Govs Seek to Take Over Fuel Subsidy Payments

  • Move could end inefficiency, graft, shortfall in NNPC remittances to treasury
  • NEC uncovers fraudulent non-remittance of N526bn, $21bn by govt agencies
  • Recommends indicted agencies for prosecution

Omololu Ogunmade and Onyebuchi Ezigbo in Abuja

The governors of the 36 states of the federation are canvassing a novel initiative that will see each state taking responsibility for subsidising petroleum products consumed within its territory.

Arising from their discontent over the claim by the Nigerian National Petroleum Corporation (NNPC) that it supplies a ridiculous 60 million litres of petrol daily to the domestic market, the governors are contending that instead of deducting the difference between the landing cost of petrol and the official pump price of the product before remitting net crude oil receipts to the Federation Account, every state should be responsible for paying its own subsidy according to its consumption.

The push by the governors to take over the responsibility of paying subsidy payments on fuel in their respective states could prove to be a major solution to the inefficiency and graft that has characterised fuel imports and consumption in the country for decades.

Other than the crippling impact fuel subsidies have had on the treasury, the shortfall in remittances by NNPC to the Federation Accounts often leaves the three tiers of government sharing less revenue than actual oil receipts accruing to the coffers of the state-run oil firm.

Should states assume control of subsidy payments to oil marketers, they would get more revenue from the Federation Account and would have to negotiate with residents to determine the price at which petrol should be sold in their territories, meaning that some states could pay more or less as petrol subsidy.

Control by the states could also lead to efficiency in the importation of petroleum products and could see daily consumption dropping to about 30 million litres a day.

However, governors unable to use the extra revenue at their disposal judiciously to ensure that there is no fuel scarcity in their states would have to contend with irate residents.

Speaking with journalists shortly after the meeting of the Nigerian Governors’ Forum (NGF) Wednesday night, the chairman of the forum and governor of Zamfara State, Abdulaziz Yari, said the state chief executives expressed reservations over the sudden rise in petrol consumption and cash call expenditure, which now runs into trillions of naira.

Elaborating on the proposed initiative, Yari said the move would actually help to reduce the volume of petrol imported and also the amount spent on subsidy.

He said the proposal was to be tabled before Thursday’s National Economic Council (NEC) meeting for deliberation and approval.

Yari, who described the NNPC’s claim of importing 60 million litres of petrol daily as unbelievable, however, said the three tiers of government would need to apply caution in implementing the new initiative to avoid disruption in fuel supply.

“Well, we don’t want to play into the hands of these people so that there will be another fuel scarcity. You know the problem is also from Nigerians, they would blame us for causing the scarcity and they won’t know why there was a shortage.

“Because for us to commence the investigation on how much each state consumes, these people will instigate chaos that we would regret and Nigerians would look at it from that perspective and will start accusing the government of laxity and not being proactive.

“So it is not about the investigation, it is about trying to reposition things for the future,” he said.

Yari said the forum agreed that the states should go and ascertain the volume of product that is needed in each of their territories.

The governors, who met in Abuja ahead of the NEC meeting, also considered issues relating to revenue remittances to the Federation Account by revenue-generating agencies, as well as other issues connected with the development and well-being of residents in the states.

The discussion on the payment of the outstanding London and Paris Club refunds was however stepped down since the report was not ready.

Similarly, the governors agreed to step down deliberation on the collection of stamp duties since there is a pending case at the Supreme Court.

Other issues on the agenda included the review of the NEC agenda and implementation of health projects, updates on disease outbreaks and the expected roles of state government in epidemic response, and replication of the Edumarshal education project at the state level.

Edumarshal is a comprehensive school management and administration software solution that enables authorities to track and enforce compulsory basic and secondary education for children of school age in their domains.

Meanwhile, at the meeting of NEC Thursday in Abuja, the council adopted the audit report presented to it by KPMG, which revealed that revenue-generating agencies, notably the NNPC, failed to remit N526 billion and another $21 billion to the government’s coffers.

