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Understanding The Oil Subsidy Quagmire




By Madaki O. Ameh 

The subsidy regime is so shrouded in opaqueness that it is difficult to explain it intelligibly to anyone.

But simply put, the government alleged that for every litre of PMS purchased at the pump price of N195/litre which was the last operating pump price before the recent jerk up of the prices, the government was paying the importers of the product the difference between the cost of producing that one litre in the foreign refineries and all the related costs (shipping, margins, handling costs, taxes, etc.

) which makes up the landing cost, and the price that the end users have to pay for the product at the pump in different parts of the country.

In addition to that differential, there is also the cost of bridging, which is the cost of transportation of the product from the ports of discharge in Lagos and Port Harcourt, to far flung places, so that the products can be sold at the same price throughout the country.

A really idiotic policy I must say, but that has been in operation since 1975! That was the sole role of the Petroleum Equilization Fund (PEF), which has now been subsumed into the Nigerian Midstream and Downstream Petroleum Regulatory Agency (NMDPRA) under the PIA.

No one seems to know how much PMS is consumed in Nigeria daily, so the figures keep fluctuating depending on who is in charge of the process at any point in time in NNPC and the other Regulatory Agencies.

And the fluctuations can be anything between 30 million litres a day to 100 million litres a day! Since a subsidy of at least N300/litre was claimed to exist on each litre of PMS, you can imagine the level of fraud if you multiply that figure by the total daily consumption claimed, and the actual daily consumption.

The more the fraudsters got greedy, the higher the alleged daily consumption on the basis of which subsidy was paid. And this went on for decades on end! 

Then, there is another dimension to it – DSDP program. The Direct Sales, Direct Purchase program was designed to be a swap, trade by barter scenario, where crude oil was swapped for the equivalent in PMS with foreign refineries (15 in the consortium) who were required to ship the finished products to Nigeria in exchange for the crude oil they got, since our refineries are always in a state of being perpetually turned around. This was introduced in 2017 and operated until a few weeks ago, when NNPC announced that they had scraped it .

In a transparent environment, there should be no claim of subsidy in this arrangement, because what you get in the quantity of PMS from the consortium is supposed to be equivalent to the value of crude oil shipped to the consortium under the swap arrangements.

Like all things Nigerian, NNPC still claims to have been paying subsidies (or making under recoveries) in respect of the same PMS, whereas there is supposed to be a zero impact in cash terms. Up till this moment, NNPC has not revealed who they have been paying this subsidy to, fuelling the outrage that a few people have been feeding fat on this fraud.

Another interesting dimension to all this is alleged smuggling of refined products across our ever porous borders. The government alleges that our subsidized PMS supplies all neighbouring countries because the Customs, Immigration and other security agencies at the borders cannot effectively checkmate the smugglers who sell the products at a high premium, and so stopping the subsidies would increase the domestic prices of the products and make smuggling unattractive. If there was ever an idiotic argument, this is certainly at the very top!

How do you punish an entire populace because of the ineffectiveness of your own security agencies paid with tax payers money and holding no one accountable? 

The full ramifications of this fraud cannot be unravelled without a wholesale, honest and transparent probe of the activities of NNPC and all the Regulatory Agencies associated with this, including CBN and Ministry of Finance.

Like all Nigerian probes, once the National Assembly gets involved, their sole interest is to plug into the drainpipe and scuttle the outcomes, and this has been happening since 2012 when the first such probe was launched during Jonathan’s regime. 

Chief Madaki O. Ameh, Managing Partner, BBH Consulting, writes from Abuja.


Tax: Kaduna Eliminates Pilferages, Emerges 5th in IGR Collection – Official




The Executive Chairman of the Kaduna State Internal Revenue Service (KADIRS), Mr Jerry Adams, says they have eliminated all tax leakages and corrupt practices, where the state emerges fifth in IGR collection in Nigeria.

Adams said this on Saturday in Kaduna at the Chartered Institute of Taxation of Nigeria (CITN) Kaduna & District Society’s 2023
Annual Tax Week dinner.

The theme of the week was: “Taxation: A Panacea to Economic Growth and Development”.

Adams, represented by Alhaji Ibrahim Galadima, said that KADIRS had enthroned an exemplary record in the collection of taxes.

He said, “Apparently, all our processes are automated and payments can be made online without any hassle.

”Our unprecedented revenue efforts in the past years have yielded positive outcomes and made us became the cynosure of all eyes of states in recent years.”

According to him, taxation is the most elastic and dependable source of government revenue.

Adams added that in the contemporary period, taxes were not limited to the quantum of money collected but used for the purposes of the growth and development of the national economy.

The executive chairman said that taxation was now an instrument of fiscal policy used to accelerate economic growth through the functions of allocation of resources.

It is also used for income redistribution through poverty eradication and provision of public goods like education, health and infrastructure and stabilisation.

Adams commended the immediate past administration of the state  for laying the groundwork and the present administration for consolidating and building on those gains which made Kaduna stand out in the IGR collection.

He also commended the selfless and relentless efforts of the members of staff of KADIRS in the performance of their official duties.

Earlier, the Auditor General of Kaduna State, Mr Abubakar Abdullahi, said taxation was not just about collecting revenue.

He said, ”It is about creating an enabling environment for businesses to thrive, attracting investments, and providing equal public services to citizens.

“It is through effective tax policies and administration that we can bridge the gap between economic development and social welfare, ensuring that prosperity is shared by all.”

Abdullahi advocated dynamism of the tax system, adding that it would keep pace with the changing economic and technological landscape.

