* Massive gap between fuel imported and consumed
* Much subsidised fuel smuggled abroad at big profit
* Fuel marketers group says "briefcase" firms to blame
(Adds Jonathan statement, paragraphs 9-10)
By James Jukwey
LAGOS, Jan 19 Nigeria has discovered a
discrepancy of more than $4 billion a year between the amount of
motor fuel it subsidises and actual consumption, a legislative
committee said, supporting the idea of massive corruption in the
government subsidy scheme.
When President Goodluck Jonathan's government abruptly
removed the subsidy on Jan. 1, strikes and protests by trade
unions and civil society forced him to reinstate part of it,
though the pump price was increased by 50 percent.
"What we have here is that 59 million litres were discharged
by vessels, but the daily consumption locally was 35 million
litres," Farouk Lawan, chairman of a House of Representatives
committee probing subsidies, told an Abuja sitting late on
Wednesday, in comments broadcast on independent station Channels
TV on Thursday.
The comments are likely to further stoke the debate over the
fuel subsidy, which economists say benefits wealthy fuel
importers and smugglers more than ordinary Nigerians.
"There is a gap of 24 million litres per day being funded by
Nigerians as subsidy that was not utilised by them. This of
course amounts to overpayment; or in other words, sharp
practices," the legislator said.
Critics of the subsidy say fuel importers overcharge for
fuel using corrupt accounting procedures, and that much of the
fuel bought for local consumption is shipped over the border to
Cameroon and Benin, where smugglers can sell it for a huge
profit. Both views seem to be supported by Lawan's findings.
"Smuggling has been encouraged by the system ... if local
consumption is 35 million litres per day and we are paying for
59 million ... we're making available 24 million litres a day
for importers to smuggle out," Lawan said.
Lawan's committee is one of several investigations now in
place on Nigeria's energy sector that were spurred by the fuel
subsidy row, including a Senate probe into subsidies, a probe by
the corruption watchdog into the state oil company and price
regulator, and an audit of the entire Oil Ministry.
In a statement on Thursday, the presidency said Jonathan was
still committed to "the total deregulation of the downstream
petroleum sector, not removal of subsidy alone", which he said
was "in the interest of the future of Nigeria".
Whether he can go through with it, given evident public
opposition, remains to be seen. Protesters said they wanted to
see the government tackle graft first before slashing welfare.
Nigeria imports most of the fuel it consumes because its
four refineries are decrepit, producing at only a quarter of
their installed capacity. The government buys the fuel then
sells it to the public at cheap, subsidised prices.
The committee heard the subsidy paid for the 24 million
litres per day imported by marketers but not consumed by
Nigerians amounted to 669 billion naira ($4.14 billion) a year.
Economists say the fuel subsidy encouraged corruption and
the wasteful use of fuel. The government had estimated it would
save 1 trillion naira ($6.2 billion) in 2012 by eliminating it.
But Nigerians have always fought against its removal because
they consider cheap petrol their sole benefit from living in a
major crude oil producer which loses billions of dollars to
Its removal had more than doubled petrol pump prices to
around 150 naira ($0.93) per litre from 65 naira, but Jonathan
on Monday partly reinstated the subsidy, pegging the price at 97
"Subsidy was paid based on what was discharged; that was the
practice I met on the ground," Reginald Stanley, head of the
Petroleum Products Pricing Regulatory Agency, which is in charge
of fuel imports, told the committee.
Stanley, who took charge of the agency in 2011, said he had
changed the system and from Jan. 1, subsidy would be paid only
for fuel actually trucked out of the port for consumption.
Stung by accusations of fraud, Nigeria's fuel marketers took
out newspaper advertisements on Thursday, saying changes brought
into the Petroleum Support Fund scheme in 2007 were to blame for
allowing firms without petrol stations to claim the subsidy.
"This saw the emergence of 'briefcase' companies (with no
asset base or accountability) in the PSF scheme," the Major Oil
Marketers Association of Nigeria said.
($1 = 161.4300 naira)
(Editing by Tim Cocks)