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Nigeria: Hearings into Subsidy Regime Exposes Confusion, Process Breakdown Featured

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The House of Representatives probe investigating the fuel subsidy system in Nigeria under the chairmanship of Farouk Lawan (pictured), has heard  of significant weaknesses in the subsidy process and confusion about the consumption of petroleum products nationwide in oral evidence over the past week.

During committee hearings, it became clear that the Government is still unsure of how much fuel is consumed in Nigeria. The Petroleum Products Pricing Regulatory Agency (PPPRA) reported consumption of 59m litres per day, though the Minister of Petroleum told the committee that consumption ran at 46.9m litres per day, still far above the 35m litres per day figure used for planning purposes. The estimated cost of the subsidy programme for 2011 also rose from N1.3tr to N1.5tr, before the Central Bank confirmed the figure at over N1.7tr. Moreover, it emerged, arrears of subsidy payments are still pending. 
 
Wale Tinubu, CEO of Nigerian oil giant Oando, also told the committee that abuses in the subsidy regime crept in when the number of fuel importers increased dramatically. Tinubu said that many importers did not possess storage facilities or a retail network, and that Oando was forced to secure supplies from these "briefcase" companies. 
 
Tinubu, however, insisted that the scheme benefitted ordinary Nigerians rather than companies such as Aando. "We bring in a cargo for $30m and sell at the pump for the equivalent of $15m, we simply make a claim to the government for the differential pursuant to a law that exists. We do not benefit from the scheme," he remarked. "the money belongs to our Nigerian shareholders and Nigerian banks."
 
In other evidence, the Independent Petrol Marketers’ Association of Nigeria (IPMAN) accused the Nigerian National Petroleum Corporation (NNPC) of promoting sharp practices by allowing companies without storage facilities or retail networks to import fuel. IPMAN President insisted that these companies were responsible for corruption in the subsidy system, adding that the NNPC should focus on restoring the country's refineries and withdraw from retail operations. 
 
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