The Senate Joint Committee investigating the operation of fuel subsidy in the country began its work on Tuesday on a wobbly note with the Minister of Finance, Dr. Ngozi Okonjo-Iweala, and her Petroleum Resources counterpart, Mrs. Diezani Alison-Madueke, giving reasons for the astronomical increase in the subsidy figure in 2011.Although the ministers failed to present facts about the funding of fuel subsidy to the tune of N1.348tn in 2011, Okonjo-Iweala, however, admitted that the over N1tn spent outside the budget was to meet the monthly subsidy payments to fuel importers.Alison-Madueke, on her part, blamed the astronomical increase in subsidy expenditure from N600bn in 2010 to N1.348tn this year on various factors such as increase in the foreign exchange rate, rise in crude oil prices in the international market and the continuous increase in the volume of Premium Motor Spirit consumed locally.According to her, the number of cars imported into the country rose by 40 per cent in 2011 alone when compared with previous years, arguing that the situation also contributed to the high rate of fuel consumption locally.She said the subsidy gap had increased at a rate of 242 per cent from N22.7 per litre in 2006 to N37.9 in 2011, noting that it had become clear that it was no longer sustainable to continue to subsidise local fuel consumption."But we must note that there has been appreciable increase in subsidy claims due to marketers and approved by the Ministry of Finance. This increase is largely due to a combination of factors. There has been a continuous rise in the average daily consumption of petroleum products in the country; there has also been a continuous rise in the price of crude oil in the international market; there has been an increase in the exchange rate of the dollar to the naira; and of course, there was the issue of verification in 2011 of the arrears on subsidy claims on kerosene for the period of July 2009 to May 2011," Alison-Madueke said.On the reasons for the huge gap in subsidy payment, Okonjo-Iweala said, "It is important to clarify that when we bring the budget framework, the amount that we put in, the amount that was referred to as N245.5bn, is really an estimate due to a number of factors; of course, we have the price of petroleum products and exchange rate, but most of all, that estimation was also an expectation that over the years, we have been talking about phasing out subsidy. "So, we put a notional amount for what could be the pending difference between what you see, the N245bn and the N1.348tn. It has been a notional estimate. What you see when we have the Federal Account Allocation Committee meeting to share the revenues between the various tiers of government is that we look at what is to be paid to the PPPRA and NNPC out of that. There is a lot of fluctuation from month to month that makes it difficult to really come up with an accurate estimate."The committee was also told that total subsidy arrears for household kerosene was N258bn, which according to the Petroleum Resources minister, also contributed to the swell in the fuel subsidy bill.Alison-Madueke said that the payment of subsidy was in line with the 2011 Appropriation Act, which categorised it as a deductible item before payment into the Federation Account.She also said that the verification of the volume of petroleum products by the various agencies was not free from manipulations, but said the government had taken some steps to make it credible to a greater extent."There is no man-made process that is totally secured from manipulation. We are aware of that and we are tightening the process and making changes in the Department of Petroleum Resources and the Petroleum Product Pricing Regulatory Agency," she said.On the process of verification and computation of subsidy, Alison-Madueke said, "The Nigerian National Petroleum Corporation imports refined petroleum products, they are discharged at the jetties and depots, and they are witnessed by PPPRA staff. Imported volumes are verified again in the presence of NNPC, PPPRA, DPR, Customs and Immigration, Nigerian Ports Authority and the Nigerian Extractive Industries Transparency Initiative because they are imported products. Certificates on the computation are forwarded to the PPPRA for the computation of applicable subsidy."
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