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Home Sectors Energy

House of Reps to probe Petroleum subsidy of 2017 to 2021

Justina Mboho by Justina Mboho
June 29, 2022
in Energy
NERC, Electricity tariffs, House of reps

Image credit: Nairametrics file

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The House of Representatives has resolved that it will investigate the petroleum products subsidy regime of the Federal Government from 2017 to 2021.

The house came to the resolution following a motion moved by Rep. Ose-Ogun during Wednesday’s plenary in Abuja.

In his motion, Rep Ose-Ogun revealed that as at 2021, over $7b in over 120m barrels of crude oil revenue had been diverted. He expressed concerns that NNPC and other critical stakeholders have used the subsidy regime to subvert the nation’s crude oil revenue to the tune of over $10b.

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The House noted that an advocate Committee will be set up to handle the probe which members of the committee will be named on Thursday.

The investigation will last for eight weeks after which the committee will return back to the house with a report of findings.

The Motion

“The  House notes that section  88  (1)  and  (2)  of the  Constitution of the  FRN (As  Amended) empowers the  National  Assembly to conduct investigations into the activities of any authority executing or administering laws  made by the National Assembly.

“Also notes that Section 32 of the  Petroleum Industry Act, 2021 saddles the Petroleum Midstream and Downstream Regulatory  Authority with the task of regulating and monitoring technical and commercial midstream and downstream petroleum operations in  Nigeria.

“Informed that  as of  2002, the NNPC’s purchase of  crude  oil  at  international market  prices  stood  at  445,000 barrels  per day  in order to  enable  it  to  provide  petroleum  products  for local  consumption.

“Concerned that  as of  2002,  the  installed capacity  of  Nigeria’s  local  refineries  stood  at  445,000  barrels  per day,  however,  their capacity utilisation  began  to  nosedive  and  eventually  fell  completely  to  zero  due  to  the ineffectiveness and alleged corruption of  critical  stakeholders  in the  value  chain.

“Aware that due to the decline in the  production capacity of  the  refineries, NNPC Limited  found  it  more  convenient to  export  domestic  crude  in  exchange for petroleum products  on  trade by barter basis described as  Direct Sales Direct Purchase  (DSDP) arrangement.

“Also  aware  that  component  costs  in  the  petroleum  products  subsidy  value  chain  claimed  by  the  NNPC Limited is highly over-bloated while the transfer pump price per  litre  used  by  the  NNPC Limited  in  relation  to  PPMC  is underquoted  as  N123-N128 instead  of  N162-N165  and  this  fraudulent  under-reporting  of  N37-N39  per litre  translates  into over 70 billion naira  a  month or  840 billion naira  a  year;

“Worried that the consumption rate of  Petroleum Motor Spirit(PMS) is 40m to 45m litres per day, however, the  NNPC Ltd uses  65m  to  100m litres per day to determine subsidy as discoverable from  NNPC’s monthly reports  to the  Federal  Allocation Committee  (FAAC).

“Also worried that the subsidy regime has been unscrupulously used by the  NNPC Ltd & other critical stakeholders  to  subvert the nation’s crude oil revenue to the tune of over $10B, with records showing that as of 2021, over $7B  in over 120m barrels have been so diverted.

“Disturbed  that  there  exists  evidence  that  subsidy  amounts  are  being  duplicated,  thus  subsidy  is  charged against  petroleum  products  sales  in  the books  of NNPC as well  as  against  crude oil revenue in the  books of NAPIMS to the tune  of  over  N2 trillion”, the motion reads.


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Tags: House of RepresentativesPetroleum products subsidy
Justina Mboho

Justina Mboho

For further inquiries about this article, contact: Email: justina.mboho@nairametrics.com Twitter: bb_ladyj LinkedIn: Justina Mboho

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