Nigerian govt watchdog wants NNPC probe over Buhari era’s subsidy surge

The Nigerian government’s extractive industry watchdog has demanded an investigation after records showed that fuel subsidy payments rose 1,433% within a year under former President Muhammadu Buhari.

The Nigerian Extractive Industries Transparency Initiative (NEITI) said the Tinubu administration should “commission a study” that would determine if there were overpayments resulting in the “sharp increase” to N1.64 trillion in 2021.

It also called for a probe of deductions made by the Nigerian National Petroleum Corporation (NNPCL) on oil revenue, which hugely slashed government earnings for years.

“Government should commission a study on petroleum product importation, consumption and subsidy payment for the last five (5) year to determine whether or not there were overpayments,” NEITI said in its Fiscal Allocation and Statutory Disbursement Audit report released Thursday.

The government’s petrol subsidy programme paid for the difference between the price of imported fuel and the price that Nigerians paid at the pump, until May when President Bola Tinubu ended the programme after taking over from Buhari.

The decision has thrown Nigerians into their worst cost of living crisis in decades. Petrol prices has soared over 250%, sending inflation to 26.7% in September – the highest in 20 years. Many families struggle with food, accommodation and transportation daily.

The government said subsidy payments took much of government revenue and claimed it did not benefit ordinary Nigerians.

Diminishing returns

In its audit report, NEITI said while total government revenue rose 14% to N14.4 trillion between 2020 and 2021, money that came from crude oil sales, paid in by the Nigerian National Petroleum Corporation (NNPCL), fell 56%.

Low oil sales contributed to the decline. But the main reason for the fall was that the NNPCL, which administered subsidy payments, deducted huge amounts of money before paying the balance to the government.

The two major deductions were for subsidy and for oil production costs, called joint venture (JV) cash-calls, a cost the government shares with oil companies.

The report said while total oil sales stood at N6.05 trillion between 2020 and 2021, JV cash-calls consumed N2.2 trillion of that amount, while fuel subsidy got N1.8 trillion. The NNPC only remitted N1.6 trillion to the federation account.

On a year-to-year basis, subsidy payment jumped 1,433% to N1.64 trillion in 2021, from N106 billion in 2020. That forced down the NNPC’s payment to government from N1.099 trillion to just N541 billion.

“At this rate of subsidy recovery, there is likely to be no remittance by the NNPCL to the federation account,” NEITI said.

JV Cash-call too

The agency, which audits resources and revenue generated from the oil and solid mineral sectors, said the huge amount paid on subsidy should be reviewed.

It also called for an investigation into the NNPCL to determine its management of JV Cash calls costs.

“The federal government should launch an investigation into NNPCL’s deductions. Specifically, there should be a JV value for money audit for period 2017 to date,” it said.

It is not clear if the government would implement the recommendations.

Last week, the NNPC said its chief finance officer, Umar Ajia, met with NEITI’s executive secretary/CEO, Orji Ogbonnaya Orji, and engaged “on implementation of recently released NEITI Oil & Gas Industry Report.”