A Review of the Nigerian Energy Industry

Nigeria paid for 24m litres of excess fuel daily in 2011

Ben Agande
& Emman Ovuakporie

19 January 2012, Sweetcrude, ABUJA—The Ad-Hoc Committee of Nigeria’s House of Representatives investigating the management of goverment’s subsidy on Premium Motor Spirit (PMS) or petrol was told Wednesday that the government paid for 59 million litres of the product daily in 2011, an excess of 24 million litres on the country’s 35 million litres daily consumption.

Alarmed by the revelation, the committee expressed dismay that the gap between what was supplied and the consumption capacity provided opportunity for the perpetration of sharp practices in the fuel subsidy regime.

Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Reginald Stanley, while testifying before the committee, said the amount of petrol imported per day in 2011 was 59 litres. But the Petroleum Minister, Mrs Diezani Alison-Madueke, had on Tuesday given the daily consumption capacity as 35 million litres.

Chairman of the ad-hoc committee, Farouk Lawan, said: “How could the nation be made to pay for 59 million litres daily when we consume only 35 million litres daily? The balance of 24 million litres per day might be the area of sharp practices. By making that provision, you are encouraging smuggling because we know that this 24 million litres balance would simply be smuggled out of the country since it has been paid for already and we cannot consume it.”

When asked whether the country had the storage facility that could accommodate the sum total of the excess 24 million litres per day multiplied by the 365 days in 2011, the PPPRA boss said the nation’s storage capacity could only accommodate 1.4 billion litres of fuel.

“This is a case of serious economic sabotage because when the daily supply excess of 24 million litres is multiplied by 365 days, you get 8.76 billion litres. This is the volume of fuel that might have been smuggled out of the country in 2011.”

The helmsman of the regulatory body drew the attention of the committee to what he called serious challenges facing the oil industry, pointing out that of the 46 depots in the country, only four could accommodate “mother vessels” bringing imported products to the country.

He advised the National Assembly to give accelerated consideration to the Petroleum Industry Bill (PIB) to facilitate the deregulation of the petroleum sector.

The Executive Secretary, however, said: “It is very important that we begin to build strategic fuel reserves in the country. In most countries of the world, reserves are built to last for at least one month in case of fuel supply cut, but Nigeria does not have reserve that can last for one week.”

Meanwhile, apparently making reference to the outburst of Deputy Comptroller of Customs, Mr Julius Ndubusi Nwagwu, on the N45 billion the Nigeria National Petroleum Corporation, NNPC, was owing the Customs Service, Group Managing Director of the Corporation, Mr Austen Oniwon, at the hearing, promised that the debt would be settled after reconciliation.

Oniwon in a response to a question on the debt, responded that the corporation would pay, but after it must have carried out some reconciliation processes with the Customs.

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  • That is the way the subsidy works.The price of protel is set at N70 a litre. When the import price is N100 the government pays N30 as a subsidy.Now this subsidy costs a lot of money so when the price of protel falls below the list price the government gets to keep the difference. Which in this case is about N2 – N3There is a website that tells you what the actual price per litre is, but I don’t know it off the top of my head.I think it is fair because the government ate the cost when oil flew up to $150 so it should recoup some benefit when oil is now at $50.