10 February 2014

Nigeria: NNPC/CBN Face-Off - Controversy Trails Yar'Adua's Directives On Kerosene

Controversy is trailing the late President Umaru Yar' Adua's directive, in June 2009, to the Nigerian National Petroleum Corporation (NNPC) for the elimination of subsidy payments on the consumption of kerosene. While governor of the Central Bank of Nigeria (CBN) Sanusi Lamiso Sanusi told the Senate Committee on Finance, last Wednesday, that the NNPC has no basis to claim payment of subsidy on kerosene, given that Yar'Adua directive. NNPC says it did not receive the directive.

However, NNPC sent out, on Friday, memos signed by the then principal secretary to President Yar'Adua, David Edevbie, that showed the paper trail of Yar'Adua's directive on the elimination of kerosene subsidy in 2009.

The first memo dated June 10, 2009, a day after Yar'Adua held a meeting with group managing director of NNPC in attendance, and had given a verbal directive to eliminate kerosene subsidy and increase the loading capacities of the various jetties, was entitled "Endorsement of Action Plan on the Deregulation of the Downstream Petroleum Sub-Sector" and forwarded to President Yar'Adua for approval of the action plan earlier agreed. According to the memo, the then vice president and now president, Goodluck Jonathan, was part of the meeting that agreed on that action plan.

A week later, on June 17, 2009, Edevbie wrote a second memo to the then minister of petroleum resources, Rilwanu Lukman, and included a copy of the president's directive on the elimination of subsidy and repair of loading arms of the Apapa jetty. Other relevant agencies to the issue were also copied.

Also, in another memo dated October 17, 2009, Edevbie wrote to the then national security adviser, Sarki Muhtar, that NNPC would no longer be entitled to claim kerosene subsidy from the Petroleum Support Fund (PSF) as from June 15, 2009.

However, NNPC said that though it was part of the meeting with Yar' Adua on the removal of kerosene subsidy, the directive was not communicated to it before the death of Yar' Adua. It also countered that if the directive was concretised, President Jonathan would not have continued with the populist policy of subsiding kerosene. NNPC claims to import kerosene for N150 per litre and sell at N40 per litre.

The NNPC group executive director, production and exploration, Dr Abiye Membere, in a news conference at the weekend, said that the subsidy removal was not formalised before Yar' Adua fell sick and later died. He said that NNPC was directed to step down the implementation of the directive because of the hardship it would cause to the poor who mostly consume kerosene "and that they would go back to the president to reverse it. It was at this point that the president fell ill and never made it".

He added that, between 2009 and 2011, under then minister of finance Olusegun Aganga, subsidy claims were paid to NNPC; "so this payment has removed any doubt about the fact that the NNPC was not authorized to carry on with subsidy on kerosene".

However, the contents of the memos signed by Edevbie showed that the subsidy payments by government on kerosene did not reach the intended beneficiaries as kerosene is rarely sold for N50 per litre anywhere in Nigeria.

Also, analysts wonder why NNPC would spend subsidy payments without appropriation by the National Assembly, as the budget does not contain any provision for subsidy claims.

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