Nigerians are likely to pay for fuel this year as the huge fuel subsidy currently borne by the Nigerian National Petroleum Corporation, NNPC, is described as unsustainable.
The development has led to a significant drop in revenue accruing to the Federation Account and the amount available for sharing by the three tiers of government.
The fears of a possible price hike which has been palpable since the resurgence of fuel queues last month were heightened on Wednesday when the Federal Government admitted that the NNPC was paying through its nose to subsidise petrol.
After the Federal Executive Council, FEC, meeting at the Presidential Villa in Abuja, the government said that NNPC had been losing huge sums of money belonging to the citizens in the importation of petrol at a cost higher than N145 approved pump price of the product per litre.
Kemi Adeosun, minister of finance,explained that ordinary Nigerians were unfortunately, indirectly bearing the cost of that decision because of the reduced remittances from the NNPC.
The Nigeria Governors Forum, NGF, had recently met with President Muhammadu Buhari to complain of the shortages as regards NNPC’s remittances to the Federation Account which nets in the bulk sum through which their monthly allocations are obtained.
Adeosun explained that while the Federal Government is not directly paying subsidy on petrol imports, the NNPC, which is the sole importer of petrol into Nigeria, is losing so much to defray the extra cost of higher landing charges.
The explanation comes against the backdrop of NNPC’s claims that government owes it about N1.7 billion as subsidy payments.
Adeosun said: “On the question of subsidy, the price of oil for Nigeria today is a double-edged sword. So every dollar that goes up, we get more revenue; but also because we are importing refined petroleum, it 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 the price of imported Premium Motor Spirit (PMS) and that is a function of us not having refining capacity.
“Now, when there is talk of payment of subsidy; technically, today, there is no subsidy, but there is under recovery. That is because NNPC is currently doing all the importing. They are importing at a higher price than they are selling, which means they are losing money. This means effectively, that the loss is being borne by everybody and effectively it is reflected in the Federation Account.
“There is no subsidy payment in the way the old subsidy scheme used to work when 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”.
On why the Excess Crude Account has remained at $2.3billion, the minister explained that “with the oil price moving consistently higher, we should begin to start seeing accruals into our excess crude going forward because of 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 must be above the benchmark before you get automatic credit into excess crude,” Adeosun said.
She also spoke on the funding of the national budget, stressing that “Customs will report that they made a trillion naira, FIRS and so on too. That is absolutely correct, but if you also follow those who cover the Federation Allocation Account Committee, FAAC, you will know that, that money is shared monthly among the three tiers of government.
The minister also disclosed that the FEC approved the acquisition of 81 units of two-bedroom houses from Brains and Hammers in Idu, Abuja, at a cost of N1.2 billion, to serve as Nigeria Customs Service barracks.
Also approved for the Customs is the purchase of 50 vehicles at the cost of N1.12 billion for its Anti-smuggling Task Force, especially to curb the smuggling of rice at the borders. The vehicles are to be bought from Elizade Motors.
Babatunde Fashola, minister of power, works and housing, SAN, said that the ministry got 66 approvals covering Katsina windmill, Afam and Mambilla power plants, Zik Mausoleum and pilot housing projects in 33 states.
He claimed that these projects created 69,736 jobs and revitalised the mining sector, which had before now recorded nine consecutive quarterly losses.
Kayode Fayemi, minister of mines and steel development, said FEC approved 10 policy and programme initiatives, including the Mining Regulatory Commission and the aero-magnetic survey of mineral deposits in Nigeria, which was commissioned in 2006, but undelivered because of non-funding.
He said that Ogun, Rivers, Kogi and others now collect their due shares of solid mineral resources earnings at the monthly FAAC.
Fayemi also briefed FEC on the handing over of 80 per cent ownership of Aluminium Smelter Company of Nigeria, ALSCON, in Akwa Ibom State to the Russian firm, UC Russal, with a mandate to reactivate the edifice within the next six months.
There were briefings on Ajaokuta Steel Complex, other steel rolling mills across the country and the Aladja Steel Company in Delta State, which he said, was yet to be fully reactivated although progress had been made by the new owners.
He clarified that the suspension of mining in limestone sites in a dispute between BUA and Dangote Group at Okpella, Edo State, did not stop both firms from working on their other sites in the area, but it was done to prevent further bloodshed and breakdown of law and order.
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