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FG spends N7.9trn importing fuel in four years


To keep the bulk of middle-class Nigerians, mainly residents in Lagos and Abuja, happy the Federal Government sank N7.9 trillion importing petrol to augment supply from the country’s rickety refineries, data from the National Bureau of Statistics (NBS) show.
This is more than Nigeria’s entire 2017 budget of N7.2 trillion and 5 percent of the country’s current gross domestic product.

Petrol subsidy cost rose by nearly 50 percent from N1.97 trillion in 2017 to N2.95 trillion last year; the highest spend since NNPC’s management of fuel subsidy came under scrutiny in 2006. Further analysis indicates petrol imports accounted for 22.4 percent of Nigeria’s total imports in 2018, up from 20.6 percent in 2017, 18.4 percent in 2016 and 17 percent in 2015.

Petrol imports have risen from an average of 35 million litres per day in 2015 to around 86.4 million litres daily in February 2019, according to data obtained from the Pipelines and Product Marketing Company, a subsidiary of the NNPC.

Data from the PPMC and the DPR showed that petrol import averaged 55.1 million litres per day (lpd) in the first nine months of last year, compared with 48.5 million in the same period in 2017. Petrol imports averaged 49.2 million lpd and 49.8 million lpd in 2015 and 2016, respectively.

The volume of petrol NNPC claims it imports into Nigeria has followed an upward trend undeterred by the country’s first recession in 25 years, a bruising 40 percent duty on vehicles which crashed imports by nearly 90 percent, weak purchasing power of Nigerians, rising unemployment and the country having the largest number of the world’s poor.

Analysts say this raises major questions about both sincerity and competence of the NNPC. “There are two big questions that need to be answered,” analysts at SBM Intelligence, a Lagos-based risk consultancy led by Cheta Nwanze, said in a note to BusinessDay.

“First, what is driving the significant variations in the daily consumption in different reporting months, even after accounting for seasonal variations where demand is likely to be elevated? Second, how much exactly does the NNPC spend on subsidising petrol?
“Nigerians deserve to know the answers, considering the facts that fuel subsidy has become a hot button issue and the NNPC is not noted for accountability and transparency,” the organisation said.

But answers from both the Federal Government and the NNPC have been contradictory when they are not totally illogical. At the height of fuel crises in December 2017, Yemi Osinbajo, Nigeria’s vice president told reporters in Lagos that the NNPC was bearing the cost of subsidy as part of its operational cost. Yet, the Federal government budgeted N305bn for subsidy in its 2019 budget.

Rising petrol subsidy also contradicts claims of improved power supply by Babatunde Fashola, minister of Power, Works and Housing as next to transportation, the bulk fuel supply is used to augment poor power supply.

The NNPC on its part blames rising oil prices in the international market and accuses smugglers of being responsible for moving large volumes of the commodity outside Nigeria’s borders to sell in neighbouring countries. BusinessDay investigation along some of Nigeria’s porous borders last year found that the volumes attributed to smuggling are largely exaggerated.

Maikanti Baru in March last year said 25 million litres of petrol was smuggled out of the country daily. Using the NNPC’s monthly report as basis for analysis, BusinessDay found that to move this volume of petrol across the border would entail a large-scale operation involving over 750 trucks with 33,000-litre capacity.

Meanwhile, petrol-trucking operation in Nigeria is undertaken by 1,017 trucks daily.

“I find no justification whatsoever for the increase in NNPC’S PMS claims,” said Jean Balouga, economics professor at the University of Lagos, who was asked to respond to BusinessDay’s analysis of NNPC under recovery data. Balouga said the claims had been ‘grossly exaggerated.’

The Federal government has refused all counsel to privatise the ailing refineries even as losses mount. Nigeria’s refineries posted a cumulative loss of N114.3 billion in the first 11 months of 2018. The subpar performance of the refineries have prompted intervention such as sourcing international financiers to revamp them, which have not dent the problem.

“The refineries add nothing to the Nigerian people and the Nigerian people should not continue to carry the costs of the loss-making assets. They should either be sold to those that can run them profitably or as scrap. Not another naira should go into revamping or maintaining them any longer,” analysts at SBM Intelligence, said.

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