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THE FRAUD, STEALING AND AFTERMATH OF SUBSIDY REGIME IN NIGERIA

By NBF News
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By  Elvis Obuehi
First of all, the Farouk Lawan led ad hoc committee of the House of Representatives (HOR) found that the official daily consumption of petrol across the country is 35 million litres per day.

In the first instance, this figure is in doubt as the figures officially declared in the preceding years proved to be unreliable before the committee. The CBN Governor had partly expressed his doubts as to the authenticity of the daily consumption rate put at 35 million litres per day during the Town Hall meeting.

While allowing this loom, another shocking revelation popped up to the end that even though the official amount consumed daily is put at 35 million litres per day, subsidy was paid on 59 million litres daily, leaving some excess of 24 million litres unaccounted for daily!

The consequent shortfall on the Nigerian economy resulting from this is 8.7billion litres of PMS per annum on which subsidy of N78 was paid per litre. This is worth about N683.28bn unaccounted for. N683.28 billion away from the government coffers plus the multiplier effect is a monumental loss to the nation's economy.

If we take out the waste from the value actually paid as subsidy (N1.4trillion - N683.28bn) we have a value of N716.78bn. This figure is approximately 25.2 million litres per day as against the 35million declared.

Escalation of the subsidy figures
In an atmosphere of opulent wisdom, if the government did not raise questions during the year of the payment of the herculean subsidy burden, the proper thing to do by the end of the year would be to probe the rocket escalation of the subsidy figures for 2011, with a view to legally prosecuting the architects (if any) of the gargantuan misdemeanour.

Such monumental omission on the part of the government watermarks its credibility with suspicion. The obnoxiously obvious demonstration of corruption and abuse of office and authority should not be winked at by the government and left in abeyance as it strengthens and secures corruption in government and its agencies.

Abraham Lincoln once sad 'if you must win a man to your course, first convince him that you are his sincere friend'

Given our history, investigating public looting with a view to sanitizing the government parastatals and their processes is about the only way for the government to convince and win the trust of the citizenry as to its sincerity on good governance. This is up to the government of the day.

Nigeria can manage local consumption of petrol
Further, some have argued that the idea of subsidy payment is a farce yet for others, it is a luxurious leakage designed by the manipulators of the system to profit themselves, their allies and their cronies. This paves the way for the discourse of two more views on the essence of subsidy. For the purpose of fair hearing, there would be need to consider these thoughts. The bottom line of the argument is that Nigeria can actually manage local consumption of petrol without having to subsidize the pump price. How true is this?

It is a well-known fact that the NNPC is allocated a certain quantum of crude to the tune of 445,000 barrels (bbls) per day to be locally refined (by the government owned refineries in Kaduna, PH and Warri) to meet indigenous demands. One of the foremost challenges that the government of the day faces is that the local refineries do not presently function at optimum capacity. This necessitates the need to import petroleum products particularly PMS to meet local demands. Agreed.

However, while the government has argued that the importation of PMS occasions large amounts being paid as subsidy because of high landing cost (as high as N123.32 per litre) plus an additional N15.49 as distribution cost (totalling about N139 per litre approximately $146 per barrel of PMS), the opposers of the removal regime have argued otherwise-alleging that upon careful and objective analysis of the facts and figures, the purported huge cost proves to be farcical.

For instance, one barrel of crude oil is equivalent to 42 gallons of crude oil. One gallon of crude oil, is equivalent to four litres of crude oil; this consequently puts the litre equivalent of a barrel at 168 litres. Standard refinery reports show that 1 barrel of crude oil produces about 19.5 gallons of PMS.

Therefore, 445,000 bbl of crude will produce about 34.71m litres of PMS. On the assumption that Nigeria's daily consumption of PMS is 35 million litres (even though many believe it is less than that); Nigeria would need to import only about 300,000 litres of PMS to meet the daily requirement nationwide.

Refineries
But then, we're told our refineries function at only about 30% capacity. Consequently only 30 per cent of the local allocation of 445,000 bbls is refine-able per day (about 133,500 bbls). Invariably, this leaves about 311,500 unrefined (i.e. 70% of the total 445,000 allocated).

If Nigeria therefore decides to embark on an outright sale of the entire local crude oil allocation of 445,000 bbls at an average of $80 per barrel and import the daily requirement of 35million litres ( about 208,333.3 bbl) of PMS in return ( at the government quoted value of $146 per barrel of PMS), Nigeria would have earned about $35,600,000 from the sale/export of crude oil and incurred about $30, 416,666 from the purchase/import of PMS, daily. From where does the issue of subsidy arise?

Logical analysis
Further on the arguments that pillars the policy of total removal of fuel subsidy, the logic upon which it is founded is indeed very thought provoking.

Experts in the field of logic and reason posit that arguments are engaged in, in proof of the weightiness or otherwise of issues raised, with the ultimate aim of convincing and persuading the opposition to shift grounds. In the light of this, they categorize arguments as sound, valid or cogent - when not fraught with fallacies - the premises giving complete or enough degree of support to the conclusions reached. On the other hand, when arguments are fraught with fallacies, they're deemed unsound, invalid, not cogent, and therefore not persuasive. Let's now logically analyse the arguments presented by the government, one after the other;

That the total removal of fuel subsidy is the best way to deal with saboteurs who smuggle subsidized fuel and sell same at 2 to 3 times the original price across the borders…..

Logically, this argument seems to go thus:
That although smuggling is a crime by law and justice demands that smuggling when suspected and identified be investigated and prosecuted; when smuggling activities by a few (less than 2% of 160million people) sabotages government's needed efforts to make available to it citizens an otherwise high cost commodity as fuel; the best and most effective reaction of the government to such sabotage is to back out on its 'needed efforts', leaving the non-smuggling 98% of its citizenry to cope with the rigor of affording the commodity, with a promise to cushion the consequent burden in other areas of their lives with palliatives….

If we adopt the government figures that Nigeria's daily consumption is presumably 35 million litre, it necessarily follows that of the 59 million litres of petrol imported daily, about 24 million litres (the excess) is smuggled out of the country on a daily basis. Now, for 24 million litres of fuel to be smuggled across our borders daily, about five hundred and forty-five 44,000L capacity tankers would be required! And it would take 3,815 tankers of the same capacity to move the same quantity in a week!

Barrister Elvis Obuehi is a lawyer based in Lagos