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Kerosene subsidy: Removal delayed to avert labour, masses unrest

Clara Nwachukwu

Available evidence has indicated that the Nigerian National Petroleum Corporation, NNPC, was advised to stay action on the implementation of the removal of subsidy on kerosene to avert labour and masses unrest.

WAITING: Queue for kerosene at a Nigerian National Petroleum Corporation, NNPC, Mega Filling Station in Yelwa, Bauchi State, yesterday. NAN PHOTO.
WAITING: Queue for kerosene at a Nigerian National Petroleum Corporation, NNPC, Mega Filling Station in Yelwa, Bauchi State, yesterday. NAN PHOTO.

Recall that in the wake of the scandal on NNPC remittances to the Federation accounts, the former Governor, Central Bank of Nigeria, CBN, Mallam Sanusi Lamido Sanusi, had declared kerosene subsidy as illegal.

But the stay of action Vanguard gathered was approved by an Inter-ministerial Committee set up by late President Umaru Musa Yar’Adua, on the deregulation of the downstream.

According to the Committee, “This unanimous decision was a strategic move to win the hearts and minds of the public over the eventual goal of deregulating the downstream sector as a whole.”

In a series of memos among the ministries of Petroleum, Finance, and NNPC over a period of five years exclusively obtained by Sweetcrude, this fact was reiterated over and over again.

In one of the memos dated February 15, 2010, the then Group Managing Director, NNPC, Mr. Mohammed Barkindo, reminded the then Minister of Finance, Dr. Mansur Muhtar of this decision, when the Corporation was having problems with getting payment for claims for kerosene subsidy.

In the memo entitled: “Re: Endorsement of Action Plan on the Deregulation of the Downstream Petroleum Sub-sector – Subsidy for Kerosene,” Barkindo reminded Muhtar of the directive to NNPC “to delay implementation of the decision to remove subsidy on kerosene.”

The stay of action remained even as the NNPC, in subsequent correspondences constantly sought clarification on the implementation of the removal of kerosene subsidy “to avoid misunderstandings”.

Removal of kerosene subsidy

Unknown to many Nigerians, subsidy on household kerosene was removed on June 15, 2009, albeit, with a caveat that “Public announcement of this measure should be avoided,” as directed by late Yar’Adua.

A memo by the Principal Secretary to the President, PSP, to Yar’Adua, dated June 10, 2009, “kindly invited” the late president to, among others, advise key government officials on the decision to remove subsidy on Kerosene.

The memo, with Reference No: SH/PSP/24/A/812, specifically urged Mr President to direct the then Minister of Petroleum Resources, Dr. Rilwanu Lukman, to “Eliminate existing subsidy on the consumption of kerosene taking into account that subsidy payments by Government on kerosene do not reach the intended beneficiaries.”

The PSP also added that “Public announcement of this measure should be avoided,” possibly to also avoid public outcry at that period.

Furthermore, in a subsequent memo to the Chief Economic Adviser, dated, October 19, 2009, the PSP wrote, “…in my humble opinion the NNPC should not be entitled to claim from the Petroleum Support Fund (PSF) in respect of kerosene with effect from the date of Mr. President approval i.e. 15th June 2009.”

The memo signed by David Edevbie, and with the reference: SH/PSP/24/A/1087, also acknowledged that the Presidential directives had been “conveyed to the Hon. Minister of Petroleum Resources and copied to the relevant state officials.”

Confusion over implementation

However, confusion has trailed the implementation of the kerosene subsidy removal since 2009, mainly because it was to be executed without “public announcement” as well as the fact that the Muhtar-led Presidential Committee, had called for a stay of action on the decision.

The confusion became evident in subsequent correspondences on the subject, as contained in the following memos:

·Mr. Odein Ajumogobia (Minister of State), on April 17, 2009 to Muhtar

·Mr. Mohammed Barkindo (GMD), December 16, 2009, to Muhtar

·Mr. Mohammed Barkindo, February 15, 2010, to Muhtar

·Mr. Mohammed Barkindo, March 2, 2010, to Muhtar

·Mallam Shehu Ladan (GMD), April 30, 2010 to Aganga

·Mrs. Diezani Alison-Madueke (Minister), May 24, 2010 to Aganga

·Austin Oniwon (GMD), March 1, 2011 to Alison-Madueke

·Alison-Madueke, March 1, 2011 to Aganga

Presidential Committee

While expressing full support for the deregulation of the downstream petroleum sector and the removal of subsidy on kerosene, the NNPC constantly noted that it will stop subsidy deductions if specifically directed to do so.”

