Posted on April 27, 2018
The Senate has declared as illegal the current payments by the Nigerian National Petroleum Corporation to augment the differentials between the landing cost of the Premium Motor Spirit (petrol) and the pump price.
The legislature asked the corporation to stop further payment of subsidy, but should clear the arrears owed marketers of the commodity.
The Committee on Public Accounts made the recommendations in its report on the investigation of the subsidy payments, which was adopted by the Senate at the plenary on Thursday.
The panel recommended that the NNPC “should stop the illegal payments without appropriation henceforth,” adding that the corporation, through President Muhammadu Buhari, “should make a formal request to the National Assembly for appropriation for the illegal payments,” while the N216bn spent in 2017 should be returned to the Consolidated Revenue Fund account.
The lawmakers also adopted the recommendation that read, “There is a need for the Federal Government to pay the oil marketers the outstanding arrears of subsidy owed them prior to 2017,” and another that stated that “the local refineries should be given maximum attention to enable them function in full capacity.”
The Senate asked the Office of the Auditor-General of the Federation to carry out a full audit of the NNPC.
The chamber also directed the committee to recommend appropriate sanctions “for officers and personnel who have carried out this illegal payment.”
Listing its findings in the report, the committee said, “The NNPC is the sole importer of the Premium Motor Spirit and almost all the major marketers have stopped importing fuel, because of the negative difference in the landing cost and the pump price.
“The landing cost of the PMS per litre varies based on international prices and exchange rate. The average landing cost (inclusive of all charges) within the period of the investigation is about N171, while the approved selling pump price is N145, giving a negative difference (under-recovery) of the sum of N26.
“The differential (under-recovery of the sum of N26) born by the NNPC as a loss in 2017 amounted to the sum of N216bn and the NNPC paid itself the differential (subsidy) but described it as ‘operational cost’.
“There was no appropriation by the National Assembly for the payment of the differential between the landing cost of PMS and the selling pump price, otherwise known as subsidy, in 2017.”
The panel noted that since 1999, there had been appropriation for the payment of subsidy
It said the corporation in 2017, imported 9.8 billion litres of petrol at the cost of $5,488,634,448.91, amounting to N672,508,506,917.55 at the exchange rate of N305 to the dollar, adding that in the previous years, all importers, including the NNPC, had collected subsidy on the product.
“It is, therefore, curious that the NNPC would in 2017 describe the differentials as ‘operating costs’ and a loss, but would not demand for refund,” the report added.
Speaking on the report, Senator Adamu Aliero asked the Senate to decide on whether there should be subsidy on petrol or not.
The lawmakers, however, resolved that since there was no alternative to importation of petrol, subsidy would remain but legalised from 2018.
The President of the Senate, Bukola Saraki, condemned the NNPC for the illegal payments.
Saraki said, “The important thing is that the NNPC cannot continue going forward making those payments without appropriation, because, definitely, there is subsidy going on now and it needs to be backed by law, which has always been the case since 1999.
“There had been appropriation for fuel subsidy. It stopped briefly. But now, the NNPC is using the absurd words ‘operational cost’ to justify this expenditure, and we all know this is not operational cost. This is fuel being imported. How that becomes operational cost is even an insult on the integrity of Nigerians.”