August 10, 2022

Re: House Of Reps Accuses NNPC Of Padding Fuel Subsidy Cost, Diverting $7bn

5 min read

By Adewole Kehinde

The House of Representatives on Wednesday resolved to set up an ad-hoc committee to investigate the Petroleum Products Subsidy regime in Nigeria from 2017 to 2021.

This resolution followed the adoption of a motion sponsored by Sergius Ose Ogun.

Since his resumption of office in July 2019 as the GMD of the Nigerian National Petroleum Company Limited, Malam Mele Kyari; someone highly regarded as a transparency champion has repositioned the NNPC Limited from its opacity and has made it an accountable organisation.

When the House of Representatives on Wednesday resolved to set up an ad-hoc committee to investigate the petroleum products subsidy regime in Nigeria from 2017 to 2021, I said to myself that Malam Mele Kyari is about to be commended by the House of Representatives for his transparency and accountability in the management of the NNPC Limited

In many forums, the CEO of NNPC Limited, Malam Mele Kyari, has expressed the support of the company to ensure that all contracts in the oil and gas industry are made open for public scrutiny.

The NNPC Limited has since 2015 taken steps to open up its books to the Nigerian public with the monthly publication of its financial reports and the publication of its audited annual financial statements.

According to Kyari, “As part of our transparency journey, we have understood that disclosing contracts supports open, fact-based dialogue that can help build trust, reduce conflict, and reinforce a company’s social licence to operate.”

“We have, therefore, since November 2021, been working with NEITI as part of a joint committee with other stakeholders to implement contract transparency in Nigeria.” The committee, amongst other things, is to develop a contract transparency implementation road map. The road map will aid NNPC in systematically disclosing its contracts. “This is also in line with PIA 2021,” he added.

The House of Representatives claimed that the transfer pump price per litre used by the NNPC Limited in relation to PPMC was underquoted. I would like the House of Representatives to look into some of the charges attached to the Premium Motor Spirit

Recently, the Federal Government increased the freight rate of Premium Motor Spirit (PMS) petrol from N7.51 per litre to N9.11 per litre.

The landing cost of Premium Motors Spirit, also known as petrol, is currently above N400 per litre, while the government is spending huge amounts subsidising the product to retail at N165 per litre. This excludes the N15.49 margin for transporters and marketers.

Even though the House claimed that the subsidy regime has been unscrupulously used by the NNPC Limited and other critical stakeholders to subvert the nation’s crude oil revenue to the tune of over $10 billion US dollars, with records showing that as of 2021, over 7 billion US dollars in over 120 million barrels have been so diverted.

The GMD of NNPC Limited, Mallam Mele Kyari, has said that subsidies should be removed, and the funds deployed to areas of the economy that need funds, particularly road infrastructure and education.

Fuel subsidies are a misallocation of resources, and they benefit mainly people who don’t need it; the rich. What we need is an investment that upgrades the general good of society and provides access and opportunity for social mobility for the poor. 

“I do not foresee the return of subsidies when oil prices rebound.” Just by removing subsidies in the 2020 budget, the nation will be able to save over $400 million. The savings would be better deployed to education or the upgrade of the critical infrastructure in the country.

The TAPE agenda has been the bedrock of all Mallam Mele Kyari’s actions, while five strategic initiatives provide the yardstick for performance measurement. The need for transparency cannot be overemphasised. Transparency creates opportunities for engagement, and trust is easy to achieve.

“We recognise our responsibility to all stakeholders, particularly the 200 million Nigerians, whom we work for and serve.” This means we must be accountable to them and we do not take assets and resources that are entrusted to our care as managers with levity. We cannot fulfil this trust and expectation without delivering on performance and excellence. TAPE is therefore a vehicle or process towards achieving greater outcomes. My team and the entire company have kept the faith and I am immensely grateful for that, Kyari said during a recent interview.

He continued, “We have continued to publish the monthly financial report, so our report card is available to everyone.” You know our successes and the strides we are making to address our struggles in “real-time”. Just to highlight a few success points, we have fully automated the process for procuring products from our downstream subsidiary, PPMC, via our Customer Express Portal.

“This translates into savings in terms of man-hours, reduced stress and gives every eligible customer, irrespective of location and creed, the same level of access and opportunity.” We have cut waste in our contracts; our openness with contractors and partners has secured their buy-in and we have seen a cost reduction across all segments of our business.

“Also, we published the first audited financial statement of the company in 44 years.” This is no mean feat, and we appreciate the support of Mr President in making this a reality. The streamlining of our processes through full digitisation and automation is ongoing. Through the digital platform, we have been able to onboard the new hires and future leaders of the company effectively, Kyari said.

From the above, it has been shown that the subsidy regime under Mal Mele Kyari Management has never been unscrupulously used by the NNPC Limited.

On the allegations by the House 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, which to me can’t be true in as much as NNPC Limited has enlisted with the Global Extractive Industry Transparency Initiative (EITI) as an EITI supporting company, which places NNPC Limited in the group of over 65 extractive companies and state-owned enterprises committed to observing transparency and accountability standards defined by EITI.

On a final note, since the Transparency, Accountability and Performance Excellence (TAPE) agenda of Mallam Mele Kyari came into practice, the NNPC Limited management has walked the transparency and accountability talk by opening up the company’s books the way no other management has before.

Adewole Kehinde is the Publisher of Swift Reporters and can be reached via 08166240846, 08123608662, kennyadewole@gmail.com

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