Nigerian govt reverses self on petrol ‘subsidy’, but denies it

File photo of Motorists queuing for fuel at a filling station on Queen Elizabeth Road in Ibadan, as scarcity of the commodity persists on Thursday (21/12/17). 06959/21/12/2017/Adeogodiran Timothy/BJO/NAN

Despite its own admission that the landing cost of imported petroleum products has exceeded approved retail pump price, the Nigerian National Petroleum Corporation, NNPC still claims the government has not been paying subsidy on petrol.

The government says it has been making for “extra cost” for months, but denies paying petrol “subsidy” which it stopped in 2016.

The Buhari administration announced the removal of petrol subsidy in 2016, and imposed a pump price increase to N145 a litre as the then new government tried to distance itself from the misdeeds of past governments.

The government said it would channel its resources instead into getting the refineries up, and save the trillions of naira past governments squandered on fuel subsidy payments.

But it seems the Buhari government, soon after persuading Nigerians to accept the petrol pump cost raise as the price for scraping subsidy, quietly went behind and continued with the same subsidy policy of its predecessors.

The NNPC has not given details how the cost is covered. But such cost would amount to billions of naira, and would imply the government redirected resources that would have gone into developmental projects into paying subsidy — the same policy it criticised other governments for.

It is not clear where the monies were sourced from, since budgets for 2016 and 2017 had no mention of subsidy appropriations.

Revealing

The NNPC Group Managing Director, Maikanti Baru, stirred controversy on Friday when he disclosed that the official landing cost of petrol has for months been about N171.40 per litre.

By implication, Mr. Baru, who was speaking at the end of his monitoring tour of filling stations in Abuja on Sunday, was admitting that the government was bearing an extra cost of about N26.40 for its decision to keep retail pump price of petrol intact at N145 per litre.

But, Nigerians have read insincerity into Mr. Baru’s disclosure, particularly about the government’s refusal to make official pronouncement on the issue of subsidy component in NNPC fuel supply cost, having declared at inception it was removed from the official petroleum products pricing template.

However, asked to confirm whether subsidy was restored in the country’s fuel pricing template without a formal announcement by government, NNPC spokesperson, Ndu Ughamadu, was emphatic in his denial, in a telephone chat with PREMIUM TIMES in Abuja.

“No! No!! No!!” Mr. Ughamadu said. “The GMD was very clear on the issue. He never talked about government subsidy. If you check the budgets for last year and this year, there was no appropriation for fuel subsidy. So, how can we be talking about subsidy? What we have is extra cost.

Asked to explain the N26.40 price differential between the fuel landing cost of N171.40 per litre and retail pump price of N145 per litre, the NNPC spokesperson said although the corporation has been subsidising the fuel price, “we cannot talk about it officially, because it is not the same thing as government subsidy, which is always appropriated in the budget by the National Assembly.”

“As I have always said, NNPC has a critical role to play in products distribution and supply in the country, not only as a commercial entity and importer of last resort, but also as ‘social supplier’, to ensure that the system gets wet all the time,” he said.

But, a senior official of one of the products marketing associations in the country, who requested anonymity because of the sensitive nature of the issue, was emphatic that subsidy had been back in fuel pricing lexicon for several months.

“There is subsidy,” the official told PREMIUM TIMES on Tuesday in a telephone interview. “For many months, products have been landing at costs higher than N145 per litre. So, subsidy has always been in the market place.

“But, there is no provision for subsidy in the budget. How the subsidy is recovered is government’s business, since the NNPC has been the only one that was importing. All that concerns us is that we buy at NNPC at N133.80 per litre and sell at N145 per litre.”

On how the current fuel supply crisis, which has given Nigerians one of the bleakest Christmas celebrations in recent times, the official traced its roots to October 2016, when NNPC products suppliers began to deliberately default on their contract deliveries.

He said during the winter months, which usually coincided with the Christmas period in Nigeria, European fuel suppliers consider producing diesel more profitable, because of their need for heating, than petrol, a situation that creates shortage of supply for petrol.

“Prior to the winter season, contracts for fuel supplies are given at ‘winter premium’, which consists of cost of product plus $6 profit. With that, the suppliers would make all the profits in the summer months, and in the winter, which they consider unprofitable, they will deliberately decide not to supply products, because the premium is very low,” he explained.

