Market Date: 12-10-2015

FG paid N1.7tn fuel subsidy, not N1.4tn - CBN

FG paid N1.7tn fuel subsidy, not N1.4tn - CBN


The Central Bank of Nigeria on Tuesday put the “actual” total subsidy payments on fuel imports in 2011 at N1.7tn, an excess of N300bn above the N1.4tn figure given by the Minister of Finance, Mrs. Ngozi Okonjo-Iweala, last week.
The apex bank told the House of Representatives Ad Hoc Committee on Subsidy Regime that that was the amount it had paid up to December 2011.
“As the banker to the government, I can confirm that N1.736tn was paid out as subsidy up to December 2011. These figures are the actuals as of December 2011,” CBN’s Deputy Governor, Mr. Kingsley Moghalu, who represented the apex bank’s governor, Mr. Lamido Sanusi, at the subsidy probe told the House Committee.
Okonjo-Iweala, while testifying before the same committee last week, said that following the reconciliation of payments up to December 2011, the total payments on subsidy now stood at N1.4tn.
She claimed that the earlier widely quoted figure of N1.3tn represented calculations up to October 2011.
The minister added that with total payments reconciled, the authentic figure in the books of the Ministry of Finance was N1.4tn.
Apparently shocked by the latest conflicting figure, Chairman of the committee, Mr. Farouk Lawan, said, “It appears like the figure on the payments for fuel subsidy will continue to go up. It appears the end will not come soon.”
According to him, a major concern to the apex bank is the pressure the rising subsidy costs put on the foreign exchange market.
Moghalu informed the committee that the CBN, as an economic adviser to government, was “worried” over the steady rise in fuel subsidy payments since 2009.
He disclosed that the demand for subsidy payments rose by 670 per cent between 2009 and 2010.
Moghalu stated that by 2011, the demand jumped 17 times, representing a 1, 523 per cent increase in payments.
“The disbursement of very large sums for the oil sector payments puts pressure on the foreign exchange market.
“The multiplicity in the beneficiaries of subsidy payments was the main factor that put pressure on the foreign exchange market.”
The deputy governor told the committee that a total of $39bn was sold in 2009 alone due to pressure for payment of subsidy claims.
He stated that the credit in the Petroleum Support Fund Account, as at January this year, was N673.8bn but noted that the account had been drawn by N667.5bn by January 17, leaving a balance of N6.2bn.
Moghalu also gave figures on the Domestic Excess Crude Account, which he said had a credit of N2.56tn in January.
However, he said that as of January 17, the account had been drawn by N2.54tn, leaving a balance of N19.2bn.
He told the committee that the pressure on the market forced the CBN to initiate an audit of the foreign exchange deposits in August 2011 to “determine the veracity of the prevailing demand for foreign exchange, especially at the official window of the foreign exchange market.”
He said the result of the audit showed that the pressure came from the oil sector.
Moghalu absolved the CBN of any role in the award of contracts for fuel importation. He said the apex bank did not also know anything about the deductions at source by the Nigerian National Petroleum Corporation from domestic crude proceeds to pay for fuel subsidy.
The Nigeria Labour Congress and the Trade Union Congress of Nigeria also made presentations to the committee, giving government conditions that must be met before removing subsidy.
The NLC, which was represented by its Chief Economist, Mr. Peter Ozon-Eso, called for the revival of domestic refineries and to “create the environment for the establishment of new ones.”
“We want a system that is less dependent on imports and can create employment locally”, he said.
On his part, the President of the TUC, Mr. Peter Esele, urged the PPPRA to “eliminate the round-tripping of imported products.
“Government should legislate that subsidy should be paid only on products delivered to retail outlets; thus consumed in Nigeria.”
Source : Punch


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