Time To End Fuel Subsidy Fraud In Nigeria, By Kazeem Akintunde
Hameed Ali, a retired colonel, who heads the Nigeria Customs Service, last week appeared before the House of Representative Committee on Finance, at the continued hearing on the proposed 2023-2025 Medium Term Expenditure Framework and Fiscal Strategy Paper in Abuja, to lampoon the Nigeria National Petroleum Corporation Limited on its inability to determine the volume of Premium Motor Spirit, PMS, being consumed in Nigeria daily.
Ali lamented that our inability to determine the amount of fuel consumed in Nigeria on a daily basis gave room for the humongous amount of N6.34 trillion to be paid as fuel subsidy next year. The retired army colonel told the lawmakers that the NNPC cannot scientifically prove that 98 million litres of fuel is consumed daily in Nigeria, alleging that the nation’s oil company was supplying and paying for an excess of 38 million litres of fuel daily.
Hear the Customs boss: “I remember that last year, we spoke about this. Unfortunately, this year, we are talking about subsidy again. The over N11tn we are going to take as debt, more than half of it is going into subsidy payment. The issue is not about smuggling of petroleum products. I have always argued this with the NNPC. If we are consuming 60 million litres of PMS per day, by their own computation, why would you allow the release of 98 million litres per day? If you know this is our consumption, why would you allow that release? Scientifically, you cannot tell me that if I fill my tank today, tomorrow, I will fill the same tank with the same quantity of fuel. If I am operating a fuel station today, and I go to Minna depot, lift petrol and take it to Kaduna, I may get to Kaduna in the evening and offload that fuel. There is no way I would have sold off that petrol immediately to warrant another load. So, how did you get to 60 million litre per day? That is my problem.”
Going by the tone of his presentation, Ali is very angry with the NNPC and the nebulous figures it has provided on daily fuel consumption in Nigeria. In fact, he is not the only one that is angry with the organised fraud the fuel subsidy regime has become in Nigeria. It is so sad that a commodity God blessed the nation with has now become a curse and may be one of the reasons that may precipitate the eventual collapse of the country, if care is not taken. The whole subsidy regime is one huge fraud in which many of the privileged Nigerians continue to swindle the government while those in government seem helpless or are in fact, complicit.
Ours is a nation that is abysmal with record-keeping. We do not know the amount of crude oil we produce, the amount we export or even when our reserve will dry up. In the last seven years, several billions of naira have been budgeted for the revival of the four moribund petroleum refineries that we have in the country. Despite that, it is doubtful if one single litre of refined petroleum product has come out of those refineries. When the present administration was seeking our votes in 2015, we were sweet-talked into believing that they have our interest at heart after promising to stop fuel importation and to establish more refineries. With few months left in the life of the Buhari-led government, building of refineries has now become a mirage but they are eagerly looking forward to the commencement of work of a private refinery built by an individual, hoping that it would solve the fuel importation challenge we are facing in Nigeria.
In 2018, the federal government issued 38 licences to private investors for the establishment of modular refineries as part of plans to curb oil theft and also end the importation of refined petroleum products into the country. If the refineries have been established, a total of 1.09 million barrels of refined petroleum products would have been produced in the country. With that figure, we would have enough fuel for local consumption and we would be in a better position to export and earn the much-needed foreign exchange. But we have greedy and lazy leaders who are bent on not only stealing our commonwealth, but also farting in our faces to rub insult on injury.
In May 2021, the House of Representatives asked the NNPC to review the status of the licences issued to indigenous companies in the country to run modular refineries. It took the decision based on the adoption of a motion moved by Alex Egbona at a plenary session. Egbona had stated that only two out of the 38 modular refineries were reported to be at advanced stages of completion preparatory for commencement of production. In the list published by the defunct DPR, it was observed that valid permits were issued to 23 private refineries, including Waltersmith Refining and Petrochemical Limited, Imo; OPAC refineries, Delta; Niger Delta Petroleum Resources (Train 3), Rivers; and Dangote Oil Refinery Company, Lagos. Others included: the Edo Refinery and Petrochemical Company Limited, Edo; Lowrie Refinery Limited, Delta; Resource Petroleum and Petrochemicals International, Akwa Ibom; and Atlantic International Refineries and Petrochemical Limited, Bayelsa, among others.