He said the refusal of the NNPC suppliers to meet their contracts resulted in a huge shortfall, despite assurances by the state oil company that it was building a healthy stock of products to take care of the usual increased demand by consumers in such festive seasons.

However, the official said the situation worsened in the run up to Christmas, because NNPC, for almost a year, remained the sole importer and supplier of petroleum products in the country.

“If there were other private importers, they would have imported to fill the gap. But, when the shock in supply shortfall came, there was no shock absorber, and everybody was exposed,” he said.

He expressed confidence that the situation was going to improve significantly in the next couple of days, as the NNPC has not only stepped up efforts to stock up products, but has also encouraged other marketers to join in importing fuel.

“The NNPC has now increased its premium from $6 to over $20, making it very attractive for other marketers to agree to jump in and import with NNPC. They have agreed to flood the market with products within 24 hours,” the official said.

The national president, Independent Petroleum Marketers Association of Nigeria, IPMAN, Chinedu Okoronkwo, said the differential in prices between landing cost and pump price “cannot be subsidy, but price modulation.”

“Whatever is the price differential between landing cost and retail pump price, government knows how to cushion it. That’s why we have government. Whether it is subsidy or price modulation, does not matter now.

“The important thing is the supply monopoly that has been broken, with government giving some marketers that have the facilities access to finance to begin to import,” Mr. Okoronkwo told PREMIUM TIMES in a telephone interview on Tuesday.

“Government is on course to solving the problem. The marketers have assured they can deliver within 24 hours. This will cushion the problem in the meantime, while government takes time to handle the long term solutions, of allowing the refineries to work continuously, other refinery operators allowed to come on board,” he added.

He dismissed insinuations that marketers were behind the current fuel crisis, by engaging in hoarding or smuggling, saying all attention should focus on making the new arrangement to work.

The national president, Petroleum and Natural Gas Senior Staff Association of Nigeria, PENGASSAN, Francis Johnson, said all that its members were interested in was for the government to ensure that four refineries were made to function optimally at all times.

“If the country’s refineries are functional at full capacity, they would augment what government gets from imports. Consequently, the huge foreign exchange spent on importation of petroleum products and payment of subsidy would be conserved. The refineries would provide jobs for our members and our economy will continue to grow,” Mr. Johnson told our correspondent in Abuja on Monday.


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  • Prosperous Nigeria

    Can someone please tell me what is going on? All these stories na dogo turenchi! Me I need fuel, petrol.

    • Iskacountryman

      you need fuel?…burn your books…

  • share Idea

    NNPC pays the price difference between landing cost of fuel and official price and the government claims that the cost been absorbed by NNPC is not subsidy. Nigeria e hail thee

  • Hajiya tunsj Soyemi(iya basira

    LORD HAVE MERCY! These APC guys are TERRIBLE!!!!

  • de Gea Messi

    Premium times, why flog a dead horse? Pastor osinbajo told you guys NNPC is not part of the Nigerian government.
    It’s probably run by that government in sambisa forest.

    • Moneyz N Horseyz

      Hahaha

    • Tess

      You hit the nail on the head. That’s the irony of the VP’s statement. I don’t know what to believe or who to believe anymore in this rogue government.

  • persona

    PT, you are simply not doing investigative journalism but working from the answer to the question.
    NNPC answered you but you would rather believe someone else.
    The statement from even the depot manger says it all…at 306/$, fuel lands in Nigeria at 145.
    The bridging cost is what is at play and there are several way to make up for that.
    The fact is as follows, NNPC takes over 400k barrels of crude out for what they call swap. NNPC has crude allocation and that is what they have been using as against just paying cash to buy fuel. It is why they were doing almost 100 percent of the importation.
    Also, they are able to absorb the cost because cost of crude in the last 4 months have risen and so is the value of fuel in exchange…these ensures the price is stable and the issue of subsidy doesn’t arise.
    Rather than postulate and confuse people, why not do a proper research. Use FOI to know how much crude is taken out and the swap details.
    The marketers know they have to buy refined products as against NNPC doing swap…that is how the cost is absorbed and no subsidy is paid. NNPC trades in crude and imports refined products…stop being lazy.
    You have a duty to enlighten your audience, don’t take a stand and without evidence as against hearsay which you do sometimes.