The NNPC’s caveat on the removal of kerosene subsidy was apparently based on the decision of the Presidential Committee to put the implementation on hold in one of its meetings.

The meeting, which was held in the office of Lukman, was also attended by Muhtar, Ajumogobia, as well as the Chief Economic Adviser to the President, and Barkindo.

In the memo by Barkindo to Muhtar on December 16, 2009, he recalled that “After extensive discussions on the issues on the implementation of kerosene subsidy removal, which at that time will translate to an increase in the price of kerosene, NNPC was directed to delay the implementation of the Presidential decision to remove subsidy on kerosene.”

He further recalled that the Committee’s decision was based on “… a strategic move to win the hearts and minds of NLC (Nigeria Labour Congress) and the public over the eventual goal of deregulating the downstream sector as a whole.”

He had also complained that: “The Principal Secretary to the President and Commander-in-Chief of the Federal Republic of Nigeria (PSP), had in a memo to the National Security Adviser, dated October 19, 2009, sought to deny NNPC of the right to claim subsidy on kerosene effective June 15, 2009, on the ground that NNPC did not implement Mr. President’s directive on the issue.”

Barkindo further noted that Muhtar, in his capacity as the Chairman of the Presidential Committee had, “the authority of Mr. President to determine the takeoff date for the implementation of the decision to eliminate subsidy on kerosene.”

He therefore, sought among others for the minister to continue to approve NNPC’s claims on Kerosene subsidy; and to direct the PPPRA to continue to honour such claims.

He also sought that the PSP be advised “of the decisions of the inter-ministerial committee on the deregulation of the downstream sector directing NNPC to delay the implementation of the sale of DPK (kerosene) at deregulated price and to clear up any misunderstanding on the part of the PSP in this regard.”

CBN declares kerosene subsidy illegal

Unfortunately, the misunderstanding has remained till date, as Sanusi insisted at last week’s public hearing that, “We do not accept the legality of the kerosene subsidy deduction.”

The former CBN governor at an earlier public hearing at the Senate on NNPC remittances on February 4, had also declared as followed:

·That implementation of kerosene subsidy regime is a violation of the DPK deregulation order by the late President Yar’Adua.

·That the directive was communicated to and received by NNPC.

·That the average supply of DPK vessels by NNPC was between four and six vessels per month with a conversion factor of 1,136 litres equals 1 Metric Ton.

·That NNPC rendered nil returns on kerosene subsidy from April 2012 to December 2013.

·That NNPC delayed in filing subsidy claims to PPPRA.

·That the entire subsidy implementation is a farce/myth.

The CBN’s rejection of the legality of the kerosene subsidy was in spite of the explanations by the Petroleum Minister, Mrs. Diezani Alison-Madueke that the stay of action was advised by the Presidential Committee.

According to her, “The reason for staying action is because if we removed the subsidy on kerosene suddenly, obviously kerosene will go up three times the price it is selling today. It will cause a major problem for the economy and the government. There will be untold hardship for the Nigeria masses.

“The GMD at that time wrote two memos to the Finance Minister seeking for clarification despite a presidential directive but no clarification came, hence the subsidy remained. The issue of deduction at source happened because the product landed at N150 and was sold at N50.

“There is a N100 gap, which must be covered and it is not budgeted for. The NNPC was unable to retrieve the amount. In this case, based on the first line charge in the Appropriation Act, it means that NNPC would have gone under long time ago under the weight of the subsidy, and it would have affected the economy of other countries in West Africa.”


Further actions


But Sanusi’s outburst has led to a series of claims and counter-claims between the CBN and the Ministry of Petroleum/NNPC on the one hand as well as between the CBN and Ministry of Finance on the other.

The counter claims resulted in the call for a forensic audit of the NNPC accounts and a legal interpretation of the legality of kerosene subsidy.

While Nigerians await the outcome of these actions, NNPC’s GMD, Mr. Andrew Yakubu, insisted that “NNPC did not flout any directive. The actual position is that the directive to implement the deregulation of Kerosene was not received by NNPC … ostensibly due to the perceived challenges in implementation process.”

He further noted “…the presidential directive contained conflicting provisions that required further clarification to support the implementation. Mr. Chairman, NNPC attempted through several correspondences to seek clarifications on the conflicting provisions in the directive without any positive response.”

He also recalled a “House of Representative Resolution on 5 July 2011, supporting the retention of the subsidy on HHK and directed the retention of the sale of HHK at N50 per liter.”

But Nigerians are already paying more because kerosene, apart from being a dual purpose fuel and used for both domestic/household kerosene and aviation fuel, is also being used for other industrial purposes.


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