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BIG STORY

NNPCL Not Transparent On Subsidy, Dollar Revenues — World Bank

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The Nigeria National Petroleum Corporation Limited is not transparent about the financial gains from fuel subsidy removal, the World Bank has disclosed.

This extends to subsidy arrears that are still being deducted and the impact of subsidy removal on federation revenues, the bank noted. The Washington-based made this call in its Nigeria Development Update, December 2023 edition titled, ‘Turning The Corner (from reforms and renewed hope, to results).

This is the Minister of Finance and Coordinating Minister of Economy, Wale Edun, revealed that the government was ready to scrutinise the revenue flow from the NNPCL.

According to the World Bank, while revenue gains from the exchange rate reforms are visible, more clarity is needed on oil revenues, including the fiscal benefits from the PMS subsidy reforms.

It declared, “nominal oil revenue gains have been evident since June; these are mostly categorised as “exchange rate gains”, suggesting that they are due to the naira depreciation.

“Except for the exchange rate-related increases, however, there is a lack of transparency regarding oil revenues, especially the financial gains of the Nigeria National Petroleum Corporation from the subsidy removal, the subsidy arrears that are still being deducted, and the impact of this on Federation revenues. It is also unclear why retail petrol prices have not changed much since August, despite fluctuations in the exchange rate and global oil prices.”

The Bretton Woods institution further expanded that gains in net oil revenue of the federation were lower than what they should have been considering what the removal of fuel subsidy should have added to the accounts.

It stated that fuel subsidy cost the federation about N380bn a month, and once removed, the federation account should have recorded an increase in net oil revenues.

It said, “However, most of the gains in the oil revenues in H2 2023, as reported by OAGF, can be attributed to exchange rate gains. Without exchange rate gains, net oil revenue between January and August would have declined by 0.2 of a percentage point of full-year GDP, all materialising in the July–August period.

“In August, additional revenue from 40 per cent profit of Production Sharing Contracts and the interim yearly dividend were reflected in the accounts.  However, these were not as high as what the gains from removing the gasoline subsidy should have been. Given that petrol pump prices have not changed in line with market fundamentals (notably exchange rate movements and global oil prices), there is a risk that the implicit fuel subsidy has reemerged, potentially keeping net oil revenues lower than expected.”

The institution further noted that the reform of fuel subsidy should help the NNPCL to settle its arrears and start paying fully for the Federation’s share of costs in joint venture operations, thereby allowing oil production to gradually increase over time.

Also speaking at the presentation of the report, the Coordinating Minister of the Economy, Edun noted that the removal of fuel subsidy saved the government’s finances.

He stated that while expectations that subsidy removal should boost the government’s revenue, it was faced with debt funding and a high fiscal deficit.

He said, “In terms of the government’s finances, you have rightly pointed out that following the removal of subsidy, there is an expectation that there would be fiscal dividends and it’s fair to say that without it, government finances will be in total disarray now.  However, there is debt funding, pressure on fiscal deficit, and on government finances, and borrowings which have been inherited.

“Our levels of borrowing are being reduced and there is a plan to reduce that fiscal deficit over time. On the revenue side, the first source is oil, and I expect that there will be serious scrutiny on oil revenue and production and insistence on raising oil production and similarly that the revenues are brought into the federation account following the constitution. I think there will be added scrutiny, and I am sure NNPC is getting ready for that.”

Edun further declared that there would be a robust rollout of measures to raise tax revenue soon. He, however, highlighted that tax rates would not be increased but a lot would be done regarding efficiency, digitalisation, and improved collection.

He added that waivers and tax incentives would be scrutinised to revamp it and save leakages, particularly among ministries, departments and agencies.

  • Subsidy Removal And Controversies

On May 29, President Bola Tinubu announced the removal of fuel subsidy with, “Subsidy is gone,” to free up foreign exchange earnings.

In his August 1 national address, Tinubu disclosed that the Federal Government had saved about N1tn in two months after the removal of the petrol subsidy freeing up funds for other things in the economy.

He said, “In a little over two months, we have saved over a N1tn that would have been squandered on the unproductive fuel subsidy which only benefitted smugglers and fraudsters.”

According to him, the funds saved from subsidy removal “will now be used more directly and more beneficially for you and your families.”

However, there have been concerns that the dividend of subsidy removal has not trickled down to the average Nigerian.

Recently, a former Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi, alleged that the NNPCL might not be remitting enough dollars to the federation account despite subsidy’s removal.