  • persona

    Mr. Adewole said the exchange rate of the dollar to the Naira is N306 for petrol imports and the interest rate Nigerian banks charge is above 25 per cent.
    “Landing cost of PMS in Nigeria is above N145 per litre which means any of our members that imports will have to resort to subsidy claims, a policy already jettisoned by the government.

    Questions:
    1- Does NNPC have over 400k Barrels as crude—yes, they use it for swap as against paying cash
    2- Does NNPC pay interest at 25 percent as loans from commercial banks— No, they sell the crude allocation and import refined products
    These are the attendant bridges that led to NNPC importing nearly 100 percent as against what other marketer do.
    When they say there is no subsidy, it means just that. Its a commercial transaction and it has to be broken down and so, if fuel gets in at 133 according to DAPPMA, then the cost at play are the charges with government agencies and the bridging so that fuel in Lagos and Kano is the same.

    Journalists owe us the duty to inform us than coming to a conclusion rather than doing proper analysis.
    Marketers wont import, NNPC steps in. Fuel is delayed due to winter issue where AGO is preferred to be refined than PMS…these are the details to be put out. Be a part of the solution and not the problem. This is your nation, be patriotic. Don’t defend government when they are wrong but don’t misinform people because you have a bias or simply because you suffered to get fuel.

    • Tess

      Tell us why other countries are not experiencing the short supply of PMS except us at this time if your theory of AGO is preferred to be refined than PMS should be holding. We very well know that the 4th quarter yearly has the highest consumption of this product. An organization, a unit of this government failed to plan for it leading us into a mess. Why have government and its agency lied against marketers / DAPPMAN when they knew they were the ones responsible and not the marketers? They had to admit they were responsible when these depot owners and marketers had to put the records straight. The drop in the ocean marketers made to be scape goats-are they the ones responsible for this massive and disastrous scarcity? NNPC a unit of this government is solely responsible for this scarcity as no one else would import at the cut throat costs and you’ve explained it here yourself. Did the NNPC official explain it to the press the way you claim here?

      • persona

        The disadvantage of hearing/ reading from one source makes it difficult to come to terms with explanations.
        Read the portion given to NNPC spokes person, Baru and the judgement PT passed.
        If they need an answer, you ask the proper questions and stop baiting people thus causing confusion.
        VP and even Minister for state for petroleum explained all that happened and those answers were not scripted because they didn’t invite journalists while the VP was at filling stations on Christmas day.
        The explanation aligns with realities globally. AGO powers more vehicles because of haulage that happens over thanksgiving and the festive seasons.
        NNPC didn’t make proper planning for the shortfall and they have owned it. Where they blame the marketers are as follows:
        They have refused to import because of the margin they get and that is because they have to pay bank loans.
        The marketers also want the price increased to 170 as against present price.
        Hoarding by selling using one pump creates artificial scarcity
        selling above pump price also.
        NNPC is not responsible for the above listed and so, everyone must take their blames.
        Government has to plan better but we as citizens must be patriotic also. The fuel sold at 250 and even 400 is not sold by NNPC but our fellow citizens.
        I believe we all need to play our parts very well for the country to run better.

  • Rumournaire

    It is not possible to stop subsidy and at the same time impose a pump price for PMS. The landed cost of the product depends on (a) the world crude oil price, and (b) the Naira/Dollar exchange rate. Buhari’ government blundered by announcing any pump price at all for PMS. It should have done it the way Yar’adua handled diesel (AGO). Anyone can import diesel and sell at any price people are willing to pay. Since then, we have had no problem with diesel supply and it currently sells for about N200. Buhari’s government should NEVER have indicated any pump price for PMS. In most countries, AGO costs more than PMS, because 1 litre of AGO has more energy content than 1 litre of PMS. So, if the government would stop imposing any price for PMS, the price would eventually find its level – perhaps at about N170, if AGO is selling for N200/litre. Then the product would be available everywhere!

    • Dan maikoko

      As long as we operate an importation regime for fuel and major and minor industries dont have reliable power and are forced to buy fuel, forget it prices will go up, inflation will increase and shortages will persist. Let every industry in Nigeria have enough power and let the railways work. By this means you have eliminated two major consumers of AGO; factories and trucks. Produce all our needs of fuel at home, pump it around the country and by this you can maintain prices for the product and eliminate bridging costs and all other euphemistic and alphabetical terms in the petroleum industry which only means money lost for Nigeria.

