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Subsidy Probe: Revelations and counter revelations

BEN  AGANDE, ABUJA

There is no end in sight to the monumental revelation that has continued to unravel at the Public Hearing by the House of Representatives on the Management of the fuel subsidy regime because more stunning disclosures were unearthed as the committee entered its second week of sitting.

The Minister of Petroleum Resources, Deziani Alison-Madueke, who had been at the centre stage of the investigation yet again refused to be boxed into a  corner since the whole subsidy removal investigation commenced.

It would be recalled that during her appearance penultimate week, Allison-Madueke and her Finance Ministry counterpart, Ngozi Okonjo-Iweala, gave contradictory figures on not only the quantum of fuel for local consumption but also differed on the amount government used in subsidising fuel in the year 2011.

In her bid to demonstrate how government had initiated moves to reform the oil sector, the Petroleum Minister told the adhoc Committee on Fuel Subsidy Regime Monitoring that the government had lined up series of reforms to clear the rot which she admitted has continue to bedevil the oil sector.

Some of the reforms initiated by the present administration, according to her, included the change of leadership of two regulatory agencies namely Nigerian National Petroleum Corporation (NNPC) and Petroleum Product Pricing Regulatory Agency (PPPRA); streamlining of downstream supply system which led to the increase in the capacity utilisation of the existing refineries from 30 percent to 60 percent; reduction in the  incidences of pipeline vandalism; setting up of various task forces on refineries as well as increased production of NTPC from 40,000bpd to 100,000bpd billion barrel per day and targeted 250,000bpd.

Others include inauguration of Special PIB Task Force headed by Udo Udoma; Task Force on Governance and Control as well as elimination of rent seeking and arbitrage and award of contract for the Turn Around Maintenance (TAM) of the existing refineries to the  original contractors.

Taking over Ojota...during subsidy protest

She further noted that President Goodluck Jonathan had directed the Economic and Financial Crimes Commission (EFCC) to look into the books of Nigerian National Petroleum Corporation (NNPC) and other regulatory agencies as part of effort to sanitize the system.

But the Minister’s chest thumbing on what she outlined to check the rot in the petroleum sector came under more scrutiny when she claimed that she was not in possession of the KPMG report that indicted the NNPC, the basis of which she initiated the enumerated reforms.

When she was pressed by the committee to explain how she would take actions based on a report that she claimed she was not in possession of, the Petroleum Minister simply admitted to have seen the report but added that it had not been communicated to her officially.  It is because of this type of double-speak on her part that pour cold water on some of her statements.

On his part, the National President of the Independent Petroleum Marketers Association of Nigeria opened a new vista on what he thinks was wrong with the whole subsidy regime.

According Alhaji Aminu Abdulkadir,  the whole brouhaha on the subsidy regime is because of government’s failure to adhere to good business practice as it has resorted to giving out contracts for the importation of  fuel to what he termed ‘brief case importers’ who neither had the storage capacity nor the retail outlets for such business.

“Why can’t the NNPC follow its sales manual? Everyday, we pay billions of naira to the NNPC, yet we are the ones made to suffer. Speaking grammar or using PowerPoint presentation will not take us anywhere, Nigerians want practical solutions,” he stated.

According to Alhaji Abdulkadir, the oil sector witnessed a drift when relevant regulatory agencies in the oil and gas sector began to patronize those who had no business to import fuel. He revealed that while the IPMAN owns and controls more than 78% of the retail outlet in the country, they only import one percent of the fuel brought into the country.

Alhaji Abdulkadir called for the enactment of a law that would compel marketers and retailers to build refineries in the country in order to ensure that there is less dependence on the importation of fuel which in turn fuel sharp practices.

But the appearance of the Chief Executive Officer of the Oando oil, Mr Wale Tinubu, as well as the Chief Executive Officer of Capital Oil, Ifeanyi Ubah brought a totally new dimension to the understanding of ubsidy as it is presently perceived.

