Integrated Oil and Gas Limited is one of the companies that has had it rough with the subsidy investigations; in this exclusive interview with Clara Nwachukwu and Kunle Kalejaiye, its Executive Chairman, Capt. Emmanuel Iheanacho, a former Minister of Interior tells Sweetcrude that the guilty parties should pay. Excerpts:
What has been the effect of the subsidy probe that began five months ago on oil marketers?
The subsidy issue has really caused us a lot of problems. This is something that started about five months ago when allegations were badly circulated about monies that were paid on the PSF programme.
We saw our name included in the report of the House of Representatives, which was really out of the blue that the sum of N13.2 billion has been drawn and we were very surprised because, there was no such thing, because every penny that we draw from the subsidy is very well accounted for in the records and it is derived simply from an arrangement that we have with the PPPRA, whereby we import petroleum products and we sell the petroleum products at control prices indicated by government and we then go back to the same PPPRA to give us an authorized issue, authorization to import the products in the first place to recover the difference between the actual selling price and the cost of importing the product.
So when we saw the N13.2 billion allegations, we were very startled and we have since of course gone to court to challenge the people who made those allegations to try to substantiate those allegations because we know for a fact that it was absolutely untrue.
We know also that, subsequent to the first report by the House of Representatives, Aigbgoje Aig- Imoukhuede ministerial committee was set up actually to look at this matter. The Aig-Imoukhuede committee worked with the records that they had at the time and came up with a different set of observation. Again, they stated that some money was received but it was completely different from what they said was in the House of Representative report.
A lot of people complained a lot of marketing companies who felt that the Aig-Imoukhuede report really had not addressed the issue and in reality a lot of thing they said were incorrect. So, again the first committee was disbanded, the second committee under Imoukhuede was set. We have been at it for nearly four to five months.
The effects that this has had on our businesses is that, in all of that time, we have not been able to trade any cargoes on our account and our fixed cost that is what characteristic of the business that we are in. We have fix cost in terms of the cost of maintaining all those who work in our tank farms and within our ships and those cost are there and we continue to pay them.
As far as it concerns us, we are owed a huge amount of money under the PSF scheme, by our own account we are owed about N8.4 billion and this money has been outstanding for a long time. But what worries us is that from time to time, we see publications that is made by the ministry of finance saying that we have been paid, they have made it about twice and in all of that we have not actually received anything from them, so we have not been paid we are still owed about N8.4 billion and if we don’t find that money and pay back to the banks who advances us those money in first place to buy the products, then we will be in serious trouble, so we are still waiting to be paid those monies that are outstanding to us.
The first time they made the publication, we have not been paid any money, if you recalled that there was a face-off between the unions in the oil industry and ministry of finance and at the end of the day it was agreed that the minister of finance would go forward and pay oil marketers. Subsequently, a publication was put out that we have been paid, but we have not been paid. On this occasion they talked about the publications that came out last week that shows that we have been paid but we have not been paid.
I have information that approval have been given for us to be paid. I have to explain to you that the payment comes in tranches because we are owed a batch of N2.8 billion, another batch of N2.7 billion and another batch of N800 million. And we have actually sourced money, a further loan from the bank to go and pay the PEF and the admin charges for the N2.8 billion.
When we went there to collect the money, we did not see that money at all. We were paid the N1.3 billion and we did not understand why that was the case and we have since advised them that we would rather collect full amount in respect of which we have already paid the PEF and other charges.
I don’t want to comment on how much they have paid, I’m just trying to get the monies that are due and outstanding to my company. If they say that they pay N289 billion, it well could be the case, all I am saying is that we are owed an outstanding both in terms of subsidy, PSF refunds that are due in terms of deduction that they had made.
In terms of interest payments, about N8.4 billion that is what we are owed and the sooner we are paid that money, the sooner we can go back into importing and distributing petrol because, in the past five months, we haven’t done it. Our business is absolutely under extra -ordinary stress and we would like to really get back in doing our business, creating jobs in the industry, and in creating profits in the economy.
When Pipelines are in good condition, do we still see oil marketers importing petroleum products?
That is not the reason why we import fuel into the country, it is not because pipelines are bad, it is because there is deficit when you look at the quantity that we consume on a daily basis and what is produced in our refineries, we do not produce enough to satisfy local demand and also the issue of the problem with the pipelines, then there is a need to import products and distribute it through channels other than the pipelines, that is to say road transport.
Can the money used in setting up a tank farm business be used to build more refineries in the country?
I agree with you that the solution to our problems is to build refineries. But there are some institutional problems that need to be dealt with in relation to that proposal.
For instance, refineries require very expensive equipment or facilities and not a lot of people have the money that they can simply go to their pocket and bring the money to build the refineries, they have to go to the banks. So if you go the bank, you have to do a detailed feasibility proposal and to how you are going to recover the outlays in the investments and pay back the loans that you borrowed.
Now if you are operating in a regulated environment, where the price you are to sell the products is determined not by market forces but by government, then a lot of banks and financial institutions are skeptical and they will never lend you the money to take out investment in refinery capacity.
So it is very important that when we talk about the requirement for us to build refineries, yes, it is a solution to our problems, but, we have to deal with the institutional and market arrangement so that who so ever will be investing in refinery should be at liberty to determine the volume that will be refined and the price at which it would be sold rather than to be dependent on the regulations of the government agencies calling the shot in these variables.
Does it also translate to reduction in petroleum price?
It would certainly translate to reduction in price because, if you refine products where the products is actually produced locally and the transporting of the crude to foreign markets and transporting the refined products back into the Nigeria market is completely eliminated, it is bound to impact significantly on the end price that people pay for the product that is refined. So, certainly to be able to refine and sell products in the Nigeria market would definitely engendered a downward trend in the price of the products that will be consumed.
What has been the response of the banks since oil marketers have not been paid?
I would say that some of the banks have been showing understanding because they know that we are in between the rock and a hard place. The problem we have is that the banks automatically charges interest whether or not it is government or whoever is holding your money.
So, we are the ones that is suffering because at the end of the day, there is no provision in the contract that we have with the banks that says because this is a force-mar-jure and it is occurring within circumstances beyond our control, therefore we will not charge interest, that is not happening.
So the delays, five months starting from when they made the allegation of subsidy been paid to people. It is killing the business, it is absolutely placing marketers under intolerable pains but we are praying to God that this issue will be resolved very soon so that we can go back to doing our business, creating jobs, sustaining them and making profit.
The Role of the PPPRA in the subsidy saga
I know that the PPPRA shares some of the frustrations that the marketers have. The only thing is that the PPPRA is a government agency and there is a limit to what they can be vocal in pushing the case on behalf of marketers.
As far as I know, they are doing the best they can, they are advising based on their experience and they do have a lot of experience in this market to say that some of these issues that have been brought to the fore in regards to how the PSF scheme has been operated and not really as bad as some has been reported. They are trying the best they can, but being a government worker there is limit to which they can indeed articulate some of these issues.