ABUJA (Reuters) - Nigeria’s upper house of parliament plans to investigate an alleged $3.5 billion fuel subsidy fund at state-oil firm NNPC, lawmakers said on Tuesday.

FILE PHOTO: The Nigeria National Petroleum Corporation (NNPC) headquarters are seen in Abuja, Nigeria December 5, 2017. REUTERS/Afolabi Sotunde/File Photo

The Senate alleges NNPC used the fund to subside the price of imported petrol without the house’s approval, the lawmakers said.

Fuel subsidies are a contentious issue in Nigeria, where prices are kept artificially low at 145 naira ($0.48) per litre, often as a populist tool.

That has meant that as fuel prices increase globally, it has become unprofitable for private petrol marketers to import, forcing NNPC to step in to prevent major shortages.

However, state oil firm money spent on subsidies is meant to be included in Nigeria’s national budget, subject to approval by the national assembly.

The Senate President, Bukola Saraki, said parliament would set up a committee to look into the issue.

A spokesman for NNPC said the oil company would await a decision from lawmakers and then decide how to respond.

“We have to call for the resolution (by the Senate), analyse it and respond accordingly,” he said.

In April, the Senate said the state oil firm illegally paid 216 billion naira ($707 million) in fuel subsidies in 2017, which should be reimbursed to the government.

Fuel shortages are a recurrent issue in Nigeria’s energy sector due to the country’s limited refining base and its cap on prices. This often creates long queues lasting hours at petrol stations whenever there is talk of fuel price increases.