Speaking during the Bank Directors Summit organised by the Bank Directors Association of Nigeria recently, Sanusi, said, “The exchange rate needs to be stabilised and we have to address the fundamental question, why is there no money coming in?

“Why is the NNPCL not able to bring in dollars? Am sorry this is the question that cost me my job and I will continue asking this question until NNPCL fixes it up or until I die. Where are the dollars? We need to shine a light on the NNPCL. The finance minister cannot tell you because he doesn’t have a monitoring system that reports to him.

“The finance minister can’t tell you how many barrels of petrol we produce and export. It is only the NNPCL that can give those figures. The finance ministry needs to know how much oil we produce daily, how much we sell, and where the money is going. We are no longer paying subsidies so where are the dollars? It was under recovery during the subsidy era and that has been stopped, so where is the money?”

Sanusi noted that the NNPCL was opaque about its dealings, shrouding many of its dealings in secrecy.

  • NNPCL Dollar Revenues

Defending the oil company’s finances, the NNPCL’s Chief Financial Officer, Umar Ajiya, who was representing the Group Managing Director, Mele Kyari, disclosed that since the inflow of dollars into the country is tied to oil revenues, the country is facing the consequence of falling oil production, insecurity, and lack of investments in the sector.

He also said the NNPCL had been using its revenue to import refined PMS and service debt. He said, “Just to clarify and let the audience go with a well-balanced information. The inflows of dollars into the country are tied to oil revenues and the oil revenues are driven from oil production.

“The consequence of what we are facing today is a fall in oil production simply because of insecurity and lack of investments. The net dollar accruable from oil operations is what the NNPCL uses to import PMS. The PMS is sold in naira, you can’t sell it in dollars. Consequently, you would find out that the net dollar inflows into the NNPCL coffers are spent on the import of basically PMS and debt service.”

Ajiya stressed that the surplus dollars inflow to the CBN and any other bank in the country can only happen when the country starts producing PMS over its domestic requirement.

According to the CFO, adequate forex inflow can also happen if insecurity is addressed, and such development will attract partners to bring in fresh dollars in the form of investment to oil operations.

He added, “So until such a point where we have excess production over and above what we consume, then we will begin to see much dollar liquidity coming into this country. The whole consumption pattern of most Nigerians is foreign import-dependent and until we come to a position whereby, we begin to consume what we produce and also add value to our raw materials to bring further FX into the country.”

  • N750/litre Petrol Price

In its report, the global bank noted that there is a risk that Federal Government may still be paying for fuel subsidy which is why net oil revenues are lower than expected.

During his presentation at the unveiling of the report, the bank’s Lead Economist for Nigeria, Alex Sienaert, noted that fuel processes are currently not cost-reflective in the country.

He disclosed that the market price of petrol should be around N750/litre.

He said, “It does seem like petrol prices are not fully adjusting to market conditions, so that hints at the partial return of the subsidy, if we estimate what is the cost reflective of retail PMS price of the would-be and assuming that importation is done at the official FX rate.

‘’Of course, the liberalisation is happening with the parallel rates, which is the main supplier, the price would be even higher. These are just estimates to give you a sense of what cost-reflective pricing most likely looks like. We think the price of petrol should be around N750 per litre more than the N650 per litre currently paid by Nigerians.”

According to him, there is a need for the government to clarify how prices at the pump are fixed as opposed to market conditions.

He noted that the government must ensure that revenue gains from the removal of fuel subsidy materialises, while improving the transparency of the NNPCL with regards to profits and oil revenues to be remitted to the Federation Account.

  • 104million Nigerians Poor

While noting that important reform decisions have been taken for Nigeria to avoid a fiscal cliff, the World Bank stated that these reforms were followed by difficult economic adjustments.

Since the removal of fuel subsidy, retail fuel prices have increased by more than 163 per cent and after shifting to a unified, market-reflective foreign exchange regime, the naira has depreciated against the US dollar by about 41 percent in the official market and 30 percent in the parallel market.

The sharp increase in the price of fuel and other imported goods has contributed to inflation, which hit an 18-year record high of 27.3 percent year-on-year in October.

However, the World Bank insists that the recent reforms will undo the increases in poverty seen in recent years from 2024 onward, albeit only marginally and slowly.

It stated that sluggish growth and rising inflation increased poverty from 40 per cent in 2018 to 46 per cent in 2023, pushing an additional 24 million people below the national poverty line.

