The Nigerian National Petroleum Corporation (NNPC), in a period of three and a half years, paid itself a total of N1.53 trillion as subsidy on Premium Motor Spirit (PMS) popularly known as petrol.
The details of the N1.53 trillion PMS subsidy amounts which was paid between January 2017 to June 2020 are as follows
- 2017 – N144.53 billion
- 2018 – N730.86 billion
- 2019 – N551.22 billion
- January to June 2020 – N106.99 billion
In 2016, no amount was spent on subsidy, but the government paid N306.917 billion to oil marketers and the NNPC as a subsidy in 2015.
This is according to a Vanguard report which sited a series of documents obtained from the corporation.
The report stated that NNPC termed the payments “under-recovery (another name for subsidy) and deducted it from the proceeds of its domestic crude oil sales, before making remittances to the Federation Account.”
The corporation’s use of the term “under recovery” in its documents was to “ensure it does not go contrary to the law because subsidy was not appropriated for in the budgets of the affected years.”
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The Group Managing Director of the NNPC, Mallam Mele Kyari, in a statement by the corporation in Abuja, disclosed that the government spent N2.13 trillion from 2016 to 2019, as subsidy on foreign exchange for marketers, in addition to the amount it said it incurred as under-recovery.
However, in 2016, following the Federal Government’s introduction of the price modulation mechanism, NNPC became the sole importer of petrol in Nigeria. The result of the policy was over 47% rise in pump price from N97 per litre to a range of N143 to N145 per litre.
Few months after the hike in May 2016, the value of crude oil in the international market soared, on the contrary naira value, fell to N500/$1 from about N197$1 as the country battled with recession.
The fall in the value of the naira and the rising price of crude oil resulted in the high cost of petrol importation. To avoid further increment of the already increased petrol price NNPC returned to subsidizing the product.
The NNPC, therefore, resorted to deducting the shortfall from its earnings Vanguard reported.
In the statement by the NNPC, Kyari said “It is really not in our interest to be the sole importer of PMS in the country. We have taken definite steps to exit the situation. The details would be communicated to stakeholders like Major Oil Marketers Association of Nigeria, MOMAN; Depots and Petroleum Products Marketers Association of Nigeria (DAPPMAN), DAPMAN; Independent Petroleum Marketers Association of Nigeria, IPMAN, and others outside this forum.”
President Muhammadu Buhari had on Monday 7 September 2020 in Abuja while speaking at the First Year Ministerial Performance Review Retreat at the State House Conference Centre said that there is no provision for fuel subsidy in the revised 2020 budget.
“There are several negative consequences if the Government should even attempt to go back to the business of fixing or subsidizing PMS prices, President Buhari said.
Reports have sited these consequences as the wrath of IMF and the World Bank , to whom Nigeria is heavily indebted to on Multilateral basis.
Abdulkadir Saidu the Executive Secretary of Petroleum Products Pricing Regulatory Agency (PPPRA) earlier in September said the agency will no longer be releasing guiding price bands for the sale of petrol at filling stations across the nation; hence, oil marketers are now free to fix prices.
Written by;
Ifunanya Ikueze