Politics

Subsidy: Anxiety as Reps embark on another probe

The House of Representatives last week constituted an ad hoc committee to investigate petroleum subsidy payments in the last 10 years. PHILIP NYAM writes on the danger ahead

Worried by protracted scarcity of petroleum products despite huge sums of money said to be spent on subsidy by the Federal Government, the House of Representatives recently resolved to constitute an ad-hoc committee headed by Hon. Aliyu Ibrahim Al Mustapha to investigate the subsidy regime from 2017 to 2021 and submit its report within eight weeks for further legislative action.

This is not be the first time the House will be investigating the petroleum sector, especially the subsidy regime. The setting up of the probe panel evokes memories of the 7th House during which the investigation of subsidy on petroleum products led to the prosecution of the chairman of the team, Hon. Farouk Lawan. On June 22, 2021, Justice Angela Otaluka of a Federal Capital Territory High Court in Apo, convicted Lawan on a three count charge and sentenced him to seven years’ imprisonment. In February this year, the Court of Appeal in Abuja affirmed the conviction of the former lawmaker.

Lawan, who served as chairman of the House of Representatives ad hoc committee that probed the multi-billion naira petrol subsidy fraud in 2012, was accused of demanding $3 million from a business man, Femi Otedola, to remove Zenon Petroleum and Gas Limited (Otedola’s former company) from the list of oil companies allegedly involved in the petrol subsidy fraud in 2012. Arraigned on a seven-count charge of bribery by the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Lawan was alleged to have collected $500,000 as bribe from Otedola. The charge was later amended to three counts.

However, the Appeal Court discharged and acquitted the former lawmaker on two out of the three counts on which he was convicted. The jail term was also reduced to five years from seven years as the court affirmed his conviction on the only remaining offence, which the lower court punished with five years jail term. It is based on this premise that most analysts are skeptical of the fresh investigation. Many are of the view that if the current crop of lawmakers investigating the subsidy regime are not careful, they may fall into the same trap because the policy is said to be fraught with corrupt practices.

Although, the chairman of the ad hoc committee has assured that it will not be business as usual, all eyes are on the panel. Speaking on what is expected of the committee, Hon. Al-Mustapha expressed worry that “the subsidy regime has been unscrupulously used by the Nigerian National Petroleum Corporation (NNPC) and other critical stakeholders to subvert the nation’s crude oil revenue to the tune of over $10 billion with the records showing that as of 2021, over $7 billion in over 120 million barrels had been diverted.”

He added: “Subsidy is an issue that concerns all of us. It concerns the economy of our beloved country, Nigeria and I don’t want to preempt the findings of the committee but actually. There are issues that we are concerned about. “Specifically, this committee is going to work on the subsidy regime. We need to understand what subsidy is all about. In the market today, those of us that use diesel know that because there is no subsidy on diesel, if you go to buy, it is as high as N800 per litre.

“The direct sale purchase you give the crude oil in exchange for refined products, what litres of crude oil we give in exchange for what litres of refined petroleum products are imported daily and how many are utilized? “Now we have a committee that is trying to check the actual rate of consumption. So, we will do the mathematics and interrelate. There would actually be synergy between this committee and the actual amount of fuel consumed daily and to know how much the Nigerian government is paying or sacrificing for the convenience of citizens.”

The decision to investigate the subsidy regime was taken after adopting a motion titled “Need to investigate the petroleum products subsidy regime in Nigeria from 2017 to 2021,” sponsored by Hon. Sergius Ose Ogun. While presenting the motion for debate, Ogun noted that section 88 (1) and (2) of the Constitution of the Federal Republic of Nigeria (as amended) empowers the National Assembly to conduct investigations into the activities of any authority executing or administering laws made by the National Assembly. He explained that section 32 of the Petroleum Industry Act, 2021, saddles the Petroleum Midstream and Downstream Regulatory Au-thority with the task of regulating and monitoring technical and commercial midstream and downstream petroleum operations in Nigeria. Speaking further, the lawmaker 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. He expressed concerns 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. His words: “Due to the decline in the production capacity of the refineries, NNPC 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.

“That component costs in the petroleum products subsidy value chain claimed by the NNPC is highly over-bloated, while the transfer pump price per litre used by the NNPC 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 N70 billion a month or N840 billion a year” The lawmaker said he was particularly worried that the consumption rate of Petroleum Motor Spirit (PMS) is between 40 million and 45million litres per day, however, the NNPC uses 65 million to 100 million litres per day to determine subsidy as discoverable from NNPC’s monthly reports to the Federal Allocation Committee (FAAC). He expressed worry that the subsidy regime has been unscrupulously used by the NNPC and other critical stakeholders to subvert the nation’s crude oil revenue to the tune of over $10 billion, with records showing that as at 2021, over $7 billion in over 120 million barrels have been so diverted.

Ogun stressed that he was 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. Supporting the motion, Hon. Obinna Chidoka, moved for the combination of the motion with the ongoing investigation by the ad-hoc committee on assets and liabilities of the NNPC. The committee on assets and liabilities of the defunct NNPC has been sitting for a while. According to Chidoka, instead of creating multiple committees, a joint committee should be mandated to do the job.

Hon. Uju Kingsley, who is the chairman of the ad-hoc committee on the determination of NNPC’s assets and liabilities agreed with Chidoka as the subsidy regime also falls under liability payments of NNPC and should be merged. However, Hon. Jimoh Olajide countered that the subject matter is totally different due to periodic differences and cannot be combined. Hon. Ibrahim Isiaka also clarified that distinctions exist between the two subject matters. Also speaking, Hon. Ahmed Jaha also called for the differentiation of the two subject matters as the issue of public funds through tax payments is also a differentiating distinction between the two subject matters. It was then agreed that the motion should be stand alone. However, the question on the lips of every concerned Nigerian is: Will the committee deliver on its mandate or go the way of infamy like the Lawan-led investigative panel?

 

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