Nigerians have been forced to pay as much as N150/litre of kerosene instead of
the government subsidised rate of N50 because the Nigerian National Petroleum
Corporation, NNPC, chose to sell kerosene to depot owners rather than retail
outlet owners as required of it.
A Report by the Technical Committee
on Payment of Fuel Subsidies, submitted to Mr President and exclusively
obtained by Vanguard, revealed that the NNPC flouted the policy on its
monopoly to import kerosene, which comes in as Dual Purpose Kerosene, DPK, at
subsidized rate to serve the masses.
Rather than deliver the product to
retail outlet owners so that it could benefit the masses for which it was being
subsidized, the NNPC, instead, chose to sell it for patronage, or what the
committee described as “rent” to depot owners.
The struggle to buy Kerosene, an
household commodity for cooking, becomes more challenging even at a NNPC petrol
Station in Lagos. Photo by Lamidi Bamidele
The depot owners who got the product
at N40.90/L ex-depot price, in turn sold it to marketers and retail owners at
between N115 and N125/L depending on the operator, a development that led to
the masses buying the product at 300 per cent increase at N150/L instead of the
recommended price of N50/L.
“The distribution of DPK which was
being imported solely by NNPC was skewed in favour of depot owners who have no
retail outlets. Two-thirds of the kerosene sold by NNPC between 2009 and 2011
was sold to depot owners and “middle men” who in turn sold the product to
owners of retail outlets at inflated prices of between N115.00 and N125.00 per
litre (compared to the ex depot price of N40.90), leaving consumers to pay
higher prices than the N50.00 per litre directed by Government,” the report said.
It added: “For several years now, the
country has been incurring huge subsidy bills for kerosene and its citizens are
not receiving the benefit – instead the country has been financing “rent” for
the middlemen.”
NNPC has many mega stations and
retail outlets
MOMAN – is the Major Marketers Association
of Nigeria, which members include Mobil Oil Nigeria Plc; Total Plc; MRS Oil Plc
(formerly Chenron Oil Nigeria); Forte Oil Plc (Formerly AP); Oando Oil Plc; and
Conoil Plc. The association controls nine per cent of retail outlets with 2,453
owned by members
IPMAN – Independent Petroleum Marketers
Association of Nigeria, own in joint venture with Purebond of UK, the Nigerian
Independent Petroleum Company, NIPCP Plc, and has about 23,026 member retail
outlets to control 85 per cent of the retail market.
DAPPMA – Depot and Petroleum Products
Marketers Association are the owners of the tank farms and petroleum storage
facilities and only 403 member outlets and controls only four per cent of the
market. Yet, they got between 60 and 70 per cent of the kerosene.
Further investigations revealed that
because kerosene comes in as DPK, the depot owners preferred to divert the
product for aviation turbine kerosene, ATK, or Jet A1, to reap higher profits
from the product as opposed to selling it as House Hold Kerosene, HHK, which
the masses rely on for domestic energy to cook their foods and light their
lanterns.
Yet, the NNPC collected the sum of
N331.55billion as kerosene subsidy for 2011 alone, when hardly any
Nigerian could buy the product at N50/L.
This has remained since 2009, a
situation that led to the acute scarcity of kerosene for the greater part of
the last three years.
The report, which revealed how oil
marketers and petroleum dealers allegedly perfected series of fraud through
products imports that led to the payment of over N2 trillion as subsidy claims
in 2011 alone, also showed that in all the established cases of malfeasance,
the regulatory agencies colluded with the concerned parties to boycott due process
for the importation of the particular product.
NNPC flouted presidential directive
In the case of kerosene, the
situation was so bad that late President Umaru Musa Yar’Adua, on June 15, 2009,
ordered the NNPC to stop making further deductions as claims for subsidy on
kerosene.
“In spite of a directive issued by
President Yar’Adua on June 15, 2009 that NNPC should cease subsidy claims on
kerosene, PPPRA resumed the processing of kerosene subsidy claims in June 2011
and NNPC resumed the deduction of kerosene subsidy claims to the tune of N331
,547,318,068.06 in 2011,” the report revealed.
The report noted that: “The current
lack of regulation (of subsidy claims) has led to NNPC’s introduction of
practices that are not permitted or recognised by the current PSF guidelines
that if unchecked by NNPC’s internal control mechanisms may allow for
significant leakages.”
Checking fraud through forensic audit
To discontinue the criminalities, the
committee called for a forensic audit of the NNPC’s subsidy payment process.
This it said, is because “while the committee conducted detailed reviews of
several aspects of the subsidy payment process, it noted that the process for
NNPC is significantly more complicated than the process for the private sector
and would require a thorough forensic audit.”
It therefore urged the Federal
Government to “appoint consultants to carry out the forensic audit of the NNPC
subsidy claim process. This is without prejudice to the committee’s
recommendations on the process from its high level review.”
