‘Subsidy a longtime veneer for corruption’: Former Economist of National Bank of Nigeria
By Ebere Inyama
Atiku Abubakar, a former vice president of Nigeria, has accused President Bola Tinibu of secretly using price controls and a price-support fund to make petrol more affordable, while refusing to acknowledge this, TruthNigeria has learned.
In a statement via X June 5, 2024, Mr. Abubakar wrote.
“President Bola Tinubu, at his inauguration on May 29, 2023, announced the abolishment of the subsidy on PMS, popularly known as fuel.
“Like millions of Nigerians, I was shocked to learn through media reports that the “government is still supporting downstream [retail] consumption.”
“Paying subsidies and lying about it is nothing to brag about. Nigerians deserve better than this deception”, he said.
Atiku’s comment came hours after a leaked draft copy report of the Accelerated Stabilization and Advancement Plan (ASAP) presented to President Tinubu by the finance minister, Wale Edun, stated that Nigeria will be spending up to N5.4 trillion ($3,595,517,586.00 ) on oil subsidies in 2024.
Economist Faults Subsidy Scam
In an exclusive interview with TruthNigeria, a former economist for the Central Bank of Nigeria (CBN), Mr. Jonathan Akuns, said there was no such thing as “subsidy” in the Nigerian context.
“There was no such thing as subsidy. Subsidy was just a name craftily used to create a business model that was not legitimate in the scheme of things. So, the use of the word ‘subsidy’ provided a cover for them to push that business model to advance their own fortunes.
“There is no administration in Nigeria that has not attempted to say they were removing subsidy. So it has just become a name that created a longtime veneer for corruption”, he said.
NNPC Introduced Fuel Subsidy Due To Its Inability To Refine Crude Oil
The nation’s fuel subsidy was introduced by the Nigerian National Petroleum Company (NNPC) in the 1970s and became institutionalized in 1977 to implement the Price Control Act, which made it illegal for some products (including petrol) to be sold above the regulated price. In other words, the government paid the retail distributors a subsidy to fix the price at a level low-income citizens could afford to pay.
The Nigerian National Petroleum Company (NNPC) began to pay subsidies to companies such as A – Z Petroleum Products Limited, A & E Petrol Nigeria Limited, Capital Oil & Gas Industries Ltd, among others to enable them to move products across Nigeria and sell them at a uniform price.
Petrol buyers have hoped for months that the completion of the mammoth oil refinery in Lagos built by Nigerian tycoon Aliko Dangotewould release cheaper petrol into the general market this year, but they will have to wait a few more weeks.
Dangote Refinery, touted as a game-changer for the Nigeria’s gas sector, has delayed the launch of petrol production from June to mid-July.
However, Nigerians won’t see it at gas stations immediately. The refinery plans a brief holding period “to make sure it settles,” according to Dangote. This additional step ensures the quality and stability of the fuel before it hits the pumps.
In the meantime, consumers have to hope that some form of the fuel subsidy is in play.
How the Petrol Subsidy Scam Works
To illustrate how the subsidy enriches scammers, a marketer could move the product from Apapa, located in Lagos state in the southwestern part of Nigeria to Maiduguri, located in the northeastern part of Nigeria, and sell it at a certain price, then claim reimbursement for transport costs from the government. However, unscrupulous marketers could discharge the products at Sagamu, in the outskirts of Lagos state, forge delivery notes, and pocket a handy profit. It was a government-orchestrated scam that made retail distributors into billionaires.
Another distribution scam involved moving the products to nearby countries such as Benin, Cameroon, or Niger and still collect subsidies after lying that they sold the product in northern Nigeria.
What the NNPC does every year is sell Nigeria’s share of crude oil to oil traders such as Sahara Energy Resources Limited, Oando, Duke Oil (an NNPC subsidiary), Petrogas, AA Rano, Oceanbed Trading Limited among others in exchange for petroleum products.
However, beginning from October, 2023, the Nigerian National Petroleum Company Limited (NNPC) began buying petrol via cash tenders, rather than oil swaps (exchange of crude oil for petroleum products) for the first time in nearly a decade.
The shift is reported to be the result of efforts by President Bola Tinubu to eliminate costly and corruptly managed fuel subsidies as part of broader reforms aimed at shoring up national revenues and cutting losses.
As a result of scams and illegal distributions, the vast revenues from publicly owned oil assets produced nothing in some months for Nigeria’s treasury in 2022. In November, 2022, the NNPC did not remit monies into the government coffers, even amid surging oil prices, according to a monthly report presented to the Federation Account Allocation Committee (FAAC) meeting on Wednesday, January 17, 2023. The reason was that the NNPC Limited deducted N152.85 billion as a shortfall for the importation of petrol (subsidy) in November 2022 and as a result, it had zero contribution to the federation revenue account in that month.
Price Of Petrol Increased By 210.31 Percent After Subsidy Removal
Regardless of government losses through distribution schemes, the subsidy appeared to have kept prices lower, because within 24 hours of President Tinibu’s removal of the subsidy, the petrol stations in Nigeria increased the pump price of petrol by more than 210 percent. In May 2023, petrol was sold for N238.11 ($0.16) per litre, but with the sudden removal of petrol subsidy by the government, the price of the product soared to N545.83 ($0.36) in June 2023.
By July, 2023, petrol prices across fuel stations operated by the state-owned Nigerian National Petroleum Co. Ltd. (NNPC) reached N617 ($0.41) per litre.
The chief executive of the Major Oil Marketers Association of Nigeria (MOMAN), Clement Isong, said the increase was due to rising global oil prices and the naira’s exchange rate to the dollar, adding that “there has to be cost recovery” for retailers.
Nigerian Government Insists That Subsidy is Gone Despite Reports to the Contrary
Despite the report on October 6th, 2023, by Festus Osifo, the spokesman for the drilling industry, that the subsidy has been restored, and despite the report on January 12, 2024 by the International Monetary Fund (IMF) that President Tinubu has partially restored the subsidy, Bayo Onanuga, a Tinubu Administration spokesman, said the issue is still under review.
Ebere Inyama is an investigative journalist and a conflict reporter for TruthNigeria