Briefing journalists at the end of the monthly NEC meeting presided over by Vice-President Yemi Osinbajo in the State House, the Governor of Gombe State, Ibrahim Dankwambo, said KPMG presented the concluding report of the technical audit of 16 revenue agencies which showed that the country was shortchanged by N526 billion and $21 billion that they failed to remit to the Federation Account.

Dankwambo, who said the audit report was the fallout of the assignment handled by a NEC ad hoc committee that he chaired, added that the committee recommended the refund of the unremitted sums by the agencies to the Federation Account.

He also said NEC adopted the recommendation of the committee that where criminal acts had been discovered in the agencies’ actions, they should be referred to the legal arm of NEC and the Attorney-General of the Federation (AGF) for prosecution.

He also said the council would ensure that the governance structures of the NNPC would be strengthened to avert a repeat of such “gross under-remittance” by the agency in future, pointing out that whereas the audit only covered the period 2010-2015, NEC Thursday resolved to extend the audit to June 2017.

“Council adopted the presentation and reports of the KPMG and the recommendations of its ad hoc committee including a resolution to identify instances where there appeared to have been criminal infringements and forward such to the Attorney-General of the Federation and the Legal Committee of the National Economic Council for further action.

“Council resolved to pursue the strengthening of NNPC governance structures to prevent further recurrence of such gross under-remittance by the NNPC and other revenue generating agencies,” he said.

Dankwambo listed the agencies audited to include NNPC, Nigerian Petroleum Development Company (NPDC), Department of Petroleum Resources (DPR), Nigerian Customs Service (NCS), Federal Inland Revenue Service (FIRS), Nigerian Ports Authority (NPA), ministries, departments and agencies (MDAs), and other maritime agencies.

In his briefing, Osun State Governor Rauf Aregbesola said the council commended the courage of President Muhammadu Buhari and the vice-president in ensuring the probe of federal government agencies, adding that this would promote transparency and the anti-corruption efforts of the administration.

The Minister of Budget and National Planning, Udoma Udo Udoma, said he briefed the council on the just concluded Economic Recovery and Growth Plan (ERGP) focus labs which he said: “Were conducted successfully and the outcomes presented to the public last Tuesday, May 15, 2018.”

According to him, the labs identified 164 projects to be spread across the six geopolitical zones of the country, adding that the outcome of the labs showed that over 500,000 jobs could be created by 2020.

He also said more labs would be conducted in due course in other sectors of the economy and states had been encouraged to adopt the same model.

Responding to questions on whether the council discussed the subsidy being paid on imported petroleum products, which was tabled by the governors on Wednesday at the NGF meeting, Yari said NEC would take an assertive decision on the subsidy regime next month.

He insisted that the claim of 60 million litres daily fuel consumption by NNPC and the huge subsidy being paid on petrol by the corporation was unacceptable and must be redressed.

“Yes, the item was brought up for discussion but it was referred back to the sub-committee which I chair. We are looking at the nitty gritty with the NNPC in terms of remittances.

“Don’t forget that the reason we got it right in 2016 on the NNPC side was because oil prices were low.

“It was easy for everyone to get fuel into the country and then make his profit. So, when the price started climbing, oil marketers started adjusting because they needed to have a template on cost recovery and how they were going to make up the difference between the landing cost and the pump price.

“Our problem is the volume, the quantity of consumption which is not acceptable. In working with the governors, so many decisions were taken but by next month, we are going to adopt a position either for the governors to take responsibility for subsidy payments in their states based on consumption or we look at other ways.

“For instance, if you said we paid N800 billion subsidy in one month, you will ask, who are we paying the subsidy to? And if you look at infrastructure development and the capital budget of the federal government, it is about N1.1 trillion, so that means almost 70 per cent of what you are spending to develop the economy is going to fuel subsidy.

“N800 billion is a huge amount that we must look at and determine who is benefiting from it? So, we are coming up with a strategy. We are going to meet in the month of May and June.

“In the next meeting, we will definitely come up with a position of government at both levels on the volume of what is being brought into the country and what the state and federal governments collaborate to check,” Yari said.