It further recommended that such
audit should cover, among others:
*Funding for subsidy paid to NNPC
*Process for determination of
products imported by NNPC
*Documentation for NNPC’s
transactions for imported petroleum products
*Verification of documentation with
NNPC’s suppliers and other agencies involved in the discharge of petroleum
products – e.g. DPR, PPPRA, Government auditors, independent inspectors, e.t.c.
*Review of documentation submitted to
PPPRA by NNPC
*Review of PPPRA’s certification
process for NNPC subsidy claims
*Reconciliation of the deducted
subsidy claims from the proceeds of crude oil sales by NNPC to the subsidy
claims certified by PPPRA.
Committee’s recommendations.
Since the poor Nigerians were
obviously not getting the benefit of the huge cost to the nation in kerosene
subsidy, the committee further urged the federal government to also:
Allow both private importers who meet the eligibility requirements of the PSF
guidelines and NNPC to import kerosene and pay kerosene subsidy under the
PSF. The role of private importers in the distribution of the product
should be monitored properly by PPPRA and DPR. Eliminate the current financing
of rent for a few by restricting NNPC’s local distribution to only groups that
own significant retail outlets – i.e. MOMAN, IPMAN and NNPC Retail at the
approved ex-depot price.
The Committee recommends that NNPC’s
roles in the downstream petroleum industry be regulated appropriately by the
existing regulatory agencies in the industry i.e. PPPRA and DPR.
The Committee recommends that:
*PPPRA must always regulate and
determine the quantity of products to be imported by NNPC in line with its
mandate and the current allocation process for NNPC. All importation of
products by NNPC (within or outside PPPRA approved quotas) must be approved by
PPPRA. A rigorous process of volume control that will facilitate identification
of red flags will reduce malpractices in subsidy claims.
*That accounting best practices
should be adopted by NNPC to enable separate audit trails of sales proceeds of
imported and locally refined petroleum products and to determine the cost of
domestic refining of petroleum products.
*That Government should always give
documented and clear directives to avoid ambiguity, indiscretion and to
encourage compliance. Given the significant financial impact of the NNPC
subsidy process on the finances of the nation, appropriate steps should be
taken by Government to document and legalise the process for NNPC’s subsidy
claims in a transparent and unambiguous manner.
*That the relevant Government
agencies such as PPPRA and DPR in line with their mandates as regulators and
others such as the Ministry of National Planning, Federal Bureau of Statistics
e.t.c. using the information at their disposal on locally refined, imported and
stored volumes of petroleum products should be mandated by Government to
continually determine the nations’ daily consumption levels of petroleum
products independent of the industry operators.
*The allocation of kerosene directly
to marketers with retail outlets, specifically IPMAN, MOMAN and NNPC Retail
based on the strength of their retail outlets. This will ensure that the impact
of the subsidy will be felt by the masses. In addition, the permit to import
DPK should be liberalized to include the marketers who meet the eligibility
criteria under the PSF guidelines and the subsidy regulated under the PSF
scheme as currently obtains for PMS.
In the long run, the option of using
cooking gas should be explored. It is expected that the cost of subsidising
kerosene would be saved if more Nigerians embrace the use of LPG. In addition,
the Committee is unable to recommend payment of subsidy claims on DPK in view
of the extant presidential directive of June 15, 2009.
The Committee
It would be recalled that the idea of
the Technical Committee on Subsidy was hatched on February 28, 2012, and was
meant to “review outstanding claims for fuel subsidies,” as fallout of the
stakeholders’ meeting of the downstream petroleum sector.
The meeting was chired by the
Coordinating Minister of the Economy/Minister of Finance, Dr. Ngozi
Okojo-Iweala, who constituted the 10-man committee on April 17, 2012, headed by
the Group Managing Director/Chief Executive Officer, Access Bank Plc, Mr.
Aigboje Aig-Imoukhuede.
The terms of reference included to
authenticate the backlog of outstandingpayments of subsidy payments to
marketers in 2011; verify the legitimacy of backlog of claims already submitted
by marketers for 2011; and review any other pertinent issues that may rise from
the exercise.
Other members included the Director
General, Budget Office of the Federation, Dr. Bright Okogu; Director General,
Debt Management Office, Dr. Abraham Nwankwo; Accountant General of the
Federation, Mr. Jonah Otunla; Executive Secretary, Petroleum Products Pricing
Regulatory Agency, PPRA, Mr. Reginald Stanley.
Others were the Group Executive
Director, Finance and Accounts, NNPC; and representatives of the CBN, Bankers
Committee as well as major and independent marketers.
If yоu would like tо get a great deal from this article then you
ReplyDeletehаve to apply such methods to уouг won blog.
my blog: wedding photographer salary
My webpage :: fotografo de bodas españa
I waѕ able to find goοd advice from уour articles.
ReplyDeleteHerе is my раgе ...
fotografos de bodas baratos
Good day! This is kind of off topic but I need some guidance from an established blog.
ReplyDeleteIs it difficult to set up your own blog? I'm not very techincal but I can figure things out pretty fast. I'm thinking about creating
my own but I'm not sure where to begin. Do you have any ideas or suggestions? Cheers
My web page software development company new york