Subsidy Probe report, Revelations.

On Wednesday, the 18th of April 2012, the report of the eight member Ad-Hoc committee of the House of Representatives on the issue of subsidy on Petroleum products was released. The report has since thrown more light on the shadowy operations of major players of the oil sector and exposed the deep rot that has eaten into the sector. When the Federal Government announced the withdrawal of subsidy from oil products on the first day of January 2012, not a few people took to the streets to protest what they saw as an insensitive move by the government. Given to the superstitious nature of majority of the populace, a lot of people faulted the president's choice of the first day of the year to announce what they saw as bad news. For them, the remaining 364 days were threatened by the president's action. But I digress.


The Ad-Hoc committee of the House of Representatives which held public hearings from 16th of January 2012 to 9th of January 2012, took sworn testimonies from 130 witnesses, received information from several volunteers as well as over 3,000 volumes of documentary evidence has finally revealed to Nigerians the massive theft going on in the oil sector. It has made it even more obvious that the problem of corruption is a deeply entrenched social problem that may likely never go away. In the report, the Nigerian National Petroleum Corporation (NNPC) and Petroleum Products Price Regulation Agency (PPPRA)appear to be the forefront of a scam being perpetuated against the Nigerian people. The Petroleum Subsidy Fund (PSF) which was established in 2006 as an intervention fund to stabilize the domestic prizes of petroleum products against the volatility of international crude and product prizes has been used as means to siphon trillions of Naira which could have been used for other developmental goals of the government. Between 12th-13th January 2009, 128 payments of equal amounts of N999 million totalling N127.872 billion were made to unnamed entities from the Petroleum Subsidy fund, but that is just one of the many incidences of disappearing monies meant to alleviate the suffering of the people. 




THE MAJOR PLAYERS


1) The Nigerian National Petroleum Corporation (NNPC) 


A beneficiary of the subsidy on petroleum products, from the period of 2009-2011, NNPC claimed subsidies from both the PSF and also made direct deductions from the domestic crude receipts accruable to the Federal Government. The corporation also made deductions that were above the prescribed NGN 540.419 Billion limit, over deducting the sum of NGN285.098Billion with its withdrawal of NGN844.944Billion. The report revealed that NNPC illegally paid subsidies on kerosene to itself after the presidential order of late president Musa Yar Adua to withdraw subsidies from the product. While affirming that it makes savings of about N11.00 per litre on locally refined products, NNPC does not reflect this cost differential in its claims to subsidy, thereby collecting excess subsidy on locally refined products. NNPC also granted discounts on 445,000 barrels of domestic crude everyday to itself by selling below international market prices pocketing the sum of N108.648 Billion. 


2) Petroleum Products Pricing Regulatory Agency (PPPRA)


In 2009 and 2010, the Agency approved payment of a total sum of N158.470 Billion and N157.894 Billion to itself from the PSF account operating in its name in CBN. It also flouted its responsibility under the PSF scheme to monitor and verify data at depots and jetties as its staff colluded with some oil marketers to defeat the envisaged purpose of the monitoring and verification. The report alleges that PPPRA allowed proliferation of importers into the scheme so that importers increased from an initial figure of 6 in 2006, 36 in 2007, 49 in 2009, and 140 in 2011, putting a strain on the PSF scheme. It is also alleged the Agency kept another undisclosed account from the PSF account where it paid money to itself. 


3) Federal Ministry of Finance (FMF)


The report alleges that in outsourcing the responsibility of witnessing and confirming imported products to the accounting and audit firms of Akintola Williams Deloitte in 2006, and Olusola Adekanola and Co. in 2011, the ministry gave room for the escalation of subsidy claims and also led to the lack of professional care in auditing marketers’ claims based on quantity, exchange rate and crude price. The report implies that the lax attitude of the ministry towards its constitutional responsibilities and a blanket approval given to NNPC made it possible for the corporation to be able to deduct subsidy payments to itself as a first line charge, thereby reducing the distributable pool from which states and local governments get shares.


4) The Department of Petroleum Resources (DPR)


The report claims that the DPR which is saddled with the responsibility verifying the quality and quantity of 108
petroleum products imported and supplied by marketers, as well as monitoring products supply and distribution chain, and enforcing prices set by the guidelines, could not provide verifiable information on the quantity of products supplied, especially between 2009 and 2011. The DPR turned a blind eye to the regulation of the quality of Premium Motor Spirit (PMS) commonly referred to as Petrol so that both leaded and unleaded petrol were imported into the country and sold for the same price to unsuspecting Nigerians. The report states "As a result of the inability of DPR to monitor the importation, distribution and sale of petroleum products nationwide, they have no records to establish daily consumption and product stock levels across the country."


The above mentioned agencies are just one of the many culprits implicated in the subsidy scam by the recently released report. It has become impertinent that reforms are introduced into the petroleum sector to save it from corrupt practices. I hope that the Federal government heeds the call of members of the committee that compiled this report to look into the CBN's requirement of FOREX for importers who load their product outside Nigeria's territorial waters as this has made operators resort to carrying out illegal operations offshore neighbouring West African countries in the absence of knowledge of those countries. The report implies that rather than the subsidy benefit millions of Nigerians who it was initiated for, it has rather benefited other African countries where subsidized fuel is being smuggled to. As recommended by the report, I also believe that the Petroleum Product Prices Regulation Agency (PPPRA) should be made autonomous through amending the PPPRA Act as the current situation where it is being supervised by the Ministry of Petroleum Resources whose minister incidentally is the chairman of the board of NNPC (A major importer/participant in the PSF scheme) defeats the principles of checks and balances. The powers of NNPC should also be curtailed as its status as payer/payee/importer/regulator has led to abuse of power. The Federal Government should also look into NNPC's bypassing of Nigerian flagged vessels in favour of foreign vessels which leads to a loss in jobs for Nigerians. Record keeping should be made a priority to discourage siphoning of funds meant to develop the country. The reorganizing of the ministry of petroleum resources will go a long way in restoring sanity to the system so that outright theft, mismanagement of refineries, corrupt government officials, and fuel hoarding marketers will be a thing of the past. All eyes are on the president now that the cat has been let out of the bag. Hopefully, the EFCC and her sister agencies are already swinging into action.




- By Umari Ayim


Download Entire Report Here


http://pdfcast.org/download/house-of-assembly-report-on-petroleum-subsidy.pdf

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