•NNPC’s subsidy payment arrears jumped to N3.73tn in May
•Under-recovery hits N1.82trn in five months
•Cameroon, Benin, Togo’s black markets crash after removal of petrol subsidy in Nigeria
•Yuguda alleges national oil company, marketers, others involved in fuel subsidy scam
Deji Elumoye, Chuks Okocha and Emmanuel Addeh in Abuja
Former spokesperson to President Muhammadu Buhari, Garba Shehu, has formally reacted to the removal of fuel subsidy by President Bola Tinubu, upon his inauguration on May 29, 2023.
Shehu justified Buhari’s refusal to remove the petrol subsidy while his eight-year administration lasted, just as it emerged that data from the Nigerian National Petroleum Company Limited (NNPC) indicated that the national oil company had a whopping N3.73 trillion in unpaid petrol subsidy arrears as at May this year.
This was just as petrol racketeering markets in some West African nations, including Cameroon, Benin Republic and Togo have crashed, following Nigeria’s decision to remove its very costly fuel subsidy on May 29, 2023.
Justifying his refusal to remove the petrol subsidy while his eight-year administration lasted, Shehu stated that if Buhari had implemented the fuel subsidy removal policy, the ruling All Progressives Congress (APC) and Tinubu would have lost the last general elections held in February and March, 2023.
In a statement issued yesterday, Shehu declared, “we must be politically honest with ourselves. The Buhari administration in its last days could not have gone the whole way because the APC had an election to win. And that would have been the case with any political party that was seeking election for another term with a new principal at its head.”
He, however, commended the steps taken so far by the new administration in implementing the removal of petrol subsidy and attempt to unify the Naira exchange rate.
The statement was in response to persistent queries by some critics who had questioned why it took Tinubu only days to remove the petrol subsidy whereas Buhari didn’t do so for several years.
According to him, successive polls indicated that the ruling party would have lost the 2023 election if the Petroleum Industry Act, containing the petrol subsidy removal, was implemented before then.
“Poll after polls showed that the party would have been thrown out of office if the decision as envisaged by the new Petroleum Industry Act was made”.
In the statement entitled, “Buhari Didn’t Fail to Remove Subsidy,” Shehu stated, inter alia: “Why did it take the new Tinubu/ Shettima presidency weeks to remove the petrol subsidy when Buhari didn’t do so for years fails to ask the right question.
“The massive electricity subsidy. The fraudulent fertilizer subsidy. Hajj/Christian Pilgrim subsidies. Remember them?
“The diesel subsidy. The aviation fuel subsidy. LPFO. Kerosene. Cooking gas and the other subsidy policies we found in place, and put them firmly on the ground. Remember them?
“For those with short memories, many of those subsides were all in place when president Buhari was elected to office in 2015: all those in place were gone by May 2023 – including the annual fertilizer subsidy that weighed 60-100 billion Naira (that’s trillion naira in about 10 years – yes you read that right) heavy on the federal budget each year.”
It added: “So no, Buhari didn’t remove the petrol subsidy – but in vitally important stages he removed every other budget-busting, egregious, economic-growth-crushing subsidy along the way.
“So far I have refrained from answering these repeated questions on the removal in Nigeria of subsidies on Premium Motor Spirit, PMS and that arising from the dual rates of the naira in the central bank and the parallel market: Why did Buhari ‘fail’ to do these?
“First of all, my thinking is that instead of the former President answering this question, it is the party, the APC that is best suited to speak and failing to do this, we are forced to say what will follow here.
“Secondly, we are mindful of the fact that with a Tinubu/Shettima presidency now in place and for which there is a ‘New Sheriff in Town’ we do not want to distract them from the onerous tasks facing them and the nation. Neither is it our wish to take the spotlight away from them in any way.
“In terms of the timings of the decisions to remove fuel subsidy and unify the currency, the Tinubu/Shettima administration has done overwhelmingly well. Even more importantly, they have been most dexterous in managing the aftermath of the decisions by successfully avoiding any crisis.
“To this extent, our wish and prayers are that fellow countrymen will continue to support the new leadership in these very laudable decisions and, in particular, for the labour leadership and civil society to work with them to ensure that the palliative efforts as promised are successfully implemented.
“The decision to remove subsidies, as in our case – and we believe in all situations – was not for the President to take all by himself.
“That’s why it’s important to remind ourselves – and all those who have conveniently forgotten – that Buhari administration had been on this pathway from the very beginning in 2015.
