The Federal Government, on Wednesday, explained the controversy surrounding the issue of subsidy payment, saying technically, no subsidy was being paid to the importers of petroleum products, but Nigerian National Petroleum Corporation, NNPC, to take care of the under recovery from the loss incurred in the importation.
The under recovery, which the NNPC pays to cover the loss, was money that should have been shared among the three tiers of government.
Minister of Finance, Mrs. Kemi Adeosun, made the explanation while fielding questions from State House correspondents, after the weekly Federal Executive Council, FEC, meeting, presided over by President Muhammadu Buhari at the Council Chamber, Presidential Villa, Abuja.
Adeosun said technically speaking, there was no longer subsidy paid to oil marketers, adding that NNPC was currently under recovering for the loss in the importation of refined products because it was the sole importers of the product, which sells at less than the cost price, thereby losing huge amount of money to defray the extra cost of importation of the product.
According to the minister, the effect of that is being borne by all tiers of government, including ordinary Nigerians, which had reflected in the downward trend in the accrual into the Federation Account.
But responding to question on who pays the differentials between N171 landing cost for petroleum and N145 pump price, the Finance Minister said “on the question of subsidy, the price of oil for Nigeria today is a double edged sword. So, every dollar that goes up, we get more revenue but also because we are importing refined petroleum, increases the landing cost of fuel.”
Also commenting on the budget benchmark and excess crude, Adeosun said: “Let me explain how the price is structured. The budget is a function of price and quantity. Excess crude kicked in when both price and quantity are exceeded. Now if you look at the oil price for last year and most of this year and quantity, the quantity has frequently been below the target and so you don’t necessarily get the straight credit into exceed crude as a result of oil price.
“Having said that, with the oil price consistently higher now we should begin to start seeing some accruals into our exceed crude going forward because we are starting to see some recovery in quantity.
“But remember that the quantity estimate is 2.5 million barrels per day and it must be consistent every day and the price above the benchmark before you get automatic credit into excess crude.”
