NNPC’s subsidy claims on kerosene hit $3.5bn in 19 months

NNPC-Andrew-Yakubu13 February 2014, Abuja – As the debate over the Nigerian National Petroleum Corporation’s (NNPC) continued importation and marketing of kerosene at a subsidised price shifts to the National Assembly today, it has emerged that the corporation incurred total subsidy claims of over $3.5 billion or N543.8billion on kerosene in 19 months, from January 2012 to July 2013.

A detailed report obtained exclusively by THISDAY that will be presented today by NNPC to the Senate Committee on Finance, which is probing the allegations of unremitted oil revenue to the Federation Account, also showed that during the same period, NNPC imported over 3.9 billion litres of kerosene from the international market at a cost of over $5.2 billion (N811.4billion), while 1.16 billion litres was produced locally by the refineries.

The report, which was signed by the Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Mr. Reginald Stanley; Director of Department of Petroleum Resources (DPR), Mr. George Osahon; and the Managing Director of Pipelines and Products Marketing Company (PPMC), a subsidiary of the NNPC, Mr. Haruna Momoh, also showed that 12.59 billion litres of petrol was imported by the NNPC during the 19-month period.
The cost of the imported PMS, according to the report, was $14.9 billion or N2.3 trillion, while 2.58 billion litres was produced locally by the refineries.

The detailed breakdown showed that N811,474,555,254.91, representing the dollar equivalent of $5,239,714,310.42 was spent by the NNPC for the importation of kerosene during the period under review.
Based on its claim that the kerosene was sold at subsidised price of N50 per litre instead of the average market price of N160.30 per litre, the NNPC said it realised N267, 584,156,729.12, an equivalent of $1,727,798,519.59.

During the period, 3,907,745,598.06 litres of kerosene was imported, while 1,167,667,424.00 litres was produced locally by the refineries, bringing it to a total of 5,075,413,022.06 litres, at a total value of N811,474,555,254.91.
With respect to petrol importation and domestic processing, the report showed that the NNPC spent N2,316,532,004,870.29, the equivalent of $14,957,913,119.84 on the importation of the product within the 19 months.

While it realised N1,502,729,331,847.91 or $9,703,166,086.70 from the sale of the products at the subsidised price of N97 per litre as against the open market price of N152.28 per litre, the corporation said the subsidy claims on the products amounted to N813,802,673,022.38 or $5,254,747,033.14.

A total of 12,594,409,357.77 litres of PMS was imported within the 19-month period, while 2,582,666,766.00 litres were produced locally, bringing the total volume supplied by the NNPC to 15,177,076,127.77litres at a total cost of N2,316,532,004,870.29.
It was however not clear how the NNPC arrived at N50 per litre as the price of its kerosene as the corporation is expected to sell its imported kerosene at the ex-depot price of N40.90 to retailers, who are exected to sell at the official price of N50 per litre at filling stations.

The price of N97 per litre used as the selling price of its imported PMS was also not clear, because NNPC as well as the private marketers, are expected to sell at ex-depot price of N87.60 per litre to retailers, who sell at the pump price of N97 per litre at filling stations.

NNPC mega filling stations are also expected to sell kerosene at N50 per litre and PMS at N97 per litre.
The alleged failure by NNPC to implement a presidential directive removing the subsidy on kerosene has created confusion among the various stakeholders in the downstream sector, fuelling suspicion over the continued retention of kerosene in the Petroleum Support Fund (PSF).

During his recent presentation at the senate hearing on the non-remittance of oil revenue to the Federation Account, the Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, had alleged that NNPC had failed to provide evidence of the presidential authorisation to buy kerosene at N150 per litre and to sell same at N40.90 per litre, whereas the product sells at between N170 to N220 per litre in the open market.

He said through the retention of subsidy on kerosene, the Federation Account was made to lose $100 million every month.
To support his claim, Sanusi said he had submitted to the Senate Committee on Finance documentary evidence of the presidential directive eliminating the subsidy on kerosene since 2009, which was reported by THISDAY on Sunday.

But the Group Executive Director of Production and Exploration of NNPC, Mr. Abiye Membere, told journalists at the weekend in Abuja that the presidential directive stopping the subsidy on kerosene, which the CBN governor had accused it of disregarding, was actually stayed for execution as a result of its possible repercussions on the Nigerian masses.

Membere also disclosed that subsidy claim payments on kerosene, which the CBN had equally accused NNPC of illegally collecting, were actually not paid to the corporation but rather it remits proceeds from its sale of the product to the Federation Account, which in turn finds a way to balance it up.

“After the late President Umaru Yar’Adua’s directive to stop subsidy on kerosene, another series of meetings were held, where it was decided that removing subsidy on kerosene would be greeted with formidableopposition.
“In fact, the memo that was sent to the PPPRA (Petroleum Products Pricing Regulatory Agency) for suspension of the subsidy removal was categorical in saying public announcement should be avoided.

“So how can such a step be taken without the public knowing? There was a meeting and the then Minister of Finance, Dr. Mansur Muktar, former Petroleum Minister, Lukman Rilwan, the Director of Budget Office, with about nine other government officials, observed that the kerosene subsidy cannot be treated the way subsidy was removed on diesel. It was then reasoned that kerosene is for the poor masses,” Membere said.

He further explained: “NNPC was then directed to step down the implementation of that presidential directive and that they would go back to the president to reverse it. It was at this point that the president fell ill and never made it.”

– Ejiofor Alike, This Day

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