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Nigeria’s Buhari under fire over ‘astronomic’ fuel subsidy bill
LAGOS, Sept 23, 2018 (BSS/AFP) – It’s only September but Nigerians are
already dreading Christmas. For years, the holiday season has been marred by
paralysing fuel shortages, grinding business to a halt.
“Every December, I guarantee you, fuel scarcity will happen,” said a
barber in the prosperous Ikoyi district in Lagos, the country’s commercial
hub.
It wasn’t supposed to be this way.
When he became president in 2015, Muhammadu Buhari appointed himself oil
minister and vowed to end the shortages, the result of an inefficient and
graft-riddled fuel subsidy scheme.
But raising the price of fuel at the pump turned out to be politically
explosive so he agreed to compromise.
Instead, he cut out the fuel marketers, effectively making the state-run
Nigerian National Petroleum Corporation (NNPC) the sole importer of fuel.
Supporters say the strategy is fortifying the country against future
shortages but opponents believe it makes the NNPC more opaque and susceptible
to graft.
The subsidy bill has spiked and as February elections approach, questions
are being asked about the government’s management of oil sales and earnings.
“Dramatically is not quite the word, it’s astronomically rising,” said
Cheta Nwanze, research head at SBM Intelligence, a Lagos-based advisory firm.
“It’s dangerously unsustainable.
“The NNPC is seen as a piggy bank for whoever occupies the presidency. We
were promised more transparency in the operations of the NNPC and that has
not been delivered.
“Now it’s all in little black books.”
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– ‘No oversight’ –
The fuel subsidy scheme has been described as a sprawling web of patronage
and mismanagement, a microcosm of the dysfunction in modern Nigeria.
Despite being Africa’s largest oil producer, churning out some two million
barrels a day, OPEC member Nigeria doesn’t have fully working refineries and
actually imports the bulk of its fuel.
The fuel is sold at a subsidised rate of around 145 naira ($0.40, 0.34
euros) per litre — half the price in neighbouring Benin.
Cheap fuel may keep voters happy but marketers have previously overcharged
the state for fuel, then turned around to sell the cut-rate petrol at a
profit to neighbouring countries.
Marketers have stopped fuel imports when the government owed them
outstanding subsidy payments, causing shortages that bring the country to a
standstill.
Under Buhari’s new configuration, the NNPC imports the bulk of the petrol
then absorbs the subsidy into its operational costs as “under recovery”.
Critics say that is problematic.
“The NNPC is not subject to any form of direct oversight,” said Abel Akeni
from BudgIT, a civil society group focusing on transparency.
“There is a real concern that the money could be redirected. There is no
breakdown of who is receiving what amount. One thing we are certain of is
something is not right.”
According to the latest NNPC data obtained by AFP, in April the company
paid $215 million in under-recovery — nearly five times as much as the $46
million six months earlier in November.
The numbers appear to be climbing higher. In May, the under-recovery
amount hit $245 million.
That approaches an estimate floated by junior oil minister Emmanuel Ibe
Kachikwu, who reportedly said in April that Nigeria was spending $321 million
monthly — or $3.9 billion annually — on subsidy payments.
He later denied making the remark.
The bill is beginning to rival that spent during the so-called subsidy
scam during former President Goodluck Jonathan’s tenure five years ago, when
the subsidy payments came to $5 billion, the NNPC reported in a January 2018
presentation to the Senate.
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– Increased scrutiny –
NNPC spokesman Ndu Ughamadu did not answer repeated requests for comment.
The company has said the sudden increase is a result of increasing its
petrol importation, higher oil prices and fuel smuggling.
But many aren’t convinced. In June, the former finance minister Kemi
Adeosun said remittances from the NNPC to the national treasury were
“unacceptable”.
Political opponents are more direct.
Lawmakers said in July there was an “urgent need” to investigate the NNPC
shortfall, saying it was “likely as a result of some individuals not doing
what they are supposed to”.
They have reason to be suspicious.
In 2014, for example, the then-central bank governor Lamido Sanusi alleged
the NNPC had failed to remit $20 billion in oil revenue over an 18-month
period in the years before.
The previous government disputed the figure and Sanusi was suspended from
his post in what was seen as a politically motivated decision.
A long-term solution to the subsidy sinkhole would be to introduce a more
flexible pricing system, said Nigerian economist Nonso Obikili.
That would mean the price at the pump isn’t subject to fluctuations in the
global price of crude and make it immune from government manipulation.
“But that’s where the government struggles,” said Obikili. “There’s too
many vested interests.”
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