Peter Obi Says Oil Subsidy’s Is Organised Crime As NNPC Spends N3.4trn To Subsidize 66.7m Litres Of PMS

•Landing cost of PMS now N327.68 per litre

•Notes Nigeria subsidizing fuel for Cameroon, other neighboring countries

Presidential candidate of Labour Party, LP, in 2023 general elections, Mr Peter Obi, yesterday, described oil subsidy in Nigeria as organised crime, with a promise to tackle it decisively if elected president.

Obi stated this yesterday, in Lagos, at Private Sector Economic Forum for 2023 presidential election, organised by Lagos Chamber of Commerce and Industry, LCCI.

He also promised to immediately stop the dollarisation of the Nigerian domestic economy on resumption of office.

Obi said: “I have said it before, 50 per cent of the subsidy is corruption. That will be dealt with decisively. Subsidy will be removed where absolutely necessary.

“Second, we will start aggressively and immediately anywhere we can, local refining, especially modular refinery, driven by private sector not government. We are going to support and ensure that the refineries are put in as quickly as possible.

“So, I assure you subsidy will not be there. Subsidy is one of the things that is driving inflation because you have huge sum of money being thrown into the system to deal with deficit budgeting to pay for the subsidy.

“As I have said before, we have to stop the dollarisation of our economy, especially domestic economy. Under my watch, if you must operate you must charge in naira, except you are operating in the international space.”

On security, he said: “If we deal with the issue of insecurity and farmers are able to go back to the farms, you remove subsidy and tackle corruption, the inflation will go down.

“When we come into government in 2023, one thing that we must aggressively and decisively deal with is the issue of security. We will deal with it as quickly as possible. And I can assure you that will be the first thing on my desk.

“We need to overhaul the entire security architecture and ensure that it is out in place aggressively, including having multi-level policing, federal, state and community policing.”

On the issue of debt, Obi noted that there is nothing wrong in borrowing but it must be for the purpose of investment, adding: “Debt is a component of development. But it must be used for investment not consumption.”

According to him, many countries such as Japan and Singapore have debts that are more than 100 per cent of their GDP but their economies are growing because they borrow for investment.

His words: “Under my watch, we will borrow for investment not consumption and ensure fiscal discipline.”

Also speaking in tackling corruption, Obi said he will live by example.

“If the principal and members of his family are not corrupt, the issue of corruption will be reduced by 70 per cent,” he stated.

The Group Managing Director, GMD of the Nigerian National Petroleum Corporation Limited, NNPCL, Mr. Mele Kyari,  said yesterday that N3.4 trillion could only subsidize 66.7 million litres of fuel.

Kyari disclosed this when he appeared at the resumed hearing of the ad hoc committee of the House of Representatives investigating subsidy regime from 2013 to date, chaired by Ibrahim Mustapha.

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It will be recalled that over N4 trillion annually was budgeted and spent on fuel subsidy in Nigeria. Kyari, who was represented by the Chief Financial Officer of the company, Mr. Umar Ajia, put the daily consumption rate of Premium Motor Spirit, PMS, or petrol,  at 100 litres.

According to him, the landing cost of PMS currently stands at N327.68 per litre.

He said: “We have about 1.6 billion litres incoming, land and marine. This is what is the minimum level we have to maintain, especially as we approach winter.

‘’Most of the refineries we procured are actually shutting down their operations because of the clamour for green energy and COP26 compliance.

“Even gas that is transition fuel for us is being given an 8 years. Of course, we do not agree. When you look at PMS outlook, we want to be closing each and every month with a two billion closing stock.

‘’That is the only way you can sustain petroleum so that the marketers do not see some slack and take advantage by beginning to hoard product that can create artificial scarcity which can lead to queues.

“There is a huge arbitrage for anybody to move product to outside. We are not saying that bulk of the product is smuggled. The reality is that there is no study to validate the actual consumption. What we are reporting daily is what the authority, which is the regulator publishes. They are represented at every depot in Nigeria.

“Exchange rate has been moving steadily from N195.5 per dollar to now N390.6 to a dollar, on average. The subsidy scheme is two ways, the FX subsidy and price. “The shipping cost has doubled.  Therefore, the landing cost of PMS has moved from N87 per litre in 2015 to about N327.68 per litre today. When you compare it to what we sell, you have N209 on every litre.

‘’When you multiply the N209 per litre with an average of 66.7 million litre, you are talking about N3.4 trillion subsidy for the year.

“The reality today is that if one were to take statistic of the number of vehicles in Nigeria, how many Keke Napep do we have?  How many pumping machines do we have? On a routine visit, I saw nothing less than a million keke, take an average that, each one uses 4 litres every day, that is 4 million litres, in one city.

“States that consume the most are states like Oyo and Ogun, they even consume more than Lagos State, so you wonder, is it that they have more vehicle than Lagos?  This explains that these are states with porous borders and that will explain why this bulk evacuation is going out of Oyo and Ogun states, probably neighboring countries.”

Kyari, who also bemoaned the failure of acquilla installation to checkmate illegal transportation of fuel from the border communities said Nigeria was inadvertently subsidizing fuel for her neighboring countries.

He was, however, responding to the committee’s enquiry  as to why the border communities were getting more supplies.

“If you have N5 million, you can cross the borders with trucks laden with PMS and that is the bitter truth.  We have porous borders; yes we have Customs but I do not know.

“PMS crosses everywhere, to Cameroon through the North East, Nigerian PMS gets to Mali.  Our neighbouring countries hardly import PMS; in fact, some of them do not have the cover to back up imports.

“Cameroon’s refinery got burnt sometime last year or so, since that time, they have not imported PSM but they are still using PMS.   if you go to Niger, you find that PMS is sold in bottles.

“To them, it is a cheaper source, why waste their foreign exchange, so we are subsidizing our neighbours, that is the simple truth,” he said

The GMD also said the Direct Sales Direct Purchase, DSDP, contract scheduled to end in August, had been suspended to avoid the scarcity in December and during the 2023 general elections.

He said:  “It is very dangerous period to begin to pretend that because we are facing the winter, these are the difficult “embers months” that we normally avoid fuel scarcity.

“You know the scarcity in Nigeria is really associated with Christmas period, so if you now tender, the tendering process will take one or two months. So what the Board approved we do is to extend the contract for six month, such

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