Explainer: Who collected over N11 trillion Buhari spent on petrol subsidy?

The Nigerian Labour Congress and the Trade Union Congress, are calling on members to embark on a nationwide strike on Wednesday to, among other things, force the government to rescind the decision to remove fuel subsidies and probe those who benefited from them.

First, these proposals are not mutually exclusive. The government can still remove the subsidy and probe the so-called ‘beneficiaries’. If indeed keeping subsidies enables corruption, is there any sense in keeping them until the beneficiaries are probed?

Who is the subsidy paid to?

Throughout Buhari’s presidency, the Nigerian National Petroleum Corporation (NNPC) was the sole supplier of petroleum products to the Nigerian market.

And subsidy is to blame. The landing cost of imported petrol when it arrives at Nigerian ports is often lower than the cost sold at the pump. So, marketers who had valid licenses stayed away from importing petrol.

So the NNPC is saddled with that task. It mostly does not pay in physical cash for the bulk of petrol imported into Nigeria. As the national oil company, it is in charge of the Nigerian share of crude oil produced in various arrangements with oil producers, both foreign and domestic.

The share of oil that belongs to Nigeria is around 445,000 barrels per day, assuming most of the crude is not stolen, pipelines are not sabotaged, and the NNPC pays its own full share of the cost of production.

What the NNPC does every year is select oil traders, both local and international, and sell to them Nigeria’s share of crude oil in exchange for petroleum products. The details on how they arrived at the swap figures are contained in the Direct Sale Direct Purchase (DSDP) contracts.

Under this arrangement, the refined products, including PMS, are exchanged for crude oil. NNPC calculates the value of the crude oil and associated costs and subtracts this from the cost if it were purchased to determine subsidy.

However, since 2021, these costs have risen so much as the smuggling of petrol outside Nigeria’s borders worsened and the country’s production declined to levels produced two decades ago, forcing the NNPC to start using its cash to augment subsidy payments.

Some analysts say the NNPC has not been very transparent about the specific amounts spent and how they were arrived at. The corporation used to publish its monthly financial and operations report but has not been consistent.

Besides the subsidy spent on bringing the products into Nigeria, a further subsidy is paid to local marketers to move the products across Nigeria and sell them at a uniform price. This is called bridging claims.

A marketer is supposed to move the product from Apapa to Maiduguri and sell it at N195, then claim transport costs from the government. Oftentimes, some unscrupulous marketers discharge the products at Sagamu, forge delivery notes, and return for more products at Apapa.

Read also: Petrol subsidy: NLC to embark on nationwide strike Wednesday

These subsidies created a system of state-sponsored corruption and a racket whereby some marketers compromise with some customs officials and move the products to Benin, Cameroun, or Niger and still collect subsidies for selling in the north. Meanwhile, the products in these areas are never the same price as those in Lagos or Abuja; they are always higher.

This is the status quo the labour unions want to maintain. Emotive arguments in favour of subsidies fail to factor in market conditions and the fiscal reality of the Nigerian state.

It is important to note that among the ranks of these labour unions are refinery workers who have failed to fix the refineries, government workers who pay bridging claims for fake product deliveries, and others involved in the value chain of oil and gas marketing in Nigeria.

It begs the question: are Nigerians being manipulated again to protest against their own interests, as they were in 2012?

In the name of the poor, who can’t even afford cars, the Nigerian government has spent more to keep subsidies on petrol for rich people who own car fleets than it spends on hospitals, roads, or paying salaries to the police and soldiers. Is this fiscal responsibility?

Who will you probe?

Joe Ajaero, the new head of the Nigerian Labour Congress, is spoiling for a fight. Since Adams Oshiomole rode on the waves of labour movement to national reckoning, other labour union leaders have seen how rewarding self-aggrandizement can be.

“The issue of subsidy has not been probed all these years for anybody to close that chapter, it’s like covering fraud,” said Ajaero.

The NLC has called on its NEC members to interrogate the processes and know who are collecting the subsidies before there can be talks about removing the subsidies.

These labour unions may be confusing the situation with the subsidy fraud era of 2011. Then marketers were importing petrol and issuing invoices to the government for repayment. The trouble was, some were submitting invoices for petrol they didn’t import.

This is not the same situation. The NNPC, as the sole importer, renders account to the government and is under the oversight of the National Assembly Committee on Finance. It is also audited by the Auditor-General; perhaps these are where to look to find answers on who is benefiting.

Nigeria’s subsidy programme remains an albatross because often the most vocal voices against the practice are either willfully ignorant about the waste and corruption it breeds or are beneficiaries of the practice and sustains the national heist using compromised labour unions that mobilise poor, ignorant workers to fight against their own interests. A selfless labour union will lead the fight for subsidy removal, fixing refineries, and increasing the scandalous minimum wage.

Femi Falana, a human rights lawyer, has called on the government to review the decision for a month to come up with options. However, options like gas-powered vehicles, electric cars, and rail are not developed in a month. Besides, subsidy payments would keep discouraging investments in alternatives, as has been the case for the past four decades.

“I think if we keep placing conditions before removing subsidy, it would never be removed,” says Ayodele Oni, energy lawyer and partner at Bloomfield law firm.

Oni said keeping fuel subsidy is fiscal irresponsibility. “Beneficiaries of subsidy payments were probed at some point during Jonathan’s time. The question is, of what effect?”

“If it can be done efficiently without wasting our scarce resources, it is not entirely a bad idea. I would personally, though, if I were president, remove subsidy and move on,” he said.

A country that does not subsidise food but gives farmers loans cannot sustain subsidies on petrol. Since 2021, the Nigerian government has been borrowing to finance subsidy payments. The debt hanging around the nation like a noose is over N70 trillion, and asking the new government to continue this system is deliberately trying to sabotage it.

This fight that Ajaero and his labour movement have taken on is one that will result in a pyrrhic victory, even if it succeeds. NNPC will simply revert to its old ways, smuggling continues, loans keep ballooning, and government officials continue with zero motivation to fix a broken nation.