot of costs for the country with respect to the oil and gas sector, stressing that there were similar scenarios on crude and petroleum product importation lines as well as on the legacy assets. “All these are obligations that are on the NNPC and these obligations come at a cost. We have more or less fully militarised both the crude oil supply and crude distribution lines in the country.”

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Sanusi

But Sanusi Lamido Sanusi, governor of the CBN, has described the kerosene subsidy claim by the NNPC as a scam. He said that claims by the NNPC, of spending money on kerosene subsidy are not credible. Sanusi refuted the corporation’s claim at the resumed Senate Investigative Public Hearing on Un-remitted Oil Revenue in Abuja stressing that the sum of $20 billion was un-remitted to the federation account by the NNPC, between January 2012 and July 2013.

He said the burden of proof was now on the NNPC to substantiate that the $20 billion unremitted either did not belong to the federation or was legally and constitutionally spent. According to the CBN governor, the NNPC, by paying kerosene subsidy, confessed to a number of serious infractions. Referring to the data provided by the National Bureau of Statistics, NBS, he stressed that kerosene was not a subsidised product, adding that the so-called subsidy was rent generated for the benefit of those in the kerosene business. He also accused the NNPC of flouting the presidential directive issued by late President Umaru Musa Yar’Adua, eliminating subsidy payment on kerosene as from July 2009.

Femi Falana, Lagos lawyer, also accused the federal government of insincerity in the management of the kerosene subsidy. He said government should fix the problems in the refineries so as to reduce subsidy claims. “It is a question of the will. The Dangote Group has gone to the bank to take a loan to build a refinery in Lagos. If a private man can do that, why should the government be wasting public funds by importing petroleum products? Why do you want to remove the subsidy, so that they can punish the people? If the government is irresponsible to the extent that it cannot refine kerosene for the consumption of its people, what is the basis of removing it? If kerosene is subsidised, why are you selling it at over N120? That is the quarrel because it should not be more than N50 or thereabout. It is the middlemen that should be fought not the ordinary people,” he said.

Meanwhile, the NNPC has absolved itself of blame for flouting any presidential directive to discontinue the subsidy on kerosene as alleged by the CBN governor.  Abiye Membere, group executive director of production and exploration, NNPC, said the presidential directive stopping the subsidy on kerosene, which the CBN governor had accused it of disregarding, was actually stayed for execution as a result of its possible repercussions on the masses. He also disclosed that subsidy claim payments on kerosene, which the CBN had equally accused NNPC of illegally collecting, are actually not paid to the corporation but rather it remits proceeds from its sale of the product to the federation account which, in turn, finds a way to balance it up.

“After the late President Umaru Yar’Adua’s directive to stop subsidy on kerosene, another series of meetings were held, where it was decided that removing subsidy on kerosene would be greeted with formidable opposition. In fact, the memo that was sent to the Petroleum Products Pricing Regulatory Agency, PPPRA, for suspension of the subsidy removal was categorical in saying public announcement should be avoided. So how can such a step be taken without the public knowing? There was a meeting and Mansur Muktar, former minister of finance, Lukman Rilwan, former minister of petroleum, the director of budget office, with about nine other government officials, observed that the kerosene subsidy cannot be treated the way subsidy was removed on diesel. It was then reasoned that kerosene is for the poor masses. The NNPC was then directed to step down the implementation of that presidential directive and that they would go back to the president to reverse it. It was at this point that the president fell ill and never made it.

“It is not that the NNPC has never been paid subsidy claims on kerosene before. In fact, under late Olusegun Aganga, subsidy claims between 2009 and 2011 were paid to the NNPC. So this payment has removed any doubt about the fact that the NNPC was not authorised to carry on with the directive on removing the subsidy on kerosene. So, the missing money was never in the hands of the NNPC; this subsidy is not the money that the NNPC collected from government. For example, the subsidy on kerosene does not mean that government will pay the NNPC the remaining N100 on the product directly. What happens is that the NNPC sells the product at N50 and then pays that into the federation account and then expects government to balance it up from the federation account with the subsidy claims of the NNPC. Nigerians must understand that the NNPC has never collected any money from the government as subsidy claims. The NNPC simply paid the N50 we collected at the pump into the federation account. Unfortunately, people turn round to  say the NNPC owes government. “It is simply because the federation account is not balanced and they think that because the NNPC has defaulted simply because we have not paid the required figure, forgetting that the balance of what we ought to pay is with the federal government,” he said.

It was reported that the 2014 budget did not make provision for kerosene subsidy. Realnews reliably gathered that the federal government will stop kerosene subsidy this year after spending N634 billion to subsidise the retail price of the product between 2010 and 2012. According to the report, N110 billion was spent on kerosene subsidy in 2010, N324 billion in 2011 and N200 billion in 2012. These add up to N634bn in the three-year period.

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