Calls to scrap NNPCL grow over fuel subsidy crisis

BY EMEKA EJERE

Strident calls for the scrapping of the national oil company, the Nigeria National Petroleum Company Limited (NNPCL), have continued to rent the air following indication that it no longer remits funds to the Federation Account, which is distributed to the various tiers of government.

Despite being commercialised a couple of months ago to run as a profit-making venture, the national oil company has continued to be in the news for the wrong reasons. Although, the oil firm declared profit for 2021, it claims to spend all its revenue on subsidy, which hinders it from contributing to the FAAC.

From subsidy payment on premium motor spirit (PMS), otherwise known as petrol, to the daily consumption figures of the product and to remittances to the federation account, the oil firm has continued to have its claims countered by prominent Nigerians and industry experts, who believe it is shortchanging Nigerians, insisting it has outlived it’s usefulness.

The latest punch was thrown by a former governor of the Central Bank of Nigeria (CBN) and vice chairman, Kaduna Investment Promotion Agency, Lamido Sanusi, who called for the unbundling of NNPCL, declaring that the national oil company was no longer a “cash cow” but a money pit.

Sanusi, while delivering his keynote speech at the seventh edition of KadInvest, an annual event organised by the Kaduna State Investment Promotion Agency, on Saturday said the claim by NNPCL that Nigeria consumes 66 million litres of fuel daily is simply “unbelievable.”

Again, last week, Kaduna state governor, Nasir El Rufai, in a television interview called for the scrapping of the oil company to saved the country from total economic collapse, arguing that the company cannot be declaring profit and at the same time claiming bankruptcy, since it spends all its income on subsidy.

In accordance with the provisions of the Petroleum Industry Act (PIA) 2021, the former Nigeria National Petroleum Corporation (NNPC) had on July 1, 2022, legally transformed into a company that will be regulated under the Companies and Allied Matters Act (CAMA), hence the unveiling in July of NNPCL by President Mohammadu Buhari.
However, while some analysts were hopeful Nigerians would now enjoy dividends from their oil resources after 45 years of wasteful spending and management, others saw nothing more than a change of name unless the underlying problems bedeviling the firm were addressed.

Outburst

Speaking on the topic; “Improving subnational resilience against global economic shocks”, the former CBN governor observed that the first and most obvious problem in the current environment is the existence of the fuel subsidy and opportunities it creates for fraud.

“NNPC is a money pit instead of a cash cow; it should be unbundled and disbanded. More can be had from simply levying royalties and CIT on private players following models like Petronas and Petrobras, Sanusi fumed,

“In the current environment, the first and most obvious problem is the existence of the fuel subsidy and opportunities this creates for fraud, the average daily fuel consumption in Nigeria (by the NNPC’s admission) is 66 million litres per day, and on some days as high as 100 million litres per day.

“This is roughly equivalent to where Indonesia (2019), a country with nearly three times Nigeria’s GDP per capita, two times the number of vehicles and 2.5 times the size of the road network.

“A different way to benchmark Nigeria’s consumption is to look at PMS consumed by each vehicle on a daily basis, on this metric, Nigeria even outranks Iran, a country with three to four times its level of wealth and a road network that is three times the size on a per capita basis and this is not just the impact of subsidies because in Iran official fuel price are 5 US cents per litre, less than 15 per cent of the pump price in Nigeria.”

Analytically, the former Emir of Kano said, “In 2019, officially we were importing 40 million litres per day. In 2022 officially, we are importing 66 million per day. In three years, we have increased our petrol consumption by 50%.

“Please tell me, is it the population? Is it the number of cars? Just ask yourself if it makes sense that in three years you increase your consumption of petrol by 50%. Are we drinking petrol?

“The NNPC says we are consuming 66 million litres per day, so we are consuming more than Indonesia, Pakistan, Egypt, Cote d’Ivoire and others.

“Whoever becomes president in 2023, the first thing they should do is ask the NNPC to document and bring evidence for every dollar they took as subsidy. They must give the ships that came and we can verify from the insurance companies if those ships were in Nigeria on those dates.

“That is what the law says. There must be proof that the product came in, at the price you said you bought it, before you pay subsidy,” he added.