It said the number of poor Nigerians rose from 79 million in 2018 to 104 million in 2023, with urban poor, more exposed to inflation, increasing from 13 to 20 million, while the number of poor people in rural areas increased from 67 to 84 million.

It argued, “In the medium term, the reforms will reverse this trend through higher growth and lower inflation, but to a limited extent, with poverty rates decreasing from 46 per cent in 2024 to 44 percent in 2026.”

According to the World Bank, the successful implementation of the initiated reforms will be the first step toward improving Nigeria’s growth prospects.

It highlighted that the implementation of fuel subsidy removal and foreign exchange unification rate would push economic growth to 3.5 per cent between 2023–2026, adding 0.5 percentage points to the growth potential in a scenario in which the reforms had not been implemented.

The global bank further stated that in the medium term, the economy will begin to benefit from increasing fiscal space for development spending.

While noting that inflation will begin to fall in 2024, it added, “Together, such reforms would boost investment and productivity across sectors, unlocking the stronger growth that Nigeria’s economy demonstrably capable of, and allowing economic development to regain its fast pace.”

 

Credit: The Punch

BIG STORY

Court Remands Woman For Allegedly Stabbing Husband To Death In Ibadan

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An Iyaganku Chief Magistrates’ Court yesterday ordered the remand of a housewife, Olajumoke Olalere, 33, at Agodi Correctional facility, Ibadan, for allegedly stabbing her husband to death.

The Chief Magistrate, Mrs Olabisi Ogunkanmi, who did not take the defendant’s plea for lack of jurisdiction, ordered her remand pending the legal advice from the Directorate of Public Prosecution (DPP).

She, thereafter, adjourned the case until March 5, 2025 for mention.

According to The News Agency of Nigeria (NAN), the police charged Olalere with a count of murder.

The prosecutor, Cpl. Akeem Akinloye, had told the court that the defendant on October 30, at 9.00 p.m. allegedly caused the death of her 39-year-old husband, Oluwasegun Tinubu.

Akinloye said the defendant allegedly stabbed her husband with a knife during a disagreement at their house, at Zone 5, Gbelu, Iyana – Agbala, Ibadan.

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BIG STORY

UPDATE: EFCC Grants Former Delta Governor Okowa Bail Over Alleged N1.3trn Fraud

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The Port Harcourt zonal command of the Economic and Financial Crimes Commission (EFCC) has granted administrative bail to Dr. Ifeanyi Okowa, a former governor of Delta State, over allegations of diverting N1.3 trillion in 13% derivation funds from the federation account between 2015 and 2023.

Okowa was arrested on Monday, November 4, 2024, in Port Harcourt, Rivers State, after reporting to the Port Harcourt Directorate of the EFCC at the invitation of investigators handling his case.

Sources confirmed that the former governor left the EFCC facility around 9 pm on Wednesday night.

A source under anonymity stated: “He left the facility at about 9 pm yesterday (Wednesday).”

“Okowa is expected to return soon to provide documents and answer more questions before the matter will be charged to court.”

The former governor is accused of failing to account for the 13% derivation funds, as well as an additional N40 billion, which he allegedly claimed to have used to acquire shares in UTM Floating Liquefied Natural Gas (LNG).

Specifically, Okowa is said to have purchased N40 billion worth of shares in one of the country’s major banks, representing an 8% equity stake in the offshore LNG venture.

The funds are also alleged to have been diverted for other purposes, including acquiring properties in Abuja and Asaba, Delta State.

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BIG STORY

Oil Marketers Respond To Dangote Refinery Claims, Say SON, NMDPRA Certify Imported Petrol

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The Standards Organisation of Nigeria (SON) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) certify the imported Premium Motor Spirit, popularly called petrol, that is imported into Nigeria, oil marketers have said.

They disclosed this on Thursday in response to claims by the Dangote Petroleum Refinery that off-spec petroleum products were imported into the country by dealers.

On Tuesday, the refinery informed Pinnacle Oil and Gas Limited and other oil marketers that the deregulation of the downstream oil sector should not be used as a justification for the importation of off-spec petroleum products or the undermining of Nigeria’s national interests.

Oil marketers denied this claim on Thursday, with the Managing Director/Chief Executive Officer of Pinnacle Oil and Gas Limited, Robert Dickerman, revealing that his firm signed a 13-year agreement with the Dangote refinery to distribute the refinery’s petroleum products through pipelines.

Dickerman pointed out that independent inspectors, NMDPRA, and SON, among others, “inspect our products, so we can’t bring in off-spec products into this country.”

