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THE NATION ON SUNDAY JANUARY 22, 2012
News Analysis
FUEL SUBSIDY Tracking the leaks and leeches The shocking accounts of how the country loses 24 million litres of petrol daily to the nefarious activities of some saboteurs who smuggle the products to neighbouring countries on a daily basis, has left many Nigerians terribly scandalised, reports Ibrahim Apekhade Yusuf
“M
AY we live in interesting times”, so says a Chinese proverb. For many Nigerians who have been following the sordid revelations, if not morbid accounts of how the country’s oil wealth has been stolen with impunity in the past few decades or more, these are certainly interesting times! The startling revelations In the view of some discerning Nigerians, the outcome of the ad-hoc committee investigating the petroleum subsidies saga is the stuff of what real blockbuster movies are made of. When Petroleum Minister, Diezani Alison-Madueke appeared before the House Committee last Tuesday, she indicated that Nigeria’s daily consumption of fuel was 35 million litres. But the Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Reginald Stanley, gave further insights on Wednesday when he appeared before the lawmakers. He gave a figure that was at variance to that of the minister. He said the volume of fuel actually imported was 59 million litres per day. He added that payment for imported fuel as well as smuggling has been going on since 2006. “In the past, what was discharged was what was paid for. That is what I met on the ground.” Stanley said the figures of consumed PMS since the beginning of the subsidy were arrived at through two different approaches of the actual or the Gross Domestic Product (GDP) growth. He said: “In 2007, our GDP growth was 6.4. That was statistically sound, while in actual fact, what was recorded as our consumption on PMS was 26million litres per day as against 27million litres per day. The variance was very minimal. “For 2011, the figure quoted was 35million litres per day, while the GDP growth rate put it at 36.3million litres per day. So, the variance was also minimal. The projection for 2012 is 39.2million litres per day. These figures cannot be faulted.” While reacting to the revelation, chairman of the House Committee, Farouk Lawan raised further posers: “How could the nation be made to pay for 59million litres daily when we consume only 35million daily? The balance of 24million litres per day might be the area of sharp practices.
By making that provision, you are encouraging smuggling because we know that this 24million litres balance would simply be smuggled out of the country since it has been paid for already and we cannot consume it.” Expatiating, he said: “Taking 2011, for instance, per day discharge was 59million litres and, consumption, from what was presented to us here, was an average of 35million litres per day. What that means is that there is a gap of 24million litres per day being funded by Nigerians as subsidy that was not utilised by them.” “Moreover, it was stated that we do not have enough storage capacity for this unaccounted for fuel that could possibly be used at the end of the year.” Cost of smuggled products According to Adebowale Adesanya, an economist, the best way to determine the cost of smuggled fuel outside the country in the last one year is by simply subtracting the difference between the actual 35million litres consumed and the 59million litres imported. “The subsidy the country pays on the 24million litres that is not even utilised by Nigerians is approximately N 670billion on petrol it did not consume in the last one year”, he stressed. Continuing, he said: “If we backdate it to about three years, what we may discover is that the country could probably have been losing trillions of naira to a clique who have held the country by the jugular these past years.” Customs’ can of worms Like the PPPRA, men of the Nigerian Customs Service (NCS) also had their day at the public hearing, when the Deputy Comptroller-General of Customs, Julius Ndubuisi Nwankwo, who represented Comptroller-General, Abdullahi Dikko Inde, disclosed that the bulk of fuel imported did not follow due process. Nwankwo said no invoices were attached during clearance of fuel, adding that “as we speak, most of the importation of PMS has no documentation.” “The NNPC does not make any documentation to the Customs. Several meetings were held where the NCS was directed not to ask for documents. The Ministry of Finance wrote to NCS, warning them not to ask for documents because this will cause crisis.” Besides, he revealed that NNPC never berthed the mother vessels at Nigerian ports, contrary to the provi-
