Before the eventual removal of the fuel subsidy by the Nigerian government, citizens of Africa’s most populous nation had envisaged that the government would make the move. When the National Assembly deliberated on the fuel subsidy issue and it was opposed by some members of the legislature, those privileged to know the internal workings of the Goodluck Jonathan administration pointed it out that the President would carry on with the move regardless of the opinion of the National Assembly. The first indication that the subsidy hitherto enjoyed on petroleum was gone came when the President presented the 2012 Budget Proposal to the legislative arm of government and no amount was allocated as fuel subsidy in the whole document.
Street Journal’s investigations have however revealed that contrary to what is being told the generality of Nigerians, the fuel subsidy is characterised by a tale of untold and hidden frauds.
For instance, while the Petroleum Products Pricing Agency (PPRA) put the amount spent as fuel subsidy between January and August 2011 at N 1.348 trillion, a figure that contradicted that was arrived at in the course of the Senate’s public hearing on the issue. It was also claimed by the Federal Government that as at the end of the first quarter of 2011, the amount spent on fuel subsidy stood at N 74.9 billion. The Nigerian National Petroleum Corporation (NNPC) submitted N 1.426 trillion as the amount spent on subsidy from January to August.
Incidentally, the PPRA had earlier made it known that it spent N 621 billion on fuel subsidy in 2010. It was also found out that the amount being accounted as being expended on fuel subsidy was shared by companies including construction firms and other companies that have nothing to do with fuel importation.
Those who benefitted from the fuel subsidy largesse included Folawiyo Oil, N113.3billion, Oando Nigeria Plc., N228.506 billion, IPMAN Investment Limited, N10.9billion, MRS, N224.818 billion, ACON, N24.1billion, Atio Oil, N64.4billion; AMP, N11.4billion, Enak Oil & Gas, N19.684 billion, Bovas & Co. Nig. Ltd, N5.685 billion; Obat; N85 billion and AP, N104.5billion. Other companies on the beneficiaries’ list include Honeywell, N12.2billion, Emac Oil, N19.2billion; D.Jones Oil, N14.8billion; Capital Oil, N22.4billion, AZ Oil, N18.613billion, Eternal Oil, N5.57 billion; Dozil Oil, N3.375 billion; Fort Oil, N8.582 billion.
It was found out that not only did most of the companies fail to meet the basic criteria which include that beneficiaries should own tank farms (petrol depots) with capacity of not less than 5,000 metric tonnes and also register with the Corporate Affairs Commission as oil companies; they were also found to have formed a habit of making false claims. Only eleven of the marketers actually own tank farms, the others share depots with filling stations, yet they claim subsidy from the government.
What has remained surprising is that with the amount spent on the Turn Around Maintenance (TAM) on Nigeria’s refineries by successive governments, more than 70 % of the petroleum products used in the country is imported.
According to the PPRA’s pricing template, the landing cost of a litre of petrol in Nigeria is N 129. 21 while the margin for marketers was put at N 15.49 thereby putting the expected pump price at N 144.70. The PPRA however claims that the N 65 per litre price was due to the subsidy of N 79.70 paid by the Federal Government over each litre of petrol sold in the country. In other words, the PPRA has put the price of imported petrol at N 144.70.
Though there have been claims and counter claims that a cartel is responsible for the cost of petroleum products, it has been found out that the cause is not restricted to the existence of a cartel. The cost is as a result of the ineptitude that characterizes the processes involved in the exportation of crude oil and the importation of the refined product where such includes fees paid for loading and handling at the ports, insurance, demurrage and security charges; thus giving an indication that refining at home would make the commodity cheaper.
Till date, no one knows what becomes of the petroleum products refined in Nigeria. A substantial part of the kerosene sold in Nigeria is refined at home but that has not in any way made the product cheaper. Kerosene is released at N 49.10 per litre yet the teeming Nigerians who use it as cooking fuel do not get it to buy for less than N 95 per litre. Street Journal’s investigation revealed that with the connivance of some unscrupulous marketers and NNPC officials, majority of the kerosene that should get to the markets end up being sold to airline operators.
Not too long ago, Street Journal reported that some marketers who got Dual Purpose Kerosene (DPK) at N 49.10 sell it to airlines at N 152
Investigations carried out by Street Journal months ago also revealed that most of what the Nigerian government describes as subsidy can actually be termed to be the cost of systemic inefficiencies and a very high level of corruption within the supply chain. It was found out that provisions for factors like demurrage and interest rate are included in the computation for landing cost of petrol. In other words, if the government has made a budget for an amount as subsidy for a particular month and the Naira slumps, it automatically means it ends up paying more. And on the issue of demurrage, at times the products are not cleared from the ports in good time. Meanwhile, for the consignments that were cleared as at when due, the money is unaccounted for.
Nigerians have continually expressed their reservations against the fuel subsidy removal. To some, the agenda is simple; the funds would be prevented from the purses of the “cabal” that hitherto enjoyed it. The money however will eventually find its ways into the hands of those in government, and the milking of Nigeria will simply continue.
Investigations have also shown that majority of those benefitting from the fuel subsidy are friends and cronies of the Goodluck Jonathan administration. For instance, Oando is owned by Wale Tinubu, Femi Otedola runs Zenon Oil and AP which has since merged with it; MRS is run by Sayyu Dantata, cousin to multi-billionaire businessman, Aliko Dangote while Integrated Oil and Gas, another beneficiary is owned by Captain Emmanuel Iheanacho, a former Minister of the Interior.
An indication that the beneficiaries of the subsidy make up a cliché of “the untouchables” is clearly visible in the fact that as at 2009, Femi Otedola, the Zenon Oil boss had debts in several banks to the tune of N 204 billion. They were bad debts that he wanted to restructure. The banks however declined the move to restructure the loans. The loans were surprisingly bought over by Nigeria’s state asset management firm, AMCON in 2011. The loans were bought over at 99% discount. The repayment of the bought over debt of N 180 billion was put at 25 years while nothing was used as security.
The fuel subsidy issue has generated a lot of unanswered questions, for instance, how did the amount spent on subsidy increase tremendously within a year? What was subsidized with over N 1.3 trillion in eight months?
While the questions beg for answers, it would also be remembered that as bad and corrupt as the Obasanjo administration was, it built up an Excess Crude account and by the time it left office, about $ 23 billion remained in that account. Today, the account has been emptied and scrapped.
It has been found out that Nigeria’s main problem lies in the preference for exporting more of her crude oil instead of refining it while the removal of the subsidy serves as a measure to make the people pay for the incompetence of the Government.