FUEL SUBSIDY AND THE WASTED TRILLIONS
Fuel is subsidised at a huge cost to the people and the economy
While submitting the report of its committee on petroleum downstream on the promissory note programme and a bond issuance for oil marketers outstanding claims last month, Senator Kabir Marafa disclosed that Nigeria spent over N11 trillion as payment for outstanding subsidy claims in the last six years. We agree with senate committee that there is no justification for the retention of the subsidy regime that has proved to be nothing but a byproduct for waste and monumental corruption. The issue here, as we have argued several times in the past, is not to the existence of subsidy, but to the fact that it is not getting to those for whom it is meant. That is why the money should be deployed into more productive areas of our national life.
Currently, the management of the Nigerian National Petroleum Corporation (NNPC) has come up with a nebulous “cost under recovery” to spend unbudgeted funds to subsidise fuel imports, and has been struggling to explain its position in the alleged N1.4 trillion annual import bills as well as allegations of illegal deductions from Nigeria’s dividends from profits posted by the Nigerian Liquefied Natural Gas (NLNG) Limited. The state oil company has cashed in on the seeming helpless situation caused by the continuing importation of fuel to overreach itself by spending unappropriated funds, including NLNG dividends accruing to the federal government.
According to figures from the National Bureau of Statistics (NBS), the federal government subsidised the importation of petrol by N2.95 trillion in 2018 alone, up by nearly 50 per cent of the previous year. We cannot forget in a hurry, the emergency billionaires thrown up by fuel import racketeers under the administration of former President Goodluck Jonathan, in obvious connivance with some unscrupulous officials, swindling a hapless nation of hundreds of billions of naira for non-existent imports. But unlike before when subsidy expenditures were budgeted and approved by the National Assembly, we are concerned that this time around, NNPC simply appropriates at will, raising serious questions about transparency and accountability in the process.
In response to the huge amount of money being illegally deducted by the NNPC as a first-line charge from the federation account, the National Economic Council (NEC), comprising the 36 state governors, last year proposed taking over the responsibility for subsidising petroleum products in their states. Following several aborted Federation Account Allocation Committee (FAAC) meetings, the governors had held a meeting with NNPC over what they described as a consistent short-change of what should accrue to them from the federation account. That lingering issue is yet to be resolved.
Addressing the legal, institutional and regulatory framework weighing down the NNPC has always been a huge challenge. “Information about Africa’s biggest oil industry is an opaque myriad of numbers. No one knows which ones are accurate; no one knows how much oil Nigeria actually produces. If there were an authoritative figure, the truly horrifying scope of corruption would be exposed,” a report in the Economist once stated. Unfortunately, no government has been able to summon the courage to address this nagging challenge.
Given that most of the states are so broke that they cannot even pay the salaries of workers, their focus has in recent times shifted to the subsidy regime. But as we have also argued several times on this page, it will be very unhelpful to bundle the removal of petroleum subsidy with the payment of salaries to workers. Petroleum subsidy, we believe, should be removed because it is inefficient, it is oiling corruption, and it is robbing society of vital resources that could be invested in hospitals, schools, roads and other critical areas that directly stimulate economic activities.
