Talks of a possible corruption in the subsidy regime of petrol by the Federal Government have continued even under the government that pride’s itself as an anti-corruption regime. With a very opaque oil sector, anything is possible. Thus, when the Senate last week announced that it would investigate the diversion of $1.5 billion from the Nigerian Liquefied Natural Gas, NLNG dividend to build up the shortfalls between the landing cost and pump price of Premium Motor Spirit, petrol, anxious Nigerians await the outcome. We have been here several times.
Raising a Point of Order during one of its Legislative proceedings, the chairman of the Committee on Gas, Senator Bassey Akpan, asked the upper chamber to give approval for the committee to investigate the withdrawal and payments.
It should be noted that NLNG funds belong to the three tiers of government, Akpan described NNPC’s withdrawal of the funds as illegal. President of the Senate, Bukola Saraki, in his ruling, mandated the committee to proceed with the probe. The investigation will run concurrently with another probe by a Senate Ad-hoc committee on the use of $3.5 billion by NNPC for subsidy. Operators in the downstream sector of the Nigerian oil and gas industry have also called on the Federal Government to pay them their outstanding N130.7 billion fuel subsidy owed them since four years ago, saying the delay in making the payment is adversely affecting effective operation of their business.
The subsidy regime has become one big mess. In terms of operations and financing, it has become a very deep gully of graft and illegalities. This is why several experts have called for its abrogation. However, in a poor country such as ours, reliance on importation of petroleum product in a regulated market, which has given rise to subsidising the product in order not to further aggravate the pains of poor Nigerians, has led to these controversies in the sector. That poverty is the reason government has continued to subsidise.
Although many believe that subsidy is also a cause of poverty as it denies government scarce resources it could have used to support other economic sources. On the flip side however, virtually everyone and everything in Nigeria rely on petrol. And our public transportation system is not yet organised. Thus, it will be suicidal to hand everyday people over to the vagaries of market forces. Subsidy is pain in the ass policy which if you do you are damned, if not you are equally and severely damned.
The present predicament was caused by the economic crisis of 2014-2016, which eventually led the economy into recession. Foreign exchange became scare but the country must import petrol. The wide difference in dollar to naira ratio forced an increase in pump price of petrol from N85 to N145. With the official price at N145 per litre, most of the marketers could no longer cope with importation of the product, as the landing cost was said to be N135. This made the NNPC the sole importer of the product. Recent findings indicate that the landing cost of the petrol being imported into the country has risen to at least N205 per litre, a bounce off from the increase in global oil prices, putting more pressure on Nigeria.
Today, Private oil marketers have stopped importation due to shortage of foreign exchange and increase in crude prices, which have reportedly made it unprofitable for the marketers to import the product and sell at the official pump price of N145 per litre. As at March 20, 2018, when the international benchmark price for oil (Brent) was around $66 per barrel, the expected open market price of petrol, according to data obtained from the Petroleum Products Pricing Regulatory Agency, (PPPRA), was N189 per litre. The agency has not released any data since then.
Somehow, we sympathise with the government on the volatile nature of the oil and gas market. However, we do not sympathise with them on the illegalities they have chosen. Illegalities will always lead to corruption and this is why we support the probe. It is important the country is guided through the path of law than impunity. NNPC was set up by law, therefore must operate within that reality no matter the exigency of time. That we still import petrol is a mystery that only our elite can explain. Local refining will resolve all the problems. Then it will be obvious whether we are paying subsidy or not. Nigerians cannot bear the irresponsibility of its leaders by paying high petrol prices through importation. We must ensure that modular refineries which have been licensed and other private sector initiatives like Dangote refinery is helped to work. For the meantime, let the probe hold without fear or favour and if found wanting appropriate sanctions must be applied against erring officials and companies.