“Removing subsidies for the naira and PMS was cued and put on hold. Look for example in the Petroleum Industry Act. The important decision was kept for a better time.
“It could not have come at a time when tensions were high in the country and no responsible leader would have added fuel to the fire.
“In the view of many-including those in the security circles- only a new administration with a goodwill that fills a warehouse can attempt this, and here now comes in the wit and grit of the Tinubu government.
“Finally, we must be politically honest with ourselves. The Buhari administration in its last days could not have gone the whole way because the APC had an election to win. And that would have been the case with any political party that was seeking election for another term with a new principal at its head.”
The statement further noted that, “Poll after polls showed that the party would have been thrown out of office if the decision as envisaged by the new Petroleum Industry Act was made.
“With the election now behind us, a capable leader as we now have in place is best positioned to move forward. We have nothing but confidence that the new administration will carry the nation and all its constituents into a stable future in the aftermath of these major economic and financial decisions.
“As they say, there are times when you have to lose in order to win.”
NPC’s Subsidy Payment Arrears Jumped to N3.73trn in May
Relatedly, data from the Nigerian National Petroleum Company Limited (NNPC) has indicated that the national oil company had a whopping N3.73 trillion in unpaid petrol subsidy arrears as at May this year before it was yanked off by President Bola Tinubu.
The information sourced from the NNPC’s monthly presentation to the Federation Account Allocation Committee (FAAC) by The Cable, also showed that the amount paid for under-recovery by the federation hit N1.82 trillion in the first five months of 2023.
Besides, the data showed that the national oil company paid N307.408 billion as petrol subsidy in May 2023; N274.769 billion in January 2023; N477.742 billion in February; N415.381 billion in March and N353.130 billion, the total sum of which was 55 per cent higher than the amount paid in the same period in 2022.
“The May 2023 subsidy amounted to N307,408,874,345.82, thus, the outstanding balance carried forward is N3,735,689,387,761.22 as of June 2023 FAAC,” the document stated.
However, the NNPC said it raked in N47.57 billion as domestic Production Sharing Contract (PSC) crude oil and gas revenue in May 2023.
Even before it became a ‘commercial’ entity, the corporation as it was then known, had stopped remitting any amount to the federation account, jointly owned by the federal, state and local governments.
On May 29, Tinubu removed the controversial petrol subsidy which was eating deep into the nation’s revenues, leading to a tripling in some locations of the prices consumers bought the product before the announcement.
This year alone, from January to June, when the subsidy was removed, the sum of N3.6 trillion was budgeted for the purpose.
There has been some kind of back and forth between the federal government and the NNPC as to which of the parties needed to be netted off, considering that even as the government admitted owing the NNPC, it also accused the firm of withholding some payable taxes and royalties.
Last week, THISDAY reported that the federal government had set up a committee to look into the discrepancies in payments between the two parties.
Cameroon, Benin, Togo’s Black Markets Crash after Removal of Petrol Subsidy in Nigeria
Meanwhile, the petrol racketeering markets in some West African nations, including Cameroon, Benin Republic and Togo have crashed, following Nigeria’s decision to remove its very costly fuel subsidy on May 29, 2023.
Reuters reported yesterday that things have been topsy-turvy lately on the roadsides of the impacted countries where cheap contraband petrol from Nigeria had abruptly doubled in price, upending an informal sector that is central to the region’s economic activity.
Since Nigeria scrapped its fuel subsidy, black market fuel vendors and commercial drivers in Cameroon, Benin and Togo who were heavily reliant on petrol smuggled from Nigeria have seen their businesses collapse, it said.
With supplies dwindling, queues have been forming at official petrol stations, where fuel is now competitively priced.
In Garoua, a town in northwest Cameroon about 60 km (37 miles) east of the Nigerian border, a litre of petrol on the black market used to sell for about 300 CFA francs ($0.48). Now the minimum is 600 CFA francs, vendors said.
“Supply has become scarce and customers think we’re ripping them off with this high price, yet it’s from Nigeria that prices have soared,” Perevet Dieudonne, a black market seller, told Reuters
The knock-on effects on motorcycle-taxis, a form of public transport ubiquitous in West Africa, include conflict between riders who often live hand-to-mouth and customers who demand cheap fares no matter what.
Ousmanou Mal Djoulde, a rider in Garoua, said he had been forced to more than double his fares. Many customers were refusing to pay and business was agonisingly slow.