El-Rufai

Ahead of investment summit, Kaduna State governor, Nasir El-Rufai, had called for the immediate privatisation of NNPCL, insisting that the national oil firm had added nothing to the federation’s account this year except excuses that their revenues are being quelled by subsidy.

Speaking on Channels TV’s programme, “Politics Today” on Thursday, El-Rufai said NNPCL has created more problems for Nigeria and has failed in the oil and gas sector of the country.

“This year, NNPC has not brought N20,000 to the federation account. We are living on taxes. It is PPTs, royalties, income tax and VAT that is keeping this country going because NNPC claims that subsidy has taken all the oil revenues. I don’t believe it.”

The governor further stated, “Nothing has changed, it’s just a change in name with “limited” at the end. They are still taking our money, declaring profit that we have not seen the dividends.”

He also explained that the government’s involvement has done no good, and should allow private investors to take charge, adding, “the electricity industry should as well be completely privatised.

Meanwhile, NNPCL has responded to El-Rufai through its Group General Manager, Group Public Affairs Division, Garuba Deen Muhammad, saying the governor’s statements were contradictory and surprising because the facts were there for everyone to see. Muhammad said it was not true that NNPCL has not been remitting to FAAC, insisting that the revenue from PPT was from the oil industry.

“He (El-Rufai) said NNPCL has not been making remittance to FAAC and yet in the same breath, he said it is income from PPT, royalty and income tax that is keeping this country.

“The confusion is where do the PPT, royalty and income tax come from? The PPT is the petroleum profit tax, have you seen anybody pay profit tax without making profit? Or pay Royalty without production?

“These things don’t just fall from the sky. These payments are possible because somebody is working hard to make it possible”.

Hameed Ali

Sanusi and El-Rufi are vindicating the Comptroller General of the Nigeria Customs Service, Col. Hameed Ali, rtd, who recently argued that NNPCL could not convincingly justify the huge volume of petrol being consumed in the country daily to warrant the over N6 trillion subsidy.

Speaking during a presentation to the House of Representatives’ Committee on Finance, Ali put the supply figure allegedly quoted by the NNPCL at 98 million litres per day, maintaining that the firm was over-supplying by at least 38 million litres daily. NNPCL had put the figure at 68 million litres.

“I remember that last year we spoke about this. Unfortunately, this year, we are talking about subsidy again. The over N11 trillion we are going to take as debt, more than half of it is going for subsidy. The issue is not about smuggling of petroleum products. I have always argued this with NNPC”, he said.

“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,” he pointed out.

On the “The issue of smuggling: If you release 98 million litres in actual and 60 million litres is used, the balance should be 38 million litres. How many trucks will carry 38 million litres every day? Which road are they following and where are they carrying this thing to?”

Zero FAAC remittance

In its monthly presentation to the Federation Account Allocation Committee (FAAC) meeting on Friday (Sept 23), NNPCL said it deducted N525.71 billion as a shortfall for the importation of petrol (subsidy) in August 2022.

The FAAC document seen by Business Hallmark showed that due to the subsidy payment, the oil company failed to remit any funds to the federation account for the eighth consecutive time. It further revealed that the national oil company hapetrold spent N2.565 trillion on subsidy payments since the beginning of the year.

“The sum of N525,714,373,874.60 being federation account share was used to defray value shortfall/subsidy for the month,” NNPCL said.

“The value shortfall on the importation of PMS recovered from August 2022 proceeds is N525,714,373,874.60 while the outstanding balance carried forward is N983,365,057,776,20.

“The sum of N525,714,373,874.60 applied to defray value shortfall/subsidy is made up of $2,337,591.52 being 40 percent of PSC.”

In January, February, March, and April 2022, the petrol subsidy gulped 210.38 billion, N219.78 billion, N245.77 billion, and N271.13 billion, respectively. Also, in May, June, and July, the country spent N327.07 billion and N319.18 billion, and N448.78 billion, respectively.

This year, the federal government plans to spend up to N4 trillion on costly petrol subsidies due to high global oil prices.

However, it plans to stop subsidy payment by June next year— with plans to spend N3.35 trillion as contained in the 2023-2025 medium-term- expenditure çframework and fiscal strategy paper (MTEF&FSP).