By Jide Ajani & Inalegwu Shaibu
Revelations coming from the ongoing joint Senate Committee on Petroleum Resources (Downstream), Appropriation and Finance, probing the management of the subsidy funds are becoming more interesting. The committee established that the scheme has become a bazaar of some sort for all types of businessmen in the petroleum sector. They tagged it an avenue for sharing government’s free money.
It has been established that the Petroleum Products Pricing Regulatory Agency, PPPRA, is key to the success of the management of the funds.
However, operators in the downstream sector have also been discovered to be part of the problem with their sharp practices. Sunday vanguard independently discovered that some of the “so called major operators do not engage in direct importation but in some instances engage the services of portfolio importers who have access to huge funds.
The reason for this, a source hinted Sunday Vanguard, is because of the drive for profits. Whereas some of the majors avoid the huge risks involved in the importation business, it is some of these portfolio importers without retail outlets or tank farms that engage in the massive importation. But is that the law? Is that what the Petroleum Support Fund Act says? No.
But Sunday Vanguard was reliably informed that some three years ago, “it was these same port folio importers who agreed to import when some of the majors refused to import petroleum products.
With the strike action against the removal of the subsidy on petrol last month, things may be about to change for the better.
For instance, Executive Secretary of the PPPRA, Reginald Stanley, while appearing before the House Committee, explained that one of the best ways to really stop the fraud in the management of the fund is the construction of refineries in the country because of the onerous task of monitoring key aspects of the downstream sector regarding allocation, importation, discharge and distribution of petroleum products in the country, especially because of the template of arriving at the pump-head price of the products.
In fact, there were times when the committee had to rely on Stanley’s forthrightness to guide it in asking the relevant questions.
The introduction of petroleum subsidy fund by the Federal Government was to provide a safety net for Nigerians in local consumption of petroleum products. Government’s intention was to use the funds to bridge the price gap between local consumption of petrol and importation.
It was designed to make the product affordable for Nigerians as against the high global market price of petrol. The scheme was also another step by government to cover up for its failure to address the problems of not refining crude oil locally.
Some of the major oil marketers that have appeared before the Committee have disclosed how they shared the lump sum of N228 billion from over N1.7 trillion expended by the Federal Government in 2011.
The major oil marketers made up of Con Oil Nigeria ltd, A. A Rano, ASB Investment ltd, Forte Oil Nigeria, Total Nigeria limited and Knight Bridge ltd in their testimonies to the committee gave detailed accounts of their various claims running into several billions of naira even as they denied malpractices in the subsidy scheme.
They denied allegations of round tripping of petroleum products despite admitting that imported petroleum products meant for Nigerian consumption are first taken to Cotonu, in Benin Republic for offloading en-route Nigeria.
A breakdown of the money as shared by the oil majors showed that Con Oil limited got N46. 3 billion as payment for importing 799, 621 million metric tons of petroleum product; A A Rano netted N1.2 billion for one approval of importing 10, 000 metric tons; ASB Investment ltd N3.016 billion as payment for 28,123, 066 million metric tons of petroleum; Knightbridge N3 billion also as payment for importing 75, 000 metric tons; while African Petroleum N130 billion, with unpaid claims N11 billion, reimbursed by the PPPRA after importing 99000 metric tons of petroleum products.
Managing Director of Conoil, Mr. Biodun Wahab, in his testimony to the committee said the company joined the subsidy scheme in 2008 and had its first approval from PPPRA to import 12, 153 metric tons of petroleum products.
He added that the figure rose to 418, 954 metric tons with reimbursement sum of N27.3 billion by the end of 2011.
Members of the committee questioned the sudden rise in reimbursement claims, alleging that it must be due to the mismanagement of the subsidy scheme.
But Mr. Wahab, however, clarified that the increment was due to the fluctuation of oil prices in the international market while absolving his company of sharp practices.