His position was confirmed by SON, as an impeccable source at the agency told one of our correspondents that the Standards Organisation of Nigeria was involved in the testing of imported petroleum products.

The official added that the organisation operates its own laboratory facility to check if the commodities are off-spec or not.

“Yes, We are involved in the testing of petroleum products when they come into the country. We are involved in that. We have our laboratory facility where these tests are conducted. It’s to ensure if the commodities meet regulatory standards or off-spec,” the official said.

A major marketer also kicked against the claim that dealers import off-spec products into the country, particularly since the downstream oil sector was deregulated by the Federal Government.

“I once told you what we went through when we brought in our imported cargo of petrol. The product underwent a lot of laboratory tests. I know the NMDPRA carries out tests on imported products. They took a sample of our recent import when it was still in the mother vessel at Atlas Cove before it was moved to Apapa.

“At the point of discharge, they took the sample again before allowing us to put it in our tanks. The NMDPRA has certified laboratories that they use. We have our laboratory, but the NMDPRA will not allow you to do your test without them certifying the product by themselves.

“The testing is in three stages, the one in Atlas Cove when the vessel lands in Nigeria. When the product moves to your point of discharge, they will do another test before they allow it into your tanks and aside from that, the day you want to start loading they will carry another test,” the marketer, who spoke in confidence due to lack of authorisation to speak on the matter, stated.

Addressing newsmen in Lagos on Thursday, Dickerman said the clarification became necessary to debunk the statement from the Dangote refinery, which accused Pinnacle of plans to blend substandard petrol in Nigeria.

The Dangote refinery had also said the Pinnacle MD approached it, pleading with the refinery to extend pipelines to its tank farms in order to blend substandard imported petroleum products with its ‘high-quality’ ones.

Reacting, Dickerman described the statement as defamatory, inaccurate, and intentionally misleading.

The managing director said it proposed and invested in pipelines to distribute petroleum products from the Dangote Refinery, saying pipeline transfer is far less costly than distribution by ship or trucking across the country.

According to him, when the project was proposed to Dangote, it wholeheartedly agreed and signed a 13-year interconnection agreement with Pinnacle Oil.

“On November 5, Dangote issued a Press Release titled, ’Pinnacle Oil and Gas FZE: Our Stand’. It is unfortunate and deeply concerning that this release contained several statements that are defamatory, inaccurate and intentionally misleading. Further, it advocated a national policy that would cause severe economic damage to Nigerians by raising the cost of petrol above global market prices and higher than they are today.

“In our effort to further enhance distribution efficiency, we proposed and invested in pipelines to distribute petroleum products from the Dangote Refinery, as pipeline transfer is far less costly than distribution by ship or trucking across the country. When we proposed this project to Dangote, they wholeheartedly agreed and signed a 13-year interconnection agreement with us.

“In addition, Dangote facilitated our process of achieving regulatory approval by writing two Letters of No Objection to the regulator to enable our project to proceed. The agreement to allow us to interconnect our pipeline to them was agreed actually in 2022 and I think it was signed in early 2023. So it was about two years ago that we actually reached this agreement, and it was done very comprehensively, from a commercial and a legal standpoint,” Dickerman stated.

He narrated that a lot of processes had gone into the project since it was signed, including the engineering design for the pipelines, surveying, getting the right of way, and letters of no objections from anyone who could be affected by the pipeline.

“There’s a whole bunch of stages to a project. This is not unlike any other construction project. It’s a very simple and straightforward process. This was done first. There was never a hint that this was not a good deal for both parties ever. So, it’s just not true that they opposed it. It’s simply not true that they opposed it. They supported it,“ the Pinnacle boss stated.

This came as the Nigerian National Petroleum Company Limited denied a video clip that claimed the oil firm was selling dirty fuel from an NNPC Retail outlet at Keffi Flyover.

“We have carried out spot checks at all our outlets and found this claim to be false. The product was not, and could not have been bought from any NNPC Retail outlet as the company does not dispense petroleum products into bottles or jerrycans as displayed in the video,” it said in a statement issued by its spokesperson, Olufemi Soneye.

It added, “NNPC Retail Ltd does not deal in adulterated products as it adheres to rigorous standards and quality control measures at every stage in its operations to ensure that only high quality, safe, and reliable petroleum products are available at its stations nationwide.

“Members of the public should discountenance the spurious claims made in the video and be wary of selfish and unpatriotic elements pushing such a narrative as they do not mean well for the country.”

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