How the Presidency Can Eradicate Fuel Subsidy

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President Muhammadu Buhari signing the New National Minimum Wage bill into law in his office at the Presidential Villa , Abuja Thursday Photo: Godwin Omoigui

Pedro Ukokobili
The presidency led by President Mohammed Buhari has immensely transformed the fuel subsidy scheme designed to drain Nigeria economy. The presidency have saved Nigeria treasury from economic looters and fraudsters. The Senate Joint Committee on Petroleum Resources revealed that between 1999-2015 fuel subsidy scheme gulp about N10 trillion from Nigeria’s treasury.

But under the new fuel subsidy scheme called under recovery scheme or direct-sales direct purchase (DSDP) scheme NNPC GMD affirmed that between 2016 and March 2019, about 29.5 million metric tons (or 39 billion litres) of petroleum products have been supplied under the DSDP scheme.

This volume represents over 90 per cent of the national requirement of about 55 million litres daily. With its pricing framework lower than the Petroleum Products Pricing Agency (PPPRA) benchmark, the GMD said the DSDP has ensured a significant reduction in product demurrage cost by about 84 per cent as well cost savings of about $2.2 billion over the years.

However, the DSDP scheme is still found to be mired in corruption to certain extent. For instance, Emmanuel Ibe Kachikwu (2018) revealed that data from the NNPC showed an under-recovery incurred cost of N190.314 billion between January 2017 and January 2018.
To this end, the presidency and the new management of NNPC led by Mele Kyari should develop a new template called Zero Agency Contract for petroleum refining.

The Zero Agency contract is an engagement contract which will oblige oil companies and refinery to gain access to 445,000 Barrels Nigeria Crude Oil for domestic refining, but require the oil company or refinery to refine the crude oil to the specified products as approved by NNPC and retain 5,000 Metric Tonnes of the refined specified products as compensatory benefits for transport and refining cost.

The aforementioned scheme was designed to free Nigeria government and NNPC Group from under recovery incurred cost presently eating up NNPC fund generation strategy. This strategy was designed to strengthen the NNPC Group and reposition Nigeria economy.

We can not afford to open our economy to economic fraudsters and looters. Zero Agency Contract for petroleum refining is a new template for fuel subsidy that would eradicate corruption from NNPC Group and Nigeria economy. I call on President Mohammed Buhari, Mele Kyari and Senate Committee on Petroleum resources to expedite action by introducing this scheme for 2019/2020 petroleum lifting contract for domestic refining.

Ukokobili wrote in from Lagos