3 December 2011

Nigeria: Senate Names Fuel Subsidy Cartel

The Senate yesterday unmasked the companies at the centre of the petroleum subsidy fund controversy.

The upper legislatures joint committee probing the management of petroleum subsidy funds revealed, at an investigative hearing, that over 100 companies including construction companies participated in the sharing of N1.426 trillion between January and August 2011, a figure that contradicts that of the Petroleum Products Pricing Regulatory Agency (PPPRA) which put it at N1.348 trillion.

Announcing the names of the benefitting companies, chairman of the committee Senator Magnus Abe complained that some of the companies contained in the list were construction companies that have nothing to do with oil. He further observed that the companies were too many and put the credibility of their participatory process in question.

Abe's complaint came against the backdrop of the observation that, since the public hearing started, the PPPRA has inexplicably shut its website where the comprehensive list of the oil cartel could be obtained.

Among the names reeled out by Senator Abe were: Oando Nigeria Plc - N228.506 billion, MRS - N224.818 billion, Enak Oil & Gas - N19.684 billion, CONOIl - N37.960 billion, Bovas & Co. Nig. Ltd. - N5.685 billion, Obat N85 billion, and AP N104.5billion.

Also on the list were Folawiyo Oil N113.3billion; IPMAN Investment Limited, N10.9billion; ACON, N24.1billion; Atio Oil, N64.4billion; AMP, N11.4billion; Honeywell, N12.2billion; Emac Oil, N19.2billion; D.Jones Oil, N14.8billion; Capital Oil, N22.4billion and AZ Oil, N18.613billion.

Others were Eterna oil, N5.57 billion; Dozil Oil, N3.375 billion and Fort oil, N8.582.

Also, Integrated Oil and Gas owned by former minister of interior Capt. Emmanuel Iheanacho was said to have benefitted to the tune of N30.777 billion, while IPMAN Investment Ltd. picked the sum of N10.9 billion.

However, the N450 billion kerosene subsidies allegedly owed the Nigerian National Petroleum Corporation (NNPC) by the federal government was debunked by officials of the PPPRA. They told the lawmakers that the agency had no record of such indebtedness.

Meanwhile, PPRA's executive secretary Mr. Reginald Elijah, has disclosed that N3.655 trillion was expended on fuel subsidies between 2006 and September this year.

He, however, disagreed with the figures of N1.426 trillion, submitted by the Nigerian National Petroleum Corporation (NNPC) as the amount spent on subsidies as at August 2011, arguing that the actual figure was N1.348 trillion.

The panel also discovered that many of the marketers who were unqualified for the job used false claims to defraud the government. The false claims "lead to drain in the nation's oil and gas industry", said Abe.

According to the panel chairman, prospective marketers were required to own tank farms (petrol depots) of not less than 5000 metric tonnes, and should be registered with the Corporate Affairs Commission (CAC) as oil companies.

"Yet it was discovered that while only 11 marketers own storage facilities, the rest were "throughput" (sharing depots with filling stations) and some were registered construction companies", he regretted.

Nonetheless, the Group Managing Director of the NNPC, Austin Oniwon told the panel that whereas a locally refined barrel of petrol costs $5, with a subsidy of N11.85 per barrel, the independent marketers were being subsidized with N77 per litre of N138.71, amounting to N12,243 per barrel.

While adjourning sitting for Monday next week, Senator Abe directed Oniwon to produce the total amount expended on turn around maintenance from 1999 to date, total dividends accruing to NNPC from the Joint Venture Companies (JVC), names of marketers, investigations conducted, results and subsequent punishments to defaulters at the next sitting.

Meanwhile, the federal government has insisted on the removal of fuel subsidy Minister of information, Labaran Maku has said that the federal government will continue to push for the deregulation of the economy. This, according to him, holds the key to a healthy and robust economy in the future and that the contrary would spell doom for the whole nation. Maku stated this yesterday in Abuja when he paid a visit to the editorial board of leadership newspapers. He noted that Nigeria's economy could not survive without deregulation of the oil sector.

"We have not made any consistent attempt to develop the downstream sector which is Nigeria's number one industry. Because of this attitude we have remained a crude-oil exporting nation.

"We have to shift away from this. The real job in that sector would have been if we are able to turn the Niger Delta into the petrochemical hub for West Africa. It would turn the Niger Delta into a destination. We have not succeeded in this," he said.

Maku stated: "If some of these policies do not come into force then I foresee greater problem in the Nigeria economy. That is what has happened in many countries. Now Asia has reached a level where they now want to export everything. They are now a competitor to Europe. Brazil has joined them. Africa is a destination where this money will come.

"If we do not prepare ourselves with the right policy formulation, what do we do to grow the economy. Presently we are running a capital budget of 25 to 26 per cent.

What will we deliver with that? The only option is to go borrowing but we cannot because we have seen the impact of borrowing. So we must make correct economic policy that will enable the money that will come to go into production, but, in our own case, if we do not make some serious quality review, I can tell you that this economy will run into greater problem" . In the last ten years Nigeria has given out about 20 new licences for refineries none of which has taken off because they are waiting for a government policy.

Deregulation is expected to boost the export of refined petroleum products. But most Nigerians are opposed to the removal of oil subsidy because it has negative economic consequences.

See full interview on Monday.

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