By Michael Eboh
The Nigerian National Petroleum Corporation, NNPC, paid itself N1.53 trillion as subsidy on Premium Motor Spirit, PMS, also known as petrol, in three years and six months, from January 2017 to June 2020, according to series of documents obtained from the corporation.
According to the documents, in 2017, 2018 and 2019, the NNPC paid itself N144.53 billion, N730.86 billion and N551.22 billion respectively; while from January to June 2020, the NNPC deducted N106.992 billion from its total remittances as subsidy.
In 2016, no amount was spent on subsidy, while in 2015, the government had paid N306.917 billion to oil marketers and the NNPC as subsidy.
The NNPC called the payments under-recovery (another name for subsidy) and deducted it from the proceeds of its domestic crude oil sales, before making remittances to the Federation Account.
To ensure it does not go contrary to the law, the NNPC coined the term ‘under recovery’, because subsidy was not appropriated for in the budgets of the affected years.
In addition to the amount it said it incurred as under-recovery, Group Managing Director of the NNPC, Mallam Mele Kyari, in a statement by the corporation in Abuja, disclosed that government spent N2.13 trillion from 2016 to 2019, as subsidy on foreign exchange for marketers.
The NNPC became the sole importer of petrol in Nigeria in 2016 after the Federal Government introduced the price modulation mechanism, which saw the pump price of the commodity rise to between N143 to N145 per litre, from N97 per litre.
Irrespective of the hike in the pump price of the product then, few months after, marketers backed out of its importation, citing difficulties in accessing foreign exchange and government’s interference in fixing the price of the commodity below the actual price determined by the forces of demand and supply.
Few months after the hike in May 2016, the value of crude oil in the international market soared, while the value of Nigeria’s currency, the naira, slid to almost N500 to the dollar, from about N197 to the dollar.
This affected the landing cost of petrol, which skyrocketed, and in a short while, the country not wanting to hike the pump price of the commodity again, returned to subsidizing the product.
The NNPC, therefore, resorted to deducting the shortfall, that is, the difference between the actual cost of the product and the pump price of the product, from its earnings.
In the statement by the NNPC, Kyari disclosed that concrete steps had been taken to address the main concerns of marketers, especially the issue of availability of foreign exchange, stressing that the Central Bank of Nigeria, CBN, had already taken the first step of merging all foreign exchange windows to have a unified exchange rate.
He said: “It is really not in our interest to be the sole importer of PMS in the country. We have taken definite steps to exit the situation.
“This is a definite step taken and the details would be communicated to stakeholders like Major Oil Marketers Association of Nigeria, MOMAN; Depots and Petroleum Products Marketers Association of Nigeria (DAPPMAN), DAPMAN; Independent Petroleum Marketers Association of Nigeria, IPMAN, and others outside this forum.”
Kyari added that there were plans by the government to inject about N2.7 trillion into the Nigerian economy to stimulate production, stabilise the exchange rate and cushion the inflationary effect of the pump price increase.
He noted that the Federal Government was keen on driving the deregulation programme to create value for the country and ensure that Nigerians enjoy the benefits of the policy.