“We must strive for simplicity, transparency, and fairness in our tax policies, minimising the burden on taxpayers while maximising revenue for national development.

”To achieve this, collaboration and cooperation between the Government, tax professionals, and taxpayers are paramount.

“By working together, we can create a tax system that encourages voluntary compliance, reduces tax evasion, and fosters a culture of tax payment as a civic duty,”he said .

Abdullahi acknowledged the hard work and dedication of tax professionals who tirelessly navigate the complexities of tax laws, advising individuals and businesses.

According to him, they are also contributing to the growth of the country and ensuring compliance with tax regulations.

Also speaking, the Kaduna District Chairman of the CITN, Mr Dalhatu Abdulazeez, said taxation played a significant role in the development and progress of the country.

According to him, taxation is not merely a means of revenue generation for the government, but a mechanism that fosters socio-economic growth, promotes good governance, and ensures a more equitable distribution of resources.

Abdulazeez said that CITN has been at the forefront of promoting professionalism, knowledge, and expertise in the field of taxation.

“As the premier professional body for tax practitioners in Nigeria, the Institute has been instrumental in shaping tax policies, providing guidance to professionals, and upholding the highest ethical standards in the practice of taxation,”he said.

Abdulazeez said that the event brought together professionals, experts and stakeholders in the field of taxation to celebrate the achievements, advancements and challenges faced in the realm of taxation in the country.

He also said the annual tax week featured visitation to orphanage homes, sport competitions and meaningful interactions with past chairmen of the CITN.

Abdulazeez thanked their sponsors and partners for their support, and members of the district for their dedication and hard work.

The News Agency of Nigeria (NAN) reports that the high point of the event was the presentation of awards to individuals who contributed to the development of CITN in Kaduna.

Those awarded were the Chairman of KADIRS, the Commissioner, Planning and Budget Commission, Hajiya Amina Etsu, Mr Abdulkadir Kayode, Mr Rahmon Obafunso and Mr Theophilus Ashaolu, among others. (NAN)

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Lithium tops Negotiations Between UK, Nigerian Officials in London




A comprehensive investment package comprising the lithium value chain topped talks between British Deputy Prime Minister Mr Oliver Dowden and Nigeria’s Minister of Solid Minerals Development, Dr Dele Alake in London.

According to a statement by Kehinde Bamigbetan, Special Adviser to the minister, the talks held on the sidelines of the “Mines and Money Conference”  in United Kingdom.

Bamigbetan quoted Alake as saying  that Nigeria had large deposits of minerals and was ready to partner with investors from the United Kingdom.

He said that President Bola Tinubu had introduced value addition as a priority policy in the sector.

“Our new policy places emphasis on local value addition rather than export of raw minerals so that the value of our mineral products can increase,” he said.

According to him, if Nigeria is not doing well, Britain should be concerned.

“And if Nigeria is doing well, Britain can benefit from the opportunities,” he said.

He said that the Nigerian team would be willing to sit down with its British counterpart to take the discussion to the next level.

Dowden said the meeting was to kick off discussion between both countries and that officials of the Department of Trade and investors would work out the details of the partnership.

He commended the Nigerian  government for the policy on value addition, adding that going up the value chain would create more economic opportunities for partnership between both countries.

He highlighted the importance of the relationship between both countries, observing that if the relations were bad, Britain would not be bothered with the supplies.

“You are right on value addition. If the processing then happens within a third world country that we are comfortable with, that would be good,” he said.

Reports says that Dowden chairs the British National Economic Security Council, which is interested in partnering with Nigeria on energy minerals such as lithium.

Meanwhile, founder and partner of Carousel Bio-Energy, promoters of the project, Jafar Hilali, briefed the meeting on his firm’s plans to intervene at every stage of the lithium value chain in Nigeria, leading to the establishment of a lithium battery production factory.

He promised to assemble a consortium of British companies in power supply, infrastructure, and lithium battery production with a projection to produce lithium battery-powered energy buses for Nigeria’s domestic market.(NAN)

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COP28: World Bank Strengthens Commitment on Financial Ambition to Drive Climate Action




The World Bank Group says it is helping people in developing countries better withstand the devastation of climate change and create a better world for their children and grandchildren.

This is contained in a statement issued by the Bank on Friday after announcing an ambitious financing package at the ongoing 28th United Nations Climate Change Conference, COP28 in Dubai.

The statement said the World Bank was pushing to do more to battle climate change and do it faster.

According to the statement, the bank will devote 45 per cent of its annual financing to climate-related projects for the fiscal year that runs from July 1, 2024, to June 30, 2025.

“This increased ambition is more than just a laudable percentage, it’s putting to work more than 40 billion dollars, around 9 billion dollars more than previously programmed.

“In 2021, the bank announced a goal to reach an average of 35 per cent by 2025 and is currently ahead of schedule, running at an average of 36.3 per cent since July 2022. ”

It said in October, the World Bank secured an ambitious and expanded mandate to create a world free of poverty on a livable planet.

“The new climate pledge is a concrete example of the bank delivering on that mandate.”

The statement said in addition to boosting resilience and adaptation among those hardest hit by the effects of climate change, the bank’s project would also focus on safeguarding ecosystems and biodiversity.

“This is to help protect the health of people and the planet.”

It said having pledged to squeeze more from its balance sheet to fund the fight against climate change, the bank would continue to deliver on adaptation to help countries devastated by climate shocks.

“The bank will also focus on mitigation to help reduce the greenhouse gases contributing to climate change.”(NAN)

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