The trade in black market fuel is so central to the local economy that authorities either turn a blind eye or are complicit. A Reuters reporter in Garoua saw a Cameroonian customs officer sitting on a motorcycle-taxi that was being refuelled with smuggled Nigerian petrol. There is no reliable data on the amount of fuel that is smuggled from Nigeria.
The Head of Nigeria’s state-controlled oil firm, the Nigerian National Petroleum Company Limited (NNPC), the sole supplier, said early this month that 66 million litres of petrol left its depots daily but could not say how much was consumed locally, though he admitted smuggling was rampant.
Independent energy experts and Dangote Petroleum Refinery – which expects to start producing petrol from early August to alleviate chronic fuel shortages – put Nigeria’s total daily consumption below 40 million litres.
In Benin and Togo, small nations to the west of Nigeria, contraband fuel vendors have lost both supplies and customers while formerly sleepy official petrol stations are suddenly busy.
At Hilacondji, a border crossing between Togo and Benin, some black market fuel stalls were shut, while at others vendors waited among rows of empty plastic jerricans for potential deliveries.
“While we wait for the situation to improve, some have gone into fishing or other small businesses,” said Ayi Hilla, who had been making a living from selling contraband fuel for 10 years but was now focusing on running a small roadside bar.
Some informal fuel depots were being demolished, and men who used to work there unloading and carrying petrol were now unemployed.
More than 80 per cent of employment in Africa is informal, according to the United Nations, making the informal sector a key driver of economic activity.
In Cotonou, the commercial capital of Benin which is about 60 km from Nigeria, queues have been building up at official petrol stations and some have been unable to meet the sudden surge in demand, especially from “zemidjan”, the local word for motorcycle-taxis.
“Before, we were selling about 2,000 litres per day, but now we’re selling up to 7,000 litres per day,” said a worker at the JNP fuel station who gave his first name, Janvier. He had just turned away four customers because supplies had run out, the Reuters report stated.
Also, a former Governor of Bauchi State and ex-minister of State for Transport, Isa Yuguda, yesterday alleged that before it was finally withdrawn, the NNPC, marketers and other stakeholders in the oil sector were running a scam using the fuel subsidy as a cover.
Speaking on Channels Television, Yuguda a former bank chief executive, stated that having been privileged to serve as the chairman of a committee that unravelled how the so-called subsidy worked, he was in a position to make the allegation.
“I am sad to let Nigerians know what I saw, we came across situations where subsidy was claimed on pipelines that never existed. They (NNPC and marketers) just claim that they have pumped X amount of either finished products or crude.
“Those that claim to pump the products and those that are in the subsidy scam, they just fill papers, invoices and they claim subsidy on it,” Yuguda disclosed.
Pressed further on the allegation, Yuguda doubled down on the on the imputation, insisting that the national oil company was deeply involved in the racket.
Yuguda, who served as the chairman of a sub-committee on Petroleum Subsidy in the country during the administration of former President Goodluck Jonathan in 2009, maintained that previous governments did not have the political will to implement the removal of subsidy for reasons best known to them.
“President Bola Tinubu should be commended for having the courage to remove the scam called subsidy,’’ he stressed.
Yuguda explained that the committee he headed discovered layers of deceit on subsidy which was contained in the report submitted to the then president but the report was never implemented as a result of lack of political will.
He also said surprisingly, when President Muhammadu Buhari assumed office in spite of the fact that he acknowledged that subsidy was a scam, he also failed to act on the dicey issue.
He maintained that even the little that could pass for subsidy benefited not Nigerians but the people of Central and West African countries where the petroleum products were smuggled into on a daily basis.
“You can’t imagine it. A friend told me that he wanted the subsidy removed because he and his colleagues in the oil business were tired of making money out of the scam called subsidy at the expense of Nigerians,” he explained.
Yuguda urged the president to go after the alleged subsidy scammers and bring those involved to justice.
“They are all involved in these things, all of them and I must sadly also report that Nigeria subsidy, that part of it that goes for subsidy, will go on subsidising sub-Saharan Africa and Central Africa because the bulk of this product is smuggled out of this country, then who is subsidising who?” he queried.
According to him, the subsidy regime should have gone way back in 2013, but he blamed the lack of political will on the part of the government to address the subsidy issue.
“This has been a very serious issue which has been so much talked of. Maybe it’s motion without movement and government didn’t have the political will to address the problem,” he added.
Yuguda further said: “Former Minister of Finance, Dr. Ngozi Okonjo-Iweala, hired some chartered accountants to probe the subsidy claims and found out that $2 billion were spent on fuel subsidies. That was where it ended.”
