Despite the expenditure of hundreds of billions of naira to subsidize the price of kerosene in three years, the product which is widely used for cooking in most Nigerian households, is not made available to consumers at the regulated price of N50 per litre. Instead, it is sold at between N100 and N150 per litre. This has raised the serious issue of racketeering in the distribution of the product, and stirred up fresh controversy on the existence, or otherwise, of subsidy on kerosene. Worse still, reports indicate that between January and September this year, oil marketers in the country fed fat on consumers of the product, and made illicit profit in excess of N148 billion.
This is shocking and disturbing news. According to figures from the Petroleum Products and Marketing Company (PPMC), daily supply of kerosene across the country is about 11 million litres. This implies that over N550 million illegitimate profit is made by oil marketers daily at a retail price of N100 per litre, or N750m at N150 per litre. This reportedly suggests that over N16.5 billion abnormal profit is made every month by oil marketers. In other words, between January and September this year, a total of N148.5 billion would have been made through these sharp practices by oil marketers across the country.
This is simply scandalous. It is a rip-off that should be thoroughly investigated and stopped. It is disheartening that kerosene supply has become such a huge scam, with the price soaring well beyond the reach of an average Nigerian, even though the Nigerian National Petroleum Corporation (NNPC) claims it spends N700m daily as subsidy on kerosene, which is also known as Dual Purpose Kerosene (DPK) Last year, the corporation told the House of Representatives Committee on Petroleum (Downstream), that it spent N643 billion on kerosene subsidy in three years, from 2010 to 2012. A breakdown of the expenditure shows that N110bn was spent in 2010, N324bn in 2011 and N200bn in 2012, yet, the product was never widely available at the official price of N50 per litre.
The government policy on kerosene remains unclear. This is largely responsible for the rip-off by oil marketers, who in any case, say that they do not get the product at the official price from the government’s oil agencies, which makes it impossible for them to sell at the official retail price of N50. Government should urgently clean the Augean stable of the kerosene subsidy regime. It can do this only by making the product widely available to marketers at a price that is below the official price of N50.
For some years now, the kerosene subsidy issue has been controversial because the price at which consumers were getting it did not suggest that its cost was subsidized. We recall that in July, 2009, there were reports of a controversial directive by the now late President Umaru Yar’Adua to the NNPC to stop the subsidy on kerosene, on account of the fact that the huge subsidy payments by government were not benefitting the retail buyers, who were still paying high prices for the product.
The NNPC, however, claimed that it did not receive the directive before President Yar’Adua died. The corporation is the sole importer of kerosene into the country. The agency also often cites Section 6 of the Petroleum Act, which empowers the minister of petroleum resources to approve petroleum product prices, including that of kerosene, through a gazette.
While the controversy over the legality or otherwise of kerosene subsidy remains unresolved, a Federal High Court judgment on March 19,2013, restrained NNPC, its agents, privies and collaborators from deregulating the downstream sector of the oil industry.
It is unfortunate that in spite of the Petroleum Minister’s assertion that the failure of the ministry to implement federal government’s order to remove subsidy on kerosene was to avoid inflicting hardship on citizens, kerosene users are still being made to pay double and thrice the official price for the product, while marketers are making huge profits at their expense.
NNPC may have unwittingly created this problem by selling the bulk of the product directly to depot owners and middlemen, who in turn, sell the product to owners of retail outlets at inflated prices of N100 per litre and above. This is against the official ex-depot price of about N40.90.This invariably makes it commercially impossible to sell the product to consumers at the recommended retail price of N50 per litre.
It is about time government made the policy on kerosene clear. At present, the policy on the product lacks transparency and accountability. The artificial scarcity and high cost of kerosene across country are due to a combination of factors that include the corruption in the system and the policy that makes NNPC the sole importer of kerosene.
A deregulation of the system as is the case with petroleum importation could bridge the shortfall in supply, due to higher national demand currently put at 15 million litres daily. We believe that subsidy on kerosene is still necessary, provided it reaches the end users all over the country at the official retail price of N50 a litre.
The government should investigate the cause(s) of the present high cost of kerosene and address them. A mechanism should be set up to ensure even and adequate distribution of the product at a reasonable price.