      • Rumournaire

        Actually, there is no country in the world where prices of petroleum products stay stagnant, expect where artificial prices are imposed. Take United States: Fuel prices – whether AGO or PMS – fluctuate with the price of crude oil. So we deceive ourselves when we think we can keep prices at the same level regardless of what prices are in the world market. And it has little to do with whether you have stable power or not. The best pricing regime we have in Nigeria is what we currently have with AGO. Because anyone can import and sell at any price, there is absolutely no room for hoarding. We only need to replicate it for PMS.

  • AryLoyds

    This is what you get when you have a herdsman as a leader

    • Ade Omowest

      What did we get when your PhD holder was in power, if not the manimental stealing in name of subsidy? Keep off, if you don’t have anything good to contribute.

      • AryLoyds

        Animal keep taking drugs , so the NNPC contract is not corruption?
        But is a bad example of a warlord who is power drunk and suffering from dementia

  • Otile

    Where is dele awogbeoba, let him step in to defend the corrupt Buhari goverment? This is the most corrupt government in Africa. With Buhari as the Petroleum Minister it is corruption with maximum pretense all the way.

  • Dan maikoko

    There is a definite connection between pump price of fuel and the value of the naira that can no longer be ignored. It is easy to understand why this is so. From the market woman up to the multinational corporations producing in Nigeria all have fuel as a basic input. So if you add a kobo to the price of any type of fuel you are inadvertently adding a kobo in a million ways to every product produced in Nigeria. This will lead to a hike in prices of goods and services across the board. According to market analysts there are two names for inflation; one is the hike in prices of goods and services and the other is the devaluation of a countries currency. Since we dont produce fuel locally, a devalued currency means an increase in the importation cost. A government that will not subsidize is then left with only one option; to raise the price of fuel again, which will generate more inflation and so on. There are two ways to get out of this loop. Maintain the price of fuel low by producing the entire requirement of Nigeria in Nigeria and/or reduce the reliance of industry on fuel by improving power supply and transportation. A true Nigerian will be laughing because he knows that the most popular form of policy among Nigerian ruling elites is pronouncement. This is why fuel price hike is popular you only need to choose a quite Monday morning and announce it. But fixing kainji, building railways and such other things are too difficult for the average Nigerian ruler and I am disappointed that Buhari is among those average rulers.

  • Iskacountryman

    wrong…they did not reverse themselves, but gave out the alternative truth…

  • Arabakpura

    We already know that we are dealing with liars in the form of Lais!

  • Dr Pat Kolawole Awosan

    President Muhammadu BUhari,s led Federal Government of Nigeria, must stop wallowing in deceit and arrive at a long time solution for fuel-scarcity in Nigeria, despite the 2016-sudden increase in fuel-per-litre to N145 Naira.
    President Muhammadu Buhari and his minister of state, for petroleum resources,Dr Ibe Kachikwu and NNPC group managing director,Dr Baru, should jointly reach a forthright long-time solution to fuel crisis by rehabilitate our four national refineries and also commence plan to build more refineries in order to stop the hopeless endless importation of refined fuel from abroad.
    Quite very shocking that Nigeria, four refineries were left rotten in idle-state because, fuel importers,s agents vandalized our four refineries in order to ensure Nigeria, continues to depend on imported refined fuel from abroad.Those backers of fuel-import are authentic enemies of Nigerian-people.Those vandalized four refineries must be fixed come what the cost to rescue Nigeria, from hopelessness.

  • deji 3SC (Up shooting)

    What manner of reporters are theses ones? Definitely not patriotic one.

    • blueeyedkitten

      interesting perspective.

  • Lanre

    Buhari has no understanding of Supply and Demand. I can pardon him since we do not have any assurance he finished secondary school. But what about the Professor of Law who is his deputy? The Ph.D Holder who acts as the Minister of State in the Petroleum Ministry? The Minister of Finance who is supposed to be an accountant; the Minister of National Planning who is a lawyer and a SAN. Nigerians are not ready to be free from the enslavement imposed by an elite. A thieving, corrupt, ruling political elite.

    • ukoette ibekwe

      You are so daft. You can pardon the President, who is also the minister of petroleum but would put you ire on the other people. That’s why we have to suffer these calamities just because of people like you. Your logic is so lousy that I’m surprised you could use the internet.

