Subsidy on petrol rises 386% in a month to N1.4 trillion — Kachikwu

Ibe Kachikwu
Ibe Kachikwu [Photo Credit: THISDAYLIVE]

The federal government says its annual expenditure on fuel subsidy has risen to over N1.4 trillion.

The Minister of State for Petroleum Resources, Ibe Kachikwu, who gave the new figure on Thursday in Abuja described the expenditure as “under-recovery” for supply of petroleum products across the country.

The latest figure means about N3.76 billion is spent daily on subsidising petrol.

That is a staggering 386 per cent higher than the earlier figure of N774 million daily given on March 5, 2018 by the Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Maikanti Baru, for the importation and distribution of petroleum products in the country.

Mr. Kachikwu was speaking at a Liquefied Petroleum Gas workshop organised by the Federal Ministry of Petroleum Resources in Abuja.

He said the rising subsidy figure was as a result of the NNPC being the only marketer bearing the financial burden of importing and distributing petroleum products as the country’s sole supplier of last resort.

The minister also attributed the growing under-recovery cost to the large number of illegal petrol stations springing up in coastal communities bordering Nigeria and other neighbouring countries.

Data by the NNPC showed that about 16 of the 36 States of the federation have about 61 local government areas with border communities.

The communities account for about 2,201 registered filling stations operating in their domains.

Mr Kachikwu said the challenge of growing under-recovery cost was “being addressed at the highest levels of government.”

On the proliferation of filling stations in border communities, the NNPC GMD said this triggered unprecedented upsurge in cross-border smuggling of petroleum products to neighbouring countries.

He said the development made it increasingly difficult for regulatory authorities to enforce compliance and sanitise the fuel supply and distribution system in the country.

According to the minister, a detailed study by the NNPC had established a strong link between the frontier filling stations and the illegal activities of fuel smuggling syndicates.

The activities of the smugglers, Mr Baru explained, accounted for the unusual high volume of fuel pumped to filling stations in the country in recent times by the NNPC.

From less than 35 million litres per day estimated as the national fuel consumption volume, the GMD said the volume has risen to more than 60 million litres per day in recent times.

Recent reports said the volume may soon rise to as high as 80 million litres per day if adequate steps were not taken to curb the activities of smugglers.

The NNPC said further investigations revealed that underground storage tanks at the filling stations had a combined capacity of about 145 million litres of petrol.

Besides. Mr Baru said eight states with coastal border communities spread across 24 local government areas accounted for about 866 registered filling stations, with combined fuel storage capacity of over 73.4 million litres.

Mr Baru said due to the petrol prices differential between Nigeria and neighbouring countries in the Economic Community of West African States (ECOWAS), smugglers use the frontier filling stations to siphon petroleum products across the borders.

He identified the borders between Nigeria and those of Niger Republic, Benin Republic, Cameroon, Chad and Togo and Ghana as the most thriving.

“The NNPC is concerned that continued cross-border smuggling of petrol will deny Nigerians the benefit of the Federal Government’s benevolence of keeping a fixed retail price of N145 per litre, despite the increase in PMS open market price above N171 per litre,” Mr Baru said.

Editor’s Note: This post has been updated to show that the correct percentage rise in petrol subsidy cost, based on Mr. Kachikwu’s position, is 386% not 81% earlier reported.

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