If the president is interested in maintaining the price of PMS at the extant value, he should make a formal request for a subsidy regime which will be vetted by the National Assembly before approval… spending without appropriation is an original sin against the constitution and we dare say, constitutes an impeachable offence, especially when a pattern of ignoring the legislature is emerging…
The Constitution of the Federal Republic of Nigeria 1999 provides for a presidential system of government, with the three arms of government acting within the doctrine of separation of powers and checks and balances. The legislature makes laws, performs oversights over actions of the executive and holds the power of appropriation. The judiciary interprets the law and settles disputes, whilst the executive runs the normal day-to-day business of enforcing laws, regulating government and the conduct of citizens, etc. Any attempt by one arm of government to usurp the powers of another would be ultra vires its powers, unconstitutional, null and void.
The recent moves by the executive to spend public resources to subsidise the cost of premium motor spirit (PMS) under the guise of under-recovery raises very serious issues of constitutionality and legality. The so called under-recovery is done without legislative approval by way of appropriation. The agency involved in this constitutional gaffe is the Nigerian National Petroleum Corporation (NNPC), which is presently led by President Muhammadu Buhari, who doubles as the substantive minister of Petroleum Resources. It is imperative to establish the preliminary facts. The first is that no one can deny the fact that the resources being managed by the NNPC are Federation Account revenues which should accrue to the Distributable Pool Account established under S. 162 of the Constitution. The Account is owned by the three tiers of government – the federal, state and local. The second fact is that NNPC and the minister of state, Petroleum Resources, Dr. Ibe Kachikwu have told Nigerians that the landing cost of a litre of petrol is now N171, which is N26 above official pump price of N145, and the NNPC, through the process of under-recovery, absorbs the extra N26 per litre.
The third fact is that NNPC unilaterally and without empirical evidence increased the volume of the national consumption of PMS from 35 million litres a day to 60 million litres, with a difference of 25 million litres a day. This is an additional N525 million a day in terms of the price of PMS being subsidised under the new under-recovery structure. If the entire 60 million litres a day are used for the calculation, we have a figure of N1.260 billion every day in terms of subsidy. There can be no scenario more licensing of corruption and arbitrariness for an executive agency to jerk up the quantum of products it withholds money on, without the oversight of other agencies that have no pecuniary interest in the matter.
Under-recovery…denote(s) the notional losses that oil companies incur due to the difference between the subsidised price at which the oil marketing companies sell certain products like diesel, fuel and kerosene and the price which they should have received… For under-recovery to legally take place, it must be supported by extant legal provisions.
The fourth fact is that Nigeria has been running a regime of fuel subsidy under the regulatory leadership of the Petroleum Products Pricing Regulatory Agency (PPPRA). The PPPRA is an agency set up inter alia to determine the pricing policy of petroleum products; maintain constant surveillance over all key indices relevant to pricing policy and periodically approve benchmark prices for all petroleum products; and identify macro-economic factors with relationship to the prices of petroleum products, and advise the Federal Government on appropriate strategies for dealing with them. The current pricing regime has no input from the PPPRA. Evidently, the Nigerian practice had been one of subsidy and it appears that subsidy is what the extant legal regime can validate.
By virtue of section 80 of the Constitution:
“(1) All revenues or other moneys raised or received by the Federation (not being revenues or other moneys payable under this Constitution or any Act of the National Assembly into any other public fund of the Federation established for a specific purpose) shall be paid into and form one Consolidated Revenue Fund of the Federation.
(2) No moneys shall be withdrawn from the Consolidated Revenue Fund of the Federation except to meet expenditure that is charged upon the Fund by this Constitution or where the issue of those moneys has been authorised by an Appropriation Act, Supplementary Appropriation Act or an Act passed in pursuance of section 81 of this Constitution.
(3) No moneys shall be withdrawn from any public fund of the Federation, other than the Consolidated Revenue Fund of the Federation, unless the issue of those moneys has been authorised by an Act of the National Assembly.
(4) No moneys shall be withdrawn from the Consolidated Revenue Fund or any other public fund of the Federation, except in the manner prescribed by the National Assembly.”
Also, S.162 of the same Constitution makes provision for a special account known as the Federation Account into which all revenues collected by the government of the federation, including oil revenues, shall be paid into. The exception is the proceeds from the personal income tax of the personnel of the armed forces of the federation, the Police, the Ministry of Foreign Affairs and residents of the Federal Capital Territory, Abuja.
Unfortunately for now, under-recovery is not recognised in Nigeria’s constitutional jurisprudence and any provision in any law purporting to grant such power to the executive cannot stand the test of constitutionalism. The executive cannot continue to spend public resources by fiat without seeking the approval of the legislature.
The foregoing shows that the legislature, in establishing the PPPRA, had provided for a subsidy regime to ensure that the price of PMS is in tandem with economic realities. On the other hand, under-recovery is an executive decision for the expenditure of public funds without seeking the approval of the legislature. The president is very much aware that under the current economic dispensation, Nigerians may formally not be disposed to any further increase in the price of PMS. But informally, in many parts of the country, PMS never gets sold at N145 per litre and majority of Nigerians are paying more for PMS. Thus, the resort to NNPC importing PMS, paying itself or withholding money due to the Federation Account, cannot be justified under the extant constitutional regime.
Under-recovery has been a term used in the Indian petroleum sector to denote the notional losses that oil companies incur due to the difference between the subsidised price at which the oil marketing companies sell certain products like diesel, fuel and kerosene and the price which they should have received for meeting their cost of production. For under-recovery to legally take place, it must be supported by extant legal provisions. Unfortunately for now, under-recovery is not recognised in Nigeria’s constitutional jurisprudence and any provision in any law purporting to grant such power to the executive cannot stand the test of constitutionalism. The executive cannot continue to spend public resources by fiat without seeking the approval of the legislature.
It has therefore become imperative for the National Assembly to take steps to halt this arbitrariness and the unconstitutional action of the NNPC which evidently has the authorisation of Mr. President. If the president is interested in maintaining the price of PMS at the extant value, he should make a formal request for a subsidy regime which will be vetted by the National Assembly before approval. Finally, we reiterate that spending without appropriation is an original sin against the constitution and we dare say, constitutes an impeachable offence, especially when a pattern of ignoring the legislature is emerging; from under-recovery to the Tucano aircraft scandal.
Eze Onyekpere and Gregory Okere wrote from Abuja.