      • Lanre

        I know standards have fallen in Nigeria and so many of you cannot understand proper English. And if you are not in Nigeria go and learn about the use of figures of speech. Be curious and inquisitive and seek knowledge rather than wallowing in illiteracy believing you are somebody.

  • Kenny

    Government of deceit and falsehood! Is SUBSIDY still a scam? Why are the refineries not working? Why then was Buhari bragging in 2015? He’s failed woefully and should proceed on retirement to enable him commune with his cattles @daura

  • Abdu

    So truly, there is fuel subsidy in spite of the denial by FGN! In my arithmetic, going by the analysis in the above piece, 171 minus 133 equals 38! So the FGN makes up for the shortfall of 38 naira per every liter of imported fuel! The money utilized is unappreciated! That makes it criminal! But maybe the FGN spin doctors have an explanation. What a country!

    • Abdu

      ….money utilized is unappropriated.

  • The Optimist

    All these stories about landing cost are just covert or subtle campaigns for fuel price hike. It’s to say, ‘See the reality. The pump price just have to go up”. They can jack it up to whatever price their greed agrees to; We will survive it. Let there be no more subsidy or any so called bearing of the extra cost. We need to enter 2018 with a SOLID step for progress.

  • babsgabrily2121@gmail,com babs

    One thing is common to all that are defending these evil genius rulers on this platform. They don’t use their names but rather choose animals names, prefixes and suffixes. Who does something good and prefer to hide his or her identity. No one, meaning that they seem to have conscience but chose to act as axes of evil
    My take.! Let us turn to the true God for positively direction. Thanks

  • blueeyedkitten

    And he goes the mysterious fella whom the Nigerian media always rope their stories around – MR ANONYMOUS.
    Mr anonymous’s testimony is always more credible than a verifiable human who speaks for the government. Don’t they ever get bored with this line of reporting?

  • Bode_139

    Pump price, landing cost , subsidy. All these should be forbidden words in Nigerians dictionary as far as common sense is concerned. We always cocooned ourselves into hopelessness by adopting denigrating languages that then becomes common language and through which the productive psychic becomes redundant and hence, hopeless. In many countries people talks about pump price when evaluating their inflationary rate. It is not people’s common words, it is a word used for analysis. In Nigeria, we’ll do everything to turn it to a common word because some people have invested interest in ensuring that it gets to and create fear and anticipations for the populace. Landing cost is an economic term use for price and figure analysis, we again turn it to common language for anticipatory purposes. And, finally subsidy. The worst form of gift you can give to your people is to subsidise their living standards. It did not work in Soviet Union with communism it will never work because it is a means of denigration and undermining. What the govt should be concentrating on is raising the living standard of Nigerians. Subsidy is a negative rhetoric, it should be banned from our dictionaries. Instead, govt should subsidise education and research so that we can have competent people who can deal effectively with our nemesis of which incessant squabbling over petrol product that we have in abundance is at the top of the list. As for NNPC, why is petroleum products still landing anyway?. It show that, that aspect of our life as a nation has been in incapable hands for decades. People who refused to plan or atleast assert their qualities by putting the nation and it’s people first does not deserve our thrust. Not to forget those who deliberately frustrates the efforts of the willing. NNPC is a business entity, it should do all that is necessary to satisfy his customers even if it meant taking out of his profits to sustain it’s businesses. Agreeably, we are customers and we still want to buy at justifiable price. May, be it’s time for the NNPC management to see the importance of the refineries working at their maximum capacity and stop messing us about. I will like to address the conscience of every Nigerian by emphasising on the values of coherence, aptitude and vision in choosing whoever leads. You cannot give what you don’t have. Our bane in this country is good education, we have a lot of educated people around, what what we often lack is those who has educational values that make people sane human beings. You do not have to have a PhD to be considered educated, you need to have good education to be viable to lead. Simple analogy helps towards great ideas. Buhari is president today because of most of those human qualities. Using your human resources effectively without bias is the only gift you can give to your people. With the NNPC still lingering, we need a driving force that is fearless and determined to make a change. It can only come through good and quality education dispensed with a touch of humanity and selflessness. God bless Nigeria. Bearing in mind that Nigeria is already blessed beyond its dreams but only needs to get it right.

  • bros73

    It is only fools that believe a word from APC govt