The country’s first modular oil refinery, built by Waltersmith Petroman Oil and the Nigerian Content Development and Monitoring Board, NCDMB, began production with an initial capacity to refine 5,000 barrels of crude oil per day in October 2020. In June this year, the NCDMB stated that Duport Midstream Company Limited with licence to refine petroleum products would commence operations in July 2022. NCDMB’s Executive Secretary, Simi Wabote, stated that: “This will be the second refinery that we will switch on. Currently, one of our refineries is working, which is Watersmith modular refinery that is producing 5,000bpd and serving the eastern market. However, the hope of those in government is on the 650,000bpd Dangote Refinery which is expected to come on stream before the end of the year”.
Why an oil-producing country cannot refine its own crude for the benefit of its people is still a misery to many. But make no mistake about the whole scenario – it is simply a case of fraud and greed.
Which brings us to the issue of imported refined products, another mother-of-all-time fraud that has been incorporated into the system. As a nation, we don’t know the amount of petrol we consume which has given rise to all manners of conflicting figures being bandied around. Right from the NNPC’s top officials, to oil marketers, security agents, senior government officials, Customs officials, Bank MDs and the likes, this rot is one bazaar that they do not want to end.
They are not worried that the subsidy regime has almost crippled the nation’s economy. In their heads, they have other options should the bubble burst. After all, they can easily relocate to other parts of the world to enjoy their loot. That is why they buy houses in Dubai, United Kingdom, United States of America and the rest. Nigeria can go up in flames for all they care. From Ali’s argument, there was no reason for the NNPC to peg 98million litres of fuel as what is consumed daily when the same corporation told us that we don’t use more than 60 million litres. What happens to the 38 million litres that those in the corporation paid for? In actual fact, Nigeria consumes between 40 and 45 million litres of fuel daily while the subsidy paid on the rest ends in private pockets. This is why many Nigerians have been calling for the deregulation of the sector to stop the fraud. But fearing that there would be political upheaval in the land, the Buhari administration has tacitly pushed the decision to those that will take over from him next year.
To bring to the fore the fraud in the entire sector, an undercover investigation carried out by reporters on the stable of TheCable revealed that daily, at least 42 million litres of petrol is smuggled out of Nigeria at a resultant cost of about N2 billion.
From Benin Republic to Niger and Cameroon, the online medium documented how security operatives pave the way for the lucrative fuel smuggling business, or, in the least, turn a blind eye for the crime to continue unabated. In Seme, Idiroko, where Nigeria shares border with Benin Republic, to Ikom in Cross River State, where Nigeria’s border with Cameroon lies, the business of smuggling fuel into neighbouring countries is controlled by an organized cabal made up of a chairman and other members of an executive council. Their key responsibility is to coordinate the illegal business and pay “settlement” fees running into millions of naira to security operatives, including Ali’s men, to look the other way.
Retaining petrol subsidy will cost Nigeria nearly N7 trillion in 2023, the Nigerian government has said. The government disclosed this in its draft fiscal strategy paper for 2023 through 2025, presented by the Minister of Finance, Budget & National Planning, Zainab Ahmed. The cost of making petrol cheaper for Nigerians has continued to rise for a country that produces crude oil but imports refined products. It is expected to reach N6.72 trillion next year, if not scrapped.
Many international agencies, including the World Bank, have warned that Nigeria’s economy is on the brink of collapse. According to the bank, Nigeria is projected to have a 3.8 per cent growth in 2022, and that as an oil-dependent country, weak oil production hampers economic recovery. It added that the increasing fuel subsidy poses a high risk to the country’s economic growth, despite the increase in the price of crude oil in the international market.
According to the bank, “Risk remains high on increasing fuel subsidy, which could weigh heavily on public finance and pose debt sustainability concerns.”
With few months before next year’s general election, one of the leading candidates, Peter Obi of the Labour Party, has vowed to do away with the fuel subsidy regime. “I will remove the subsidy and look for something to replace it. The subsidy is a scam. It’s not going to be business as usual.”
Other presidential candidates are yet to make their intention known on the fraud that fuel subsidy has become but what is certain is that whether we like it or not, the subsidy has to go if we still intend to have a country. Let’s establish more local refineries and sell cheaper fuel to our people. That is one of the benefits we should enjoy for having raw crude on our soil. The economy is bad and continuing fuel subsidy is making it worse. It is not benefitting the masses but corrupt government officials and their collaborators in the private sector.
See you next week.