sions of the extant laws. “Vessels imported into this country are referred to as mother vessels. These mother vessels never get to the ports in Nigeria. The vessels are normally anchored offshore. If you see the manifest covering these imports, what you will see is ‘offshore Cotonou, offshore Lome.’ “They never get to the ports. Rather, you have smaller vessels that pick these products from the mother vessels and they come to the ports to report to the Customs – in line with the provision of the enabling Act of Customs. “These mother vessels do not report to Customs. Customs does not board mother vessels; we can only board vessels that are anchored within our territorial waters. The smaller vessels take these products to the ports.” He said NNPC has failed to pay duty on imported Premium Motor Spirit (PMS) worth N45 billion to Customs from 1999 to 2002 when the duty was formally suspended by the Federal Government. Nwankwo said to ensure transparency, the Nigeria Extractive Industries Transparency Initiative (NEITI) should conduct forensic audit of all the ships in Nigeria and from exporting countries. While he condemned the corruption in the oil and gas sector, Nwankwo said there was no documentation of PMS imported by NNPC into the country and that only independent oil marketers attempted to document importation. According to him, the Federal Ministry of Finance had in a letter sent to Customs warned that any insistence on enforcing Customs rules (SEMA) would cause untold hardship and petrol scarcity. NEITI while corroborating the allegation by the NCS said the management of the country’s crude oil and importation of petroleum products by the NNPC was deficient in transparency. Payments made in respect of fuel subsidy by the NNPC “lack transparency and due process”, said NEITI chairman Prof. Assisi Asobie. According to him, subsidy payments should be made from the Central Bank through the Petroleum Fund, but that
•Babangida •Buhari
•Obasanjo •Inde
has not been the case with the NNPC. His words: “This clear due process is not followed by the NNPC. NNPC estimates the subsidy entitlements and deducts the estimated amounts directly from the domestic crude proceeds before remitting the rest to the Federation Account.” He noted that during the audit of the oil and gas sector for 2006 and 2008, NEITI discovered inadequacies that complicated the problem of accurate determination of volume of imported petroleum products. According to him, “the measurement methods used by the PPMC and DPR are not in accordance with best practices. Even then, they are not consistently applied and cannot be relied upon.” The NEITI chair noted that the systems for recording the movement of refined products through the PPMC pipeline are outdated, paper-based and subject to error. Rebuttal For observers who have watched the unfolding drama of the huge scandal in the sector, one common fact which resonates among the dramatis personae is the trading of accusations. Responding to claims made by Customs and NEITI, the NNPC Group Managing Director, Austin Oniwon, said at no time did he illegally take money out of the Federation Account for subsidy payment.
He said: “Let me put it on records that I have never taken money from the Federation Account. The same way this Act allows the NNPC to deduct cash call before the balance is paid into the Federation Account, is the same way the bill allows the NNPC to deduct subsidy before the balance is paid into the Federation Account. “If we are not quarrelling about deductions of cash calls, which is allowed by the same law, I am always at a loss when I am being accused that I am touching the Federation Account. “We don’t take money from the Federation Account. We take as provided for by the law. But the adequacy or inadequacy of what was provided for is a question I believe the Ministry of Finance will be able to talk about. “So, I do not touch the Federation Account. I do not intend to touch the Federation Account and in a totally deregulated environment without subsidy, nobody would have any recourse to deduct anything at all. “I only deduct what is authorised by PPPRA. Once they give me the certificate, after checking with all authorised inspectors and auditors, it is that value that constitutes what is deducted as per the Appropriation Act. “I don’t go outside that. So, it is not for me to determine what is deducted from the crude’s value. Before I deduct,
“The NNPC does not make any documentation to the Customs. Several meetings were held where the NCS was directed not to ask for documents. The Ministry of Finance wrote to NCS, warning them not to ask for documents because this will cause crisis”
I write to the Minister of Finance that the PPPRA has approved it for me. “That is the procedure I have been using and I believe that it is the same my predecessors used. I hope that everybody would join hands to ensure that we move towards a fully deregulated environment where subsidy is placed on production rather than consumption.” On the differential between N360billion against N630billion claim as subsidy for 2008, Oniwon argued that NNPC at no time provided information to NEITI on its operation. He said: “For NEITI, I don’t know how they arrived at that calculation. I have not communicated with NEITI; I never knew where the body got that figure from. I only heard the figure for the first time. We have that document for N630 billion. The N1.348 trillion was the reconciled figure between NNPC, PPPRA and Ministry of Finance.” Oniwon added: “It was the arrears of N250 billion for kerosene that was responsible. In the component of N1.3trillion that was presented, N250billion of that was for kerosene and there was kerosene arrears paid at different points, not stated in that document with you. The N1.09trillion was for PMS for the period under review, that is, 2011. “Nigeria was declared a war zone by other exporting countries that forced vessels to pay high premium on insurance as well as on the vessels too. Secondly, the exchange rate to the dollar, whereby we buy in dollar and sell in Naira.” Expectedly, AlisonMadueke told the committee