Nigeria: Senators Clash Over Probe of $3.5bn 'Subsidy Fund'

NNPC towers.
17 October 2018

Senators clashed on the floor of the Senate yesterday over the probe of an alleged $3.5 billion subsidy fund.

Sen Biodun Olujimi (PDP, Ekiti) had in a motion said that the amount, dubbed as 'under-recovery,' is allegedly being managed by two individuals in the Nigeria National Petroleum Corporation (NNPC).

She prayed that the committee on petroleum (downstream) should be mandated to invite the NNPC to explain the circumstances surrounding the management of the fund and why it was not brought for appropriation.

But Senate President Bukola Saraki suggested and ruled that, in view of the enormity of the fund, an ad hoc panel headed by Senate Leader Ahmad Lawan (APC, Yobe) be constituted to probe the matter and report back next week.

However, trouble started when Sen Mohammed Ali Ndume (APC, Borno) suggested that the petroleum committee be excused from the assignment since it oversees the NNPC but could not ask questions about the fund.

"Let's be taking matters raised on this floor seriously. I think the committee has responsibility of oversight. I'm suggesting that [Senator Kabiru] Marafa and the committee members should be out of it.

"By the time you have such amount stashed somewhere and nobody said anything about it, it calls for a lot of question. We should constitute an ad hoc committee headed by the Leader instead," Ndume said.‎

But Marafa (APC, Zamfara), who chairs the petroleum committee (downstream), raised a point of order under Order 53 (7&8), which says it shall be out of order to use offensive and insulting language on a colleague.

The Zamfara senator made reference to the fact that people were looking for campaign funds, hence their action.

"I have no problem even if the committee is dissolved today. But I have serious problem when Sen Ndume said the committee has ulterior motives.

"For somebody to come and say that two people are managing the subsidy funds, it's wrong. More disturbing is saying the committee has compromised," Marafa said.

But Saraki interrupted Marafa, saying he was committing the same offence that he raised objection to, asking Marafa to withdraw a particular statement he made to the effect that "people are looking for campaign money."

Both Marafa and Ndume later withdrew their comments, with the latter saying he never said his colleague compromised. It took Saraki serious efforts to control the two senators both of whom created a short chaos on the floor.

At this point, Sen Dino Melaye raised another point of order, accusing Marafa of disrespecting the Senate rules, saying "a situation where a matter was decided and a senator who understands the rules very well will hold the Senate to ransom, and even when the gavel goes down, he insists, that's wrong. We are not children here."

After this drama, Lawan stood up to decline the chairmanship of the ad hoc panel in view of the issues it generated on the floor. But Saraki overruled him, saying the assignment was too important.

Fuel subsidy: the figures then and now

Between 2006 and 2016, Nigeria spent N9trillion on fuel subsidy paid to private oil marketers and the NNPC, according data obtained from the Petroleum Products Pricing and Regulatory Agency (PPPRA).

The corruption that trailed the subsidy regime prompted the Federal Government under Muhammadu Buhari to remove subsidy on petrol in May 2016 pegging the pump price at N145 per litre.

However, due to shortage of foreign exchange and increase in crude prices, private fuel marketers, who imported most of the petrol consumed in the country, stopped importation leaving NNPC to import petrol since 2017 at a huge cost to the government treasury.

NNPC now classifies the losses as under-recovery instead of outright subsidy.

On March 5, 2018 the corporation disclosed through its GMD that it was incurring N774m daily as under-recovery on petrol.

The corporation's latest operations report for May 2018 showed that in the last 12 months it has spent N391bn as under recoveries on PMS.

On April 6, 2018 the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu said Nigeria incurs over N1.4trn yearly as under-recovery or losses on the importation and sale of petrol by the NNPC, although the minister has denied ever saying so.

Daily Trust reports that there has been controversy over whether to classify the under-recovery on PMS as outright subsidy or just business losses.

NNPC has severally said that the N774m under-recoveries in the importation and sale of PMS was a burden categorized as business losses which the Act establishing NNPC recognizes.

The losses, from the PMS imports, NNPC said, could not be classified as subsidy since it was not appropriated for by the National Assembly.

The immediate past Minister of Finance, Mrs. Kemi Adeosun, while answering questions from journalists in Abuja explained that there was no subsidy but under-recovery because the NNPC was currently doing all the importation.

"There is no subsidy payment in the way the old subsidy scheme used to work where they were paying the oil marketers, but there is an under recovery, a loss on the importation of the PMS being borne by the NNPC and therefore indirectly being borne by everyone of us," she said.

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