He said, “The cost of crude is a function of the fluctuation in the international oil price which you have to manage. When you look at the price of crude today, it is not as the same as 2009, and 2010. There is document to back this, we do not do any sharp practice, we do not share vessels with anybody, and we take oil to Cotonu for ship to ship transfer because of insecurity at the Lagos port.”
Managing Director of Duport Marine, Mr. Tosin Odusanya, admitted before the committee that he got N5.2 billion for importing 50, 000 metric tons of petrol even though the company had no tank farms and retail outlets.
“We do not retail, we sell ship load to retailers that include OANDO, Ascorn, Sahara oil and few others” he said.
Awed by the discoveries, the committee promptly summoned some of the key players in the scheme including the management of Keystone Bank and Union Bank to appear before it on tomorrow, Monday with details of transactions and payment of all subsidy claims to the beneficiaries.
Chairman of the Committee, Senator Magnus Abe, who issued the summon also ordered the management of PPPRA and Petroleum Product Marketing Company of Nigeria, PPMC to appear before it tomorrow to explain why approvals were given to unqualified companies.
The summon further include the Chairman of OANDO Nigeria limited, Mr. Wale Tinubu, who was asked to appear following his petition to Major Oil Marketers Association of Nigeria, MOMAN, accusing some oil majors of diverting domestic kerosene for aviation fuel.
Abe said, “Clearly there are some operators we need to talk to and some persons invited to brief us. From our resolution here, we can see that there are brief case companies that were getting approval to import fuel, there are serious operators and those that have invested heavily in the oil sectors.
“The Managing Director of OANDO should do everything to be here next week. We also want the PPPRA, PPMC and the banks that paid for all the transactions to be here because we want to see copies of the transactions and we want to know the criteria PPPRA used in allocating license to the beneficiaries.”
Abe also lambasted the Chief Executive Officer of Knight Bright ltd, Mr. Gregory Enaharo, who claimed that his logistic company got approval from PPPRA to import 75, 000 metric tons of fuel, with accompany payment of over N3 billion.
Mr. Enaharo had earlier told the committee that the company had no tank farm or retail outlet for distribution of petroleum products but however got the approval due to its experience in importing raw materials for oil companies like Mobil oil.
Abe said, “You are one of the brief case companies. You have reimbursement of over N3 billion with the logistics turnover of about N100 million. Does this make you a leading logistics company? You have only supplied valves and bolts, but you got three approvals, how did you do it? You do not even have an office, no storage farm, filling stations what do you have?”
Total Nigeria limited Executive Director, Felix Boni, who also testified before the committee revealed that his company received N43 billion from PPPRA between 2006 and 2011 as subsidy reimbursement. Total also imported 1246 cubic meters of petrol within the period.
A member of the Committee, Senator Danjuma Goje, questioned the arbitrary allocation, marveling why companies like Majope without capacities like Total plc could get 5000 metric tons allocation.
He asked, “Smaller companies with less capacity have received N70 billion and you received less, what accounted for that?”
But Mr. Boni responded saying allocation was at the discretion of PPPRA, adding that the company applied for 90, 000 metric tons but was only allowed to import 45, 000.
Some of the oil companies that appeared before the Committee picked at the PPPRA’s modus of allocating quantities of petroleum products imported by oil companies.
They called for improvement in the allocation of quantity of oil to be imported, adding that presently some of them were importing below the capacity they would have otherwise desired.
It would be recalled that on Wednesday, January 18, 2012, Akin Akinfemiwa, the boss of Forte Oil Plc, appeared before the House Committee.
In fact, till date, no revelation before the committee which is now holding closed door meetings with a view to preparing its report 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”.
But all these said, there is the knotty issue of the 445,000 barrels of crude that is allocated to the Nigerian National Petroleum Corporation, NNPC, for which it is not accountable to anyone how it spends the money generated from its sale. With a lack of capacity to refine the entire 445,000 barrels, yet it takes delivery of the barrels on a daily basis, there is the need to look into the regime of this seemingly absurd allocation. In deed, the audit report of the NNPC raised more questions about the management of funds at the disposal of the corporation, among other issues.