In the words of Mr Tinubu, marketers like Oando were not “beneficiaries” of subsidy, but were being paid for legitimate transactions they were engaged to do. According to him, the money paid to marketers as subsidy was not a profit or windfall but under-recovery arising from the differentials between the landing cost of petroleum products and the official pump price.

He stated that the use of the word ‘beneficiary’ was a misconception as the money was not a special favour from the government but a refund of the actual cost incurred by marketers in the importation of petrol.

He said the marketers spent an average of $30 million to import a 30,000-metric-tonne cargo of petrol but sold the products at almost $15million, while the balance was paid to marketers as subsidy.

“The Petroleum Support Fund (PSF) expected that there would be under-recovery. For example, when the landing cost was higher than the pump price, the government owed us money, which is paid as subsidy. When there is over-recovery, that is, when the landing cost is less than the pump price, we pay back to the government.

For example, during the Yar’Adua administration, when the petrol price was N65 and the crude oil price dropped to $50 per barrel, the marketers paid back to the fund. I remember that Oando paid N1.6 billion back to the Federal Government,” he said.

Going down memory lane, Mr Tinubu said  when the subsidy regime was introduced in 2006, three major marketers, including Oando Plc, participated in the scheme along with NIPCO Plc and the Nigerian National Petroleum Corporation (NNPC), noting that Oando accounted for 53 per cent of petrol importation in 2006 and 47 per cent of subsidy payment.

He however said that the company’s market share in terms of subsidy receipts and petrol importation dropped to 11 per cent in 2011 due to proliferation of companies that participated in the PSF scheme.

When the subsidy regime was introduced in 2006, Tinubu said, only companies that had at least 25 petrol stations and 5,000mt storage capacity were allowed to participate, according to the PSF guidelines.

Like the IPMAN president, he reiterated that the scheme was abused when companies that did not have retail outlets and storage facilities were allowed to participate in the importation business, at the detriment of companies that built capacity.

“In terms of summary of our subsidy payment, we collected approximately N120 billion by the end of 2011 and we imported well in excess of one billion litres or about 700,000 metric tonnes as at August 2011. By the end of 2011, we had imported about 1.3 million metric tonnes into the country,” he said. He said his company had an outstanding N4 billion of unpaid subsidy in 2011.

On the part of Capital Oil’s Ubah, he insisted that what the petroleum products importers were doing was partner with the government of the federation.  He toed the line of Oando’s Tinubu.

But Ubah was more insistent that efforts were already in top gear to make Nigeria a better country.  Even on the touchy issue of local refining, Ubah’s understanding is that Nigerians should be empowered more to engage the business of building local refineries.

“What we are doing as indigenous operators in the downstream sector”, he said, with a calm voice, “is to ensure that we make Nigeria a better country by pulling resources together for the benefit of our people.  We have made great sacrifices and we will continue to make sacrifices in the interest of the people of Nigeria”.

Ubah, who recently had to contend with what appeared to have turned out as wild rumours regarding some financial impropriety is of the view that the indigenous operators in the downstream sector where he is a big player mean well for the country.

The ad-hoc committee praised the presentation by Folawiyo Energy as excellent and detailed. Dipo Makanjuola, the company’s general manager, told the public hearing that Folawiyo Energy  operates a tank farm that services high-end customers efficiently and without demurrage  since its facilities can discharge 45 million litres from any vessel within 24 hours.

The company’s participation in the PPPRA’s petrol support fund, Makanjuola said, represents only 21% of its entire business and it was conducted with integrity and properly documented. With 10.5 metre draught, Folawiyo Energy’s facilities for discharging fuel cargoes is surpassed in Nigeria only by the NNPC-owned Atlas Cove.

With the Hon. Faruk Lawan led committee continuing its sitting tomorrow, it is expected that more revelations would come to light. How soon the House will deliberate and take a final decision on the apparent misnomer in the oil sector would either check the continuing slide and rot in the oil sector of fasten the already deteriorated state of the oil sector of the econ


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