New Telegraph

February 24, 2024

Petrol subsidy: Inside Nigeria’s biggest drain pipe

Retaining petrol subsidy will cost Nigeria nearly N7 trillion in 2023. This is over a third of Nigeria’s N19.76 trillion budgets for the year. PAUL OGBUOKIRI reports that how the country arrived at this figure remains the eighth wonder of the world as NNPCL, the body that has the responsibility to produce reliable data on the nation’s daily petrol consumption, has remained unreliable on the matter.

 

Oil subsidy to gulp a third of Nigeria’s 2023 budget

The payment of petrol subsidy has been a major drain in the resources of Nigeria and allegedly become a conduit pipe for the siphoning of public funds into private pockets.

The subsidy payment is necessitated by Nigeria importing all of its petroleum needs because the local refineries have not been working for several years, with Africa’s largest oil producer unable to benefit from the high crude oil prices. That is because the country is used to paying for the product.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, had disclosed that Nigeria could be spending up to N6.72 trillion in 2023 on petrol subsidy if it was not removed, which is a 68 per cent increase when compared to the N4 trillion that was appropriated for petrol subsidy in the 2022 budget.

Conflicting figures on daily petrol consumption

As different government agencies continue to bandy divergent figures on the nation’s daily petrol consumption, the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) says Nigeria consumes 62.9 million litres of petrol a day.

NMDPRA’s Head of Finance and Account, Adebayo Adeniyi, disclosed this while appearing before the House of Representatives Committee on Finance recently in Abuja.

He said the agency arrived at the figure based on the official trucks out from depots.

“The average daily truck-out for 2022 is 62.95 million litres per day. This is from the actual truck-out,” Mr. Adeniyi said.

He added that, “what we gave you is what is obtainable as an actual truck-out. When we say truck-out, we mean from the depot to the retail outlets. I don’t know where other figures may be coming out. I cannot speculate on that.”

NMDPRA’s figure joins the list of figures given by the agencies of the Federal Government on the daily petrol consumption in Nigeria.

An ad hoc committee of the House is currently investigating the country’s actual consumption figure.

But experts say the House Committee’s investigation won’t yield any dividend until the authority (NNPCL) that imports the product comes out clean. They expressed worry at NNPCL’s seeming incapacitation in producing accurate figures of the country’s petrol daily consumption and subsidy payment, saying the essence of NNPCL taking over from major marketers and others as the sole importer has been shamefully defeated.

It would be recalled that in 2012, the figures grew astronomically and inexplicably from below 30 million litres per day to almost 60 million litres during the subsidy regime where private fuel marketers were allowed to bring in the product. Today, only the NNPCL imports products into the country.

In 2017, the then Minister of State for Petroleum Resources, Ibe Kachikwu, told a House of Representatives committee that daily consumption of petrol was 28 million litres, saying that the figure dropped from about 50-55 million litres a day that the PPPRA was using for fuel subsidy payment.

 

In one of its publications in November, 2016, the NBS said that about 12.66 billion litres of petrol were consumed in the country between January and September of that year, which would translate to about 51.87 million litres per day.

Interestingly, the figure for that period contrasted firmly with that published by the NNPCL in its annual statistics bulletin on its website, which pegged it at 17.41 billion litres, or 67.6 million litres per day of petrol.

Similarly, in August 2017, the NNPCL said that consumption figures jumped from below 30 million litres per day to an average of over 50 million litres, peaking at about 84.2 million litres on December 8 of that year.

In February 2020, the DPR stated that the cumulative depot stock of petrol at the depots was 915,771,566 litres and put the estimated daily national demand at 38.2 million. The department’s position has not changed in a major way since then.

Added to that, the Minister of State, Petroleum Resources, Mr. Timipre Sylva, told journalists in June last year that Nigeria’s daily consumption stood at 52 million, with a huge daily difference of 14.2 million litres when put side by side with the DPR data.

In fact, Sylva announced that part of the achievement of his ministry in the last few months of the year, was the reduction of consumption from 60 million per day to 52 million liters daily consumption. But in April this year, consumption hit a record high of 93 million litres, according to the national oil company.

Kyari’s bombshell

In a shocking revelation in June this year, Group Managing Director, NNPCL, Mr. Mele Kyari, disclosed that daily consumption had increased from 60 million litres to 103 million litres, with the so-called under-recovery now hovering between N140 billion to N150 billion.

Given the February figure of roughly 50 million litres, many believed that it was simply unthinkable that fuel consumed by Nigerians would rise to over 100 per cent in just three months.

