17 March 2010

Nigeria: FG Uses Excess Crude Revenue to Pay Oil Subsidy

The Federal Government has started dipping its hands into the revenue accrued into the excess crude account to offset its pilling debt of oil subsidy owed marketers, Daily Trust investigation has revealed.

Earlier, it was thought that the Nigerian National Petroleum Corporation (NNPC) was paying the subsidy claims of marketers on government's behalf.

But yesterday it emerged that the excess crude account, which the Revenue Mobilisation Allocation and Fiscal Commission said it is an illegal account, is being used to offset the unpaid subsidy to oil importers.

Government had in the last three years spent over a trillion Naira to settle claims on petroleum subsidy.

Sources in the Ministry of Finance and the Petroleum Products Pricing Regulatory Agency (PPPRA) informed Daily Trust that the fact is that government has not budgeted for subsidy and the states government have protested against deduction from the federation account, therefore the government was left with no option then to draw from Excess Crude Proceeds to settle the claims.

The excess crude proceed is the money accrued from the difference between the budget benchmark and the real price of crude oil in the international market. As at last week the excess crude proceeds fund crashed to $3.2 billion after several deductions by the three tiers of government in recent times.

President Umaru Musa Yar'adua had disbursed over US$13billion from $20 billion Excess Crude Proceeds Account in the last two years. Part of the account has been used to finance the joint projects of the three tiers of government such as power, railway and gas which affected the three tiers of government. "As long as the downstream oil sector is not deregulated, someone somewhere must settle the remaining balance to marketers or else the country will be out of products", a source told Daily Trust.

The 36 states of the federation had earlier rejected the funding of the petroleum subsidy from the Federation Account, calling it illegal. But the delay in the take up of the regulation pushed the federal government to use the excess crude proceeds for the payment of the subsidy, the sources added.

NNPC recently sent N1.15 trillion invoice to the ministry of finance for various expenditures incurred on behalf of the Federal Government, including cost of crude and products lost owing to pipeline vandalism and losses incurred from supplying petroleum products at regulated prices.

The governors recently at the National Economic Council (NEC) meeting in Abuja, backed the Federal government's proposal to embark on the deregulation of the downstream sector of the economy. They also appealed to the organised labour to cooperate with Government to ensure early completion of the deregulation exercise.

It was not clear at the time of filling this report when the deduction began.

Delta State governor, Emmanuel Uduaghan, said: "It will definitely affect the revenue coming to the states, because the money that is to be paid is supposed to be part of the money that is to be shared by the states, so the states will be short-changed".

Efforts to speak to the spokesman to the Minister of Petroleum Rilwan Lukman and NNPC's spokesman failed.

Copyright © 2010 Daily Trust. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 2,000 reports a day from more than 130 news organizations and over 200 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.