FG Suspends Payment of Fuel Subsidy to Marketers

 Minister of  Petroleum,  Diezeani Allison Madueke

By Kunle Aderinokun and Ejiofor Alike

To avoid further crisis with the National Assembly over another "extra-budgetary expenditure", the Federal Government has suspended payment of arrears of fuel subsidy for 2011, which also covers the first quarter of 2012.

This year's N888 billion provision for subsidy also covers arrears carried over from last year, but the entire budget is virtually exhausted five months into 2012.
The shortfall is attributed to higher landing cost of imported fuel and underestimation of subsidy for local consumption in the current budget.

But the Petroleum Products Pricing Regulatory Agency (PPPRA), THISDAY, has rejected the directive by the Ministry of Finance to suspend processing of payments for marketers, insisting the ones for 2012 should commence to avoid fuel crisis, pending the resolution of the issue of 2011 arrears.

The Nigerian National Petroleum Corporation (NNPC) has also raised the alarm that the Ministry of Finance was about to plunge the country into a fuel crisis because its fuel subsidy

projection for 2012 was 19 million litres daily, instead of the "actual figure" of over 33 million litres.
But responding on behalf of the Coordinating Minister of the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, her Senior Special Assistant on Media, Mr. Paul Nwabuikwu, told THISDAY that the ministry would prefer not to join issues with other government departments and agencies.

“The issue of underestimation does not arise because the NNPC and PPPRA which had the responsibility did not provide any basis for estimation of consumption. They both gave very different estimates which could not sustain scrutiny. The ministry did the best thing in the circumstance which was to use an economic estimation method to arrive at the projected amount of subsidy for 2012 based on growth in income and growth in demand. This amount was based on the consumption for 2008 which was adjudged as a good base year from an assessment of various relevant factors,” he explained.

Nwabuikwu stated that in the course of preparing the budget, there was a lot of public concern about subsidy payments, adding that this was reflected in the probe by an ad hoc committee of the House of Representatives.

Various figures ranging from N1.2 trillion to N2 trillion were estimated as expenditure on subsidy last year which was considered as fraud by the public, while daily consumption was also estimated at various inconsistent figures.

According to Nwabuikwu, National Assembly estimation of the subsidy was N557 billion.
The finance ministry "had to do a lot of work" to estimate the amount which was eventually approved - N888 billion - through the legislative process, he added.

“So prudence and realism were our watchwords during the entire process. In the light of these challenges and the lessons learnt, we have commissioned the globally respected consulting firm, Mckenzie, to use their worldwide and resources to help us estimate the consumption, going forward. The bottom line is that we are determined to ensure that the interests of the Nigerian people are always paramount,” Nwabuikwu said, adding that the current efforts will eventually provide the authentic figures.

THISDAY gathered the Ministry of Finance has directed the PPPRA and the Debt Management Office (DMO) to stop issuing Sovereign Debt Statements (SDS) and Sovereign Debt Notes (SDN), respectively, to marketers.

But the PPPRA has rejected the directive, insisting that “if the arrears of 2011 are to be suspended, payment for 2012 should commence to avoid fuel scarcity”.

Under the subsidy regime, PPPRA issues SNS to marketers, who forward them to the Debt Management Office to obtain SDN, which they use to make subsidy claims for imported cargoes.

But it was gathered that acting on the instruction of the Ministry of Finance, the DMO has withheld the Sovereign Debt Notes of marketers, who had submitted their Sovereign Debt Statements for processing of payment.

It was however learnt that the PPPRA has protested to the Director General of the DMO, Dr. Abraham Nwankwo, insisting that they should release the debt instruments for the payment of the marketers to avoid fuel crisis.

The official in charge of issuance of sovereign debt notes at the DMO, Mr. Atiku Saleh, referred THISDAY to the Ministry of Finance, saying “that is where the directive came from”.
“We don’t administer fuel subsidy; we are just clearing house. When they (Ministry of Finance) asked us to stop; we stopped,” he said.

THISDAY gathered that the DMO has withheld Sovereign Debt Notes for payment of marketers under Batches C1 (2) and D1 (2), after receiving the Sovereign Debt Statements from the PPPRA for the two batches.

The PPPRA, it was learnt, has also issued the Sovereign Debt Statements for Batch E1 (2), while Batch F1 (2) is scheduled to be issued by Friday.

A source close to PPPRA told THISDAY that the Executive Secretary of the agency, Mr. Reginald Stanley, has protested to the Director General of the DMO.

“If the DMO cannot pay for the arrears of 2011, they should start the payment of subsidy for 2012 to avoid fuel scarcity,” the source said.

It was learnt that a stakeholders’ telephone conference, which was anchored by the Managing Director and Chief Executive Officer of Access Bank Plc, Mr. Aigboje Aig-Imoukhuede, was held on Tuesday over the issue.

Imoukhuede is the chairman of the committee set up by the Ministry of Finance to examine the claims of arrears of subsidy for 2011 currently being made by the marketers.

A source close at the Ministry of Finance told THISDAY that the action was taken because “what they have budgeted for the payment of arrears of 2011 have been exhausted but more claims are still coming. Claims have overshot the budget and the minister has said that she will not embark on extra-budgetary spending".
NNPC accounts largely for the incoming claims as the corporation has continued to make claims for arrears for 2011.

But the spokesman of the NNPC, Dr. Levi Ajuonuma, told THISDAY that the Ministry of Finance was about to plunge the country into fuel crisis by misleading the government on the daily consumption of petrol.

“I want you to alert the nation that the Federal Ministry of Finance is about to plunge this country into fuel crisis and when this crisis starts, we know whom to hold. How can anybody say that Nigeria with a population of 167 million consumes 19 million litres of PMS daily? The Ministry of Finance made provision for subsidy based on 19 million litres pay day, instead of over 33 million litres, which the country is consuming. So, within four months into the year, they have exhausted the money budgeted for subsidy but instead of going to Mr. President to apologise for their mistake, they are looking for whom to blame. If anybody hides his head in the sand and play the Ostrich, the person will have himself to blame at the end of the day,” he said.

Ajuonuma stated that the Ministry of Finance has no right to deny anybody, who genuinely imported fuel in 2011 his claims, so long as the papers have passed the tests.

“There are ways of verifying arrears and once they are genuine, the Ministry of Finance must pay. They cannot deny the NNPC or marketers their genuine claims. The Federal Ministry of Finance must pay genuine businessman and women, whose papers have passed the tests,” he said.

“Are they not aware that nobody is bringing products into this country? The day this crisis will start, we know whom to hold,” he added.

Marketers, who spoke to THISDAY, stated that the banks were no longer granting them credit facilities to import fuel on account of their inability to pay outstanding credits for 2011.

This development, it was learnt, has the potential to plunge the country into fuel crisis, if not resolved urgently.

One of the marketers told THISDAY that the last allocation/import permit for 2011 was given to the marketers in December 2011 and the allocation took care of the first quarter of 2012.

“This means that the cargoes were coming in up to March 2012. For the cargoes that were imported in March, the government had 45 days to process payment and this spilled over to the second quarter of 2012 and we are yet to be paid. So, no allocation was issued in the first quarter of 2012,” he said.

A source privy to the stakeholders’ meeting held last week told THISDAY that the marketers aligned their views with the position of the PPPRA that the Ministry of Finance should start paying subsidy for 2012, pending when the issues of the arrears of 2011 are resolved