But even the argument by the NNPCL that smuggling was responsible for the astronomical rise, has been jettisoned by a treatise by one Mr. Mohammed Ettu, on the issue which went viral recently, arguing that even if all the fuel used by all Nigeria’s neighbours are smuggled from Nigeria, it still won’t hit 70 million litres per day.

In his post titled: “Nigeria: A crime Scene,” Ettu, an engineer, recalled that the DPR in February 2020 told Nigerians that Nigeria’s petrol consumption was 38.2 million litres per day, rehashing that the NNPC also said in June that daily consumption had risen to 103 million litres.

At a 64.8 million increase per day and 170 per cent rise, Ettu stressed that the argument that smuggling was responsible for the leakages did not hold water, coupled with NNPC’s position that it currently spends N120 billion daily as subsidy on the 103 million litres of petrol consumed across the country every day.

“These figures do not add up to the landing cost of petroleum,”he wrote.

He argued that if Benin, Niger, Chad, Togo, Cameroon, Ghana and Cote d’Ivoire have a cumulative 148.88 million population and Nigeria has a population of 211.6 million, at 0.18 litres/day, per person consumption, 149 million people will consume only 26.82 million litres/day in those seven West African nations using Nigeria’s figures to determine their own usage.

He added that since the DPR said Nigeria consumes 38.2 million, even if Nigeria’s figures are added to the West African nations surrounding Nigeria, it will still amount to 38 million plus 27 million litres, which will still give a paltry 65 million litres compared to the NNPCL’s data.

Customs dismiss petrol consumption figures

Meanwhile, the Nigeria Customs Service (NCS) doubted the claim that Nigerians now consume 103 million litres of petrol a day as at February 2022.

Comptroller-General of Customs, Col Hameed Ali (rtd) expressed the agency’s doubts during a recent session with the House of Representatives Committee on Finance on the 2023-2025 Medium-term Expenditure Frame and Fiscal Strategy Paper (MTEF/FSP).

Ali said he wondered “why NNPC, which puts Nigeria’s daily fuel consumption at 60 mil lion litres, lifts 98 million litres into the market”.

Reacting to questions by the committee on the proposed subsidy spending for 2022, Ali said the issue is about the daily petroleum consumption estimations.

 

“I remember that last year, we spoke about this. Unfortunately, this year, we are talking about subsidies again. The over N11 trillion we are going to take as debt, more than half of it is going for a subsidy,” he said.

“The issue is not about the smuggling of petroleum products. I have always argued this with the NNPC. If we are consuming 60 million litres of PMS per day by their own computation, why would you allow the release of 98 million litres per day? If you know this is our consumption, why would you allow that release?

“Scientifically, you cannot tell me that if I fill my tank today, tomorrow, I will fill the same tank with the same quantity of fuel.

“If I am operating a fuel station today and I go to Minna depot, lift petrol and take it to Kaduna, I may get to Kaduna in the evening and offload that fuel. There is no way I would have sold off that petrol immediately to warrant another loading.

“So, how did you get to 60 million litres per day? That is my question. The issue of smuggling, if you release 98 million litres in actuality and 60 million litres are used; the balance should be 38 million litres. How many trucks will carry 38 million litres every day? Which road are they following and where are they carrying this thing to?”

The comptroller-general said the customs is doing its best to fight smuggling, adding that more support, collaboration and provision will go a long way.

He also explained that the service was not remitting its operating surplus of seven per cent because it is used for operations and payment of its staff members’ salaries.

Using technology to monitor fuel supply, distribution

At the House of Representatives session, the Deputy Chairman of the committee, Saidu Abdullahi, said that about 500 trucks with 70,000 litre-capacities each are needed to ferry the 38 million excess litres.

Abdullahi said he wondered “if the Nigerian Communications Satellite (NIGCOMSAT) had at any time captured images of trucks leaving our shore”.

He described subsidy payment as a scam, adding that it constitutes a drain on the economy.

“If there is anything that has constituted a nuisance and has become a drain on the economy today, it is this issue of subsidy,” Abdullahi said.

“As a government, we have not done well. We owe it to the people of this country to do what is right for this country. We are talking about over N6 trillion going for subsidy payment that almost doesn’t exist.

“You talk about 38 million litres which amount to about 500 trucks leaving our shores on a daily basis. We have an investment in NIGCOMSAT. Has there been any time that our satellite captured images of trucks leaving our shore?

“I think it is very clear that what is required is the political will to put a halt to this.
“Considering the importance of the inter-dependence of these two arms of government, I think we should work together to put a halt to this. Posterity will be kind to us if we are able to proffer a lasting solution to this issue of subsidy because it is not sustainable.

“We talk about insecurity. This is the real course of it. The money that is supposed to go into the provision of social amenities is going into private pockets. I think there is a need to work together to put a halt to this.”

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