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Revelations from House probe on Subsidy

By Jide Ajani, Ben Agande, & Emma Ovuakporie, Abuja
Never before has an investigation by the House of Representatives generated interest and following as the three week investigation on the management of the subsidy regime on petrol.

It would be recalled that the House of Representatives had empanelled an Ad-Hoc committee chaired by a veteran member, Hon. Faruk Lawan, to investigate the management of the subsidy regime by the executive arm of government and report to the House.

The setting up of the committee was the outcome of the strike called by the Nigeria Labour Congress, NLC, and its affiliate bodies to protest government’s abrupt removal of the subsidy on petrol which had shot up the price of the product by over 100% with the attendant rise in prices of goods and services.

Though the intervention of the House of Representatives in the imbroiglio between the government and organised Labour did not avert the strike, it however portrayed the House as being on the same with many Nigerians who bear the brunt of the debilitating effects of the sudden increase in price of petrol.

The last three weeks of investigation by the committee has unearthed mind boggling rot that pervades the oil sector. Though the House, nay the National Assembly, is not itself clad in shinning armour, the interests generated by the probe would continue to serve as an elixir to the House to pursue the matter to its rightful conclusion.

After the appearances of the so called big wigs like the ministers of finance, petroleum resources, customs, the Petroleum Products Pricing and Regulatory Agency, PPPRA, last week was the turn of other elements in the fuel subsidy ladder who though not as deeply involved as the officials were, nonetheless, represent players who benefited from the subsidy granted by the government.

The Managing Director of Total Nigeria, Mr. Dominique Thiolon was the only chief executive of the oil majors that appeared in person, forcing members of the Ad-Hoc Committee to threaten action against other chief executives of oil companies who failed to appear before it in person.

The appearance of the chief executive officer of Total also provided room for discovery of more discrepancies in the payment of oil subsidy to benefiting companies. While the chief executive of the company claimed that Total received subsidy payments to the tune of N16.1 billion in respect of 211 million litres of petrol in 2011, the Ad Hoc committee was able to provide documentary evidence to prove that the actual subsidy received by the multinational oil firm for the period was N18.8 billion, a difference of N2.7 billion.

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The panel further took Total up on the 2011 subsidy payments, arguing that the payment of N11 billion for 251 million litres of petrol the previous year raised some questions.

The incontrovertible proof by the committee left a flustered Mr. Thiolon to admit that his company got excess payment, but disclosed that the excess fund was returned to the Petroleum Products Pricing and Regulatory Authority (PPPRA), an admission that left a mark on the minds of the members of the committee and created credibility problems for the entire submission of the Chief Executive of the Oil Marketing Company.

Buoyed by this discovery, members of the committee took to task the Chief Executive officer of Total to explain why the payment on the subsidy made to Total appeared to be inversely proportional to the quantity of premium motor spirit imported by the oil marketing firm.

Specifically, the committee members sought to know why payment on subsidy would be more when the company imported less of Petrol into the country.  It appeared as thought he could not provide an answer that satisfied members of the committee.

It would be recalled that on Wednesday, January 18, 2012, Akin Akinfemiwa, Chief Executive Officer, CEO, of Forte Oil Plc, appeared before the House Committee

In fact, till date, no revelation before the committee has been more astounding that Akinfemiwa’s revelations.  The kernel of his presentation was the now notorious Petroleum Support Fund, PSF.

According to the Forte boss, there was an urgent need to revisit the PSF Act of 2006 wherein “it was clearly stated that the conditions precedent for participating in the scheme are the ownership of a tank farm of a minimum capacity of 5,000 MT and a network of retail outlets evenly spread across Nigeria”.  This may appear stringent but the framers of the Act knew what the intendment was.

“Adherence strictly to the PSF Act of 2006”, Akinfemiwa continued, “will bring a lot of sanity into the system as products discharged can be matched with products delivered to known destinations and thus reduce smuggling and diversion”.

Though he said “that every Nigerian is a beneficiary of petroleum subsidy as long as we continue to buy fuel at the pump at subsidised prices”, it did not detract from his observations on the need to apply the PSF Act strictly.

The Act spells out roles for stakeholders.

*“Analysis of the quality specification of the products

*”Verification and certification of the quantity imported/supplied by the Marketers

*”Monitoring of the products supply and distribution chain from the jetties to depots

and the retail outlets”, are among the roles spelt out for stakeholders.

Akinfemiwa’s point was well digested by the committee members.

In fact, the issue of obeying the rules in the breach rather than its observance comes up with the deliberate efforts of some individuals who grant import licence to some marketers who do not have the facilities for storage, nor outlets spread across the country.

The members were so attentive and concerned that they pleaded with Akinfemiwa to “please name some of those companies not qualified but who have been getting licences to import”.

To this, a pall descended on the hall. Akinfemiwa became mute; jaws of some committee members dropped in anticipation of the bombshell.

Smartly, however, Akinfemiwa demurred.  He said it would not only be difficult for him to begin to name names, it would also bother on foolhardiness to so act.

But the committee members offered what they called immunity and further pleaded that Akinfemiwa should write the names and forward.  It has since ended as that: a plea.

Not one to shy away from frankness, the Forte boss still lamented that the payment being made at an average of 120 days to the importers chip away at their profits because funds are sourced at interest rates.  The number of days required is 45!

The appearance of the Executive Secretary of the  Federal Inland Revenue Services, Mrs Ifueko Omoigui-Okauro brought to the fore the enormity of the loss of revenue  incurred by government in the preferential treatment of importers of petroleum products who are exempted from paying tax.

According to her, though taxation is a veritable instrument in raising the revenue profile of the country, those for the importers of fuel was waived by the government because of its likely implications on price and the resultant pains it would have inflicted on consumers

“Tax on petroleum products is a major source of revenue but government had always been sympathetic to the people and that is why the emphasis has been on how to ensure that the burden was not on the consumers. Taxation is a very emotional and sensitive issue but it is a sacrifice we all need to make,” she said.

The explanation that government was bidding its time on the extension of  the same treatment  on imported diesel years after the price of the product was deregulated did not jell with the committee members.

With the investigation of the committee drawing to a close, the ball is now back to the court of the House of Representatives to make far reaching recommendations that would be meant to clear the Augean stable in the petroleum industry. The next few weeks will determine whether the House will toe the path of honour and do the desirable or pander to the caprices of those determined to bring the country to its knees.

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