As the Senate probes fuel subsidy scheme

Senate President, David Mark

FACED with the Federal Government’s decision to eliminate what it terms subsidy in pump prices of petroleum products, the Senate has resolved to probe the management of funds appropriated for the scheme in the 2011 budget.
The Nigerian National Petroleum Corporation and the Ministry of Finance are alleged to have overshot the budgetary allocation by a wide margin – N145 billion in August alone – and thus reinforced widespread fears about abuse of the scheme.

Details of expenditure on subsidy were provided on the floor of the Senate by Senator Abubakar Saraki. According to him, "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 NNPC got N88 billion and Independent Marketers N77.7 billion. In the first three months of the year, both the 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."

With such scandalously wide differentials between appropriated sums and actual expenditure on the controversial subsidy, the initiative by the Senate is logical and commendable. The N20 billion per month approved by the National Assembly was arrived at after relevant committees of the Assembly had studied existing records on costs and subsidies and made projections (using varying scenarios) to ensure that pump prices remained at a desired level. While the occasional surge in oil prices in the international market might have necessitated an upward adjustment of subsidy level, the variation – between N150 billion and N186 billion, monthly, within the past three months – is suspicious and alarming.

The NNPC should open its books to the Senate as there is widespread apprehension about its management of the nation’s financial resources. It has to be emphasised, though, that NNPC’s subsidy claims represent only one aspect of the unending controversy over the subsidy scheme of the Federal Government. The desirability or otherwise of the scheme continues to be debated in the mass media. Beyond that, the reality of fuel subsidy is equally doubted in several quarters and deserves a thorough investigation by the National Assembly.

Stakeholders outside of government, who know of such curious cost elements as "demurrage" and "highways maintenance charge," among others, on the template for petroleum products pricing, believe the cost structure ceaselessly flaunted by the authorities is not only flawed and untenable but also masks massive corruption.

Besides, NNPC, as is well-known, is the dominant player in the sourcing and marketing of petroleum products, controlling over 50 per cent of the market share. For several months, it has remained the sole importer of kerosene, which sells at between N100 and N150 per litre at filling stations around the country as against the official pump price of N50 per litre.

In the cost structure associated with NNPC’s operations are salaries and allowances of thousands of redundant personnel in its four refineries that have been operating at far below installed capacity, or not at all, for over two decades. The bureaucracy created by the establishment of the Petroleum Products Pricing and Regulatory Agency and the Petroleum Equalisation Fund also has cost implications. Stakeholders believe that the wage burden in NNPC, PPPRA and PEF has been factored into the cost of operations and, by extension, the pump prices of petroleum products.

The National Assembly is the people’s branch of government, the institution where citizens’ interests and preferences are expressed and transformed into policy. It is also the point at which, at least potentially, people most closely engage their national government. As the Senate undertakes to unearth the factors behind the subsidy claims, the different issues that have provoked doubts and resistance to Federal Government’s subsidy removal plan need to be carefully examined.

In order to institute a corruption-free system, it has been suggested that the government must get out of the way of local refining and importation of petroleum. Refinery construction and petrol importation, storage and distribution should be thrown open, subject only to quality control. The refineries should also be privatised. The Senate must demand and publish the names of the firms and individuals who collect the subsidy. The World Bank’s Vice-President for the African Region, Mrs. Oby Ezekwesili, said recently: "Government needs to focus on the supply side."

In a democracy, such as we have in place, the views and feelings of the masses cannot be discountenanced. And it is the duty of elected representatives to defend and propagate such views if backed by facts. The National Assembly must not fail the nation this time.

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