by Henry Boyo
In the light of the attrition, social stress and economic losses experienced during extended periods of fuel scarcity in recent years, Nigerians would pray that such traumatic situations do not arise again. Even if all indicators pointed to imminent fuel scarcity, it is unlikely that any government official would summon the courage to alert Nigerians of such market possibility. In this event, Nigerians are left with no option than to synthesise the oftentimes discordant, but inadvertently revealing, notes of various public officials to decipher the actual reality. In this light, we recall the Finance Minister, Dr. Ngozi Okonjo-Iweala’s media interview recently. In response to a question as to whether subsidy payments were ongoing, Okonjo-Iweala, who also doubles as the Coordinating Minister of the Economy, confirmed that out of a total N888bn budgeted for subsidy in 2012, the sum of N451bn had already been paid out, well before the end of the second quarter!
Incidentally, this sum of N451bn was in addition to the sum of about N1tn already paid to oil marketers to settle part of 2011 subsidy claims! The minister explained that the rapid depletion of the provision for subsidy has therefore necessitated a slowdown in the payment of claims of marketers. Indeed, according to the minister, only N17bn had so far been released for 2012 claims! (The PUNCH, June 18, p. 19). Such reality can only make oil marketers jittery with regard to commitment for future deliveries.
Besides, in spite of the collateral of sovereign guarantee for fuel imports, banks are still concerned by the very late liquidation of loans by oil marketers. Marketers also are concerned that these late payments would increase their cost of funds, and may ultimately leave them with little or no margin in this enterprise.
Worse still, crude prices in excess of $100/barrel together with naira depreciation in the last four months may also make subsidy payments predicated on this benchmark inadequate to cover import loans obtained by marketers, especially when repayment is compounded by excessive charges for almost six months’ late payment.
In a media comment on delayed subsidy payments, a major oil importer confirmed that “the banks give us loans based on 21 per cent and they usually apply a default rate of 35 per cent… Many of us have not been paid for imports made in February 2012! A lot of marketers are still being owed subsidy arrears for 2011.” The spokesman for another major oil marketer disclosed that, “the banks are already getting impatient with delayed loan repayments” (The PUNCH, June 19).
What immediately becomes obvious from the above is that if some marketers have yet to receive payments for supplies made in 2011, it is just possible that much of the provision of N888bn in the 2012 budget may be applied for settlement of last year’s subsidy claims. It is worrisome that the Ministry of Finance together with other related agencies has yet to fully reconcile the actual daily national fuel consumption nor has it fully identified those who submitted false claims for subsidy. More worrisome still, is the fact that the relevant authorities failed woefully to alert the government on the inadequacy of the 2011 budget provision of less than N300bn for subsidy.
Furthermore, the illegality of extra-budgetary spending of over six times the approved appropriation for subsidy seems to have been glossed over. Okonjo-Iweala has only recently set up a committee, chaired by the Managing Director of the Access Bank, with representatives of the Finance ministry, bankers, the Nigerian National Petroleum Corporation, the Petroleum Products Pricing and Regulatory Agency and marketers to review the 2011 arrears and ensure that correct payments had been made!
In an attempt to manage this awkward situation, Okonjo-Iweala indicated that subsidy payments for 2012 would be staggered. According to her, “We just slowed down the payments; once we have verified that payments already made are genuine, we will commence payment again, but we will not be stampeded into making payments until we are sure of them”. Evidently, things have gone awry with fuel supply and subsidy management in the country.
In addition, the minister has now acted on a presidential recommendation to establish a company “that will certify the discharge and also verify the payments that will be made for fuel imports”. The minister revealed that the contract with the erstwhile official auditors of this process has now been terminated. (Daily Independent, June 17, p. 28). Presumably, the new company is an internal department of the Finance Ministry; even if this new arrangement allows for easier and direct supervision by the ministry, it is not yet clear why we should expect this internal audit unit to do a better and more transparent job than the team of independent, private auditors already in existence.
However, it is curious that the obvious failure and negligence of the disbanded private auditors have not attracted any other punitive sanctions, other than the slap on the wrist penalty of contract termination.
It is rather disconcerting that 12 months or so after her second coming, Okonjo-Iweala still does not know the average volume of fuel consumption in Nigeria. It is sad that under her purview, the fuel subsidy budget for 2011 was brazenly exceeded without as much as a whimper of protest from her ministry until after the bubble burst in the first quarter of 2012!
In the light of the above, it is clear that the current shenanigans in the fuel market can only lead to market dislocations and shortfalls. It may ultimately devolve on the NNPC to step in and save the day; after all, they have always been responsible for the bulk of market supply anyway. Thus, in spite of the minister’s assurances of the several vessels waiting to discharge stocks, it is unlikely that the NNPC would as usual gladly jump in to close supply gaps, without prior formal executive and/or legislative approval to bypass the Federation Account and directly commit its crude export revenue to such an unsustainable financial venture.
The consequent stalemate in imports as a result of the above factors will lead to a huge drop in fuel importation, and it may once again be crying time nationwide, as fuel scarcity disrupts normal life. That notwithstanding, it will be market day once again for those nefarious hoarders of fuel. Nonetheless, Nigerians are keeping a close watch on the market, so as to thwart the large-scale fraud and theft witnessed lately in this commercial subsector.
Op-ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija
This piece was first published in The Punch