By Lawrence Olaoye
The federal government has admitted that part of the funds expected to accrue to the Federation Accounts from the sale of crude are being used to pay for the differential between the landing cost of petrol and the pump price.
It would be recalled that at the height of fuel scarcity in December last year, independent marketers claimed that they withdrew from importation of petrol because they could no longer recoup their cost as the landing cost of fuel was N171 per liter while the pump price was fixed at N145 per liter.
Based on the reality, the Nigerian National Petroleum Corporation (NNPC) has now become the sole importer of petrol and bears the differential in price even though the government has maintained that it was not paying any subsidy.
Governors, under the aegis of Nigeria Governors Forum (NGF) had last week alleged that the NNPC was short-changing Nigerians by not remitting all funds to the Federation Accounts.
The Minister of Finance, Kemi Adeosun yesterday explained how the NNPC manages the gap between the landing cost of fuel and the regulated pump price while responding to questions from newsmen after the weekly Federal Executive Council (FEC) meeting chaired by President Muhammadu Buhari.
She said “On the question of subsidy, the price of oil for Nigeria today is a double edge sword. So, every dollar that goes up we get more revenue but also because we are importing refined petroleum increases the landing cost of fuel.
“So for every time we get excited that the oil price is going up, there is also a knock on effect on the price of imported PMS and that is a function of us not having refining capacity. It is one of the unfortunate impact of that.
“Now, when there is talk of payment of subsidy, technically today, there is no subsidy but there is under-recovery. Why that is, is because NNPC are currently doing all the importing. They are importing at a higher price than they are selling which means they are losing money; which means effectively that loss is being borne by everybody and effectively it reflected in the federation account.
So, there is no subsidy payment in the way the old subsidy scheme use to work where they were paying the oil marketers but there is an under recovery; a loss on the importation of PMS being borne by NNPC and therefore indirectly being borne by everyone one of us.”
Asked why the Excess Crude Accounts (ECA) has been stagnant at about $2.3 billion for over a year in spite of increase in price of crude at the international market, Adeosun explained that “The budget is a function of price and quantity. Excess crude kicked in when both price and quantity are exceeded. Now if you look at the oil price for last year and most of this year and quantity, the quantity has frequently been below the target and so you don’t necessarily get the straight credit into exceed crude as a result of oil price.
Having said that, with the oil price consistently higher now we should begin to start seeing some accruals into our Excess Crude going forward because we are starting to see some recovery in quantity. But remember that the quantity estimate is 2.5 million barrels per day and it must be consistent every day and the price above the benchmark before you get automatic credit into Excess Crude.”
The minister also disclosed that she presented two memos on behalf of Nigeria Customs Service. “One was to acquire additional 81 units of two bedroom residences in Idu, Gwari district, Life Camp for use as barracks for Customs officers within the Abuja area. The total amount is N1.2 billion. We are purchasing them from Brains and Hamas City.
The second approval was for the purchase of 50 operational vehicles that are going to be deployed for anti-smuggling or anti-rice smuggling task force that is being put together, which customs will be leading.”
She continued “As you know, effort to become major rice producers has resulted in the revival of local rice growing. What we have found is 90 per cent reduction in the official import of rice but smuggling has increased and of course, our borders are very, very porous.
“Now, we believe that to protect our farmers, to protect the investment that people have gone back to the farm for, government must really act to stem the tide of illegal rice importation and rice smuggling.
So, there is a multi-task force agency that has been working since last July which includes customs, NAFDAC, the Consumer Protection Council, the Ministry of Finance, the Trade Mark Practices Bureau, gathering information on how this rice is coming in. What are the key entry points? And mapping out how we are going to have effective strategy to stop it.
We felt that it is important that we don’t want customs going to seize rice in the markets. Customs should actually stop rice coming in at borders points and Customs indicated that they need additional vehicles, additional resources as well as more information driven measures that will be taken. But what was approved today was the purchase of 50 vehicles as part of these efforts. The contractor is Elizade and the value is N1.12 billion