21 August 2012

Nigeria: FG to Reconstitute Auditors to Verify Subsidy Claims

As part of the measures to facilitate the speedy payment of outstanding subsidy claims, the Federal Government will immediately after the Sallah holiday, reconstitute the auditors that worked on the Aigboje Aig-Imoukhuede Presidential Committee report to verify government's outstanding indebtedness to the marketers, THISDAY's investigation has revealed.

The reconstitution of the auditors is meant to enable the Federal Ministry of Finance to continue the payments of subsidy claims to oil-marketing and trading companies (OM&Ts).

This is coming as the government prepares to consider the report of the globally-renowned consulting firm, McKinsey & Company, which was commissioned to formulate foolproof processes and procedures for the highly flawed fuel subsidy scheme in the country.

But despite the finance ministry's effort to speed up payments to oil marketers, the National Union of Petroleum and Natural Gas Workers (NUPENG) Monday threatened to embark on a nationwide strike by Friday, if the outstanding subsidy claims are not paid.

However, commenting on NUPENG's threat, sources in the Ministry of Finance said that NUPENG might have decided on this course of action because its members have succumbed to pressure by some indicted oil marketers who want to avoid prosecution, and are resorting to blackmail and holding the nation to ransom.

A source in the ministry told THISDAY Monday that as part of the meeting last Thursday between the Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, and oil marketers, it was agreed that all claims must be verified.

He said that it was agreed that companies with minor infractions would be asked to resubmit their documents and claims to the auditors and inspectors that had worked on the Aig-Imoukhuede committee report so that it could be established if they had been overpaid.

"Where it is established that they owe the Federal Government, we shall net off what they owe the government against their claims to determine who owes what. It is only when that has been done that companies with claims will be paid," the source explained.

He added that the ministry would not be stampeded into paying subsidy claims on products that are not properly verified, insisting that the ministry must verify the source and validity of imported products before paying subsidy claims.

"What obtained in 2011 where N2.19 trillion was spent on fuel subsidies was unconscionable. The marketers must show us where they brought the products, all the relevant documents and paper trail. It is this that is causing the current rancour.

"The Ministry of Finance and the Petroleum Products' Pricing Regulatory Agency (PPPRA) have changed their approach. If we have to be slower, so be it.

"I believe the Nigerian public will appreciate it. We have also told the marketers that if they owe us and we owe them, we will net off the difference before determining if there are more payments to be made," he said.

The ministry had also stated that between April and May 2012, 14 marketers under Batches D/12 and E/12 were paid N17 billion claims. It also paid an additional N25.6 billion in claims to marketers, since the beginning of July 2012, bringing the total claims paid to 31 oil marketers between April and August 2012 to N42.666 billion.

Following the public outcry that trailed the huge subsidy payments to marketers in 2011 and the attendant mass protests occasioned by the attempt to remove the subsidy on petrol in January this year, the ministry had commissioned McKinsey to look at ways of putting in place better processes of streamlining subsidy payments.

A top official of the ministry told THISDAY yesterday that the ministry would consider the McKinsey report any moment from now.

According to him, the recommendations in the report could help in checking the perceived fraud in the management of the Petroleum Support Fund (PSF).

He said the McKinsey report would be much more desirable now, considering the controversy over the discrepancy in the volume of imported products and the quantity consumed in the country.

A recent controversy arose between the Ministry of Finance on the one hand, and the PPPRA and the NNPC on the other hand, over the projected daily consumption used for the preparation of the 2012 subsidy budget.

While the ministry was said to have insisted on 19 million litres per day consumption, the PPPRA and the NNPC were said to have insisted on about 33 million litres per day.

According to the source in the ministry, the government believes that with its globally acknowledged expertise, McKinsey, "would use their worldwide resources to help us estimate the consumption to provide the authentic figures".

Okonjo-Iweala had disclosed in a recent interview with THISDAY that the ministry had commissioned McKinsey to undertake a report on subsidy management.

"We are not the only ones importing fuel in the world, and it will be interesting with their worldwide experience, to be able to benchmark and tell us where there are loopholes in our processes, and help us think through a better process.

"They are busy doing that, and I hope that the report will be ready soon. And based on all these inputs, we hope to put in place a new process of checks and balances that will enable us to manage better, the payment of subsidy claims," the official said.

The Federal Government has so far paid about N2.19 trillion between 2011 and 2012 on fuel subsidy, which is seen as unprecedented in the history of subsidy payments in the country.

In a related development, the current fuel scarcity in Abuja may spread to other parts of the country as NUPENG yesterday threatened to embark on a nationwide strike by Friday to force the government to pay outstanding subsidy claims to fuel importers.

National President of the union, Comrade Igwe Achese, who gave the notice of strike at a press conference in Lagos, stated that the non-payment of the subsidy claims by government was a breach of the agreement earlier reached with the union.

He said the failure by government to implement its own part of the collective bargaining agreement had continued to threaten the job security of members working for the oil marketers, adding that this has led to the ongoing strike by the union in Abuja.

Achese, who questioned the rationale behind the selective payments of subsidy, alleged that payment was only made to "portfolio carriers" who do not meet the requirements for fuel importation, rather than those marketers who invested in depots and storage facilities.

He condemned what he called the outbursts by Okonjo-Iweala that the union was being used by oil marketers to perpetrate the strike, adding that NUPENG could not be used in whatever form by any government or institutions.

He said fuel importation was a burden government brought upon itself by sheer neglect of the refineries, noting that since government has refused to repair the refineries, it should fulfil its obligation to Nigerians by paying those licensed to import products.

Achese warned that the ongoing strike in Abuja, which was specifically to demand the payment of subsidy claims, would be extended nationwide by the end of this week if the funds for payment were not released.

"You will recall that our last strike action was suspended based on a Memorandum of Understanding signed with all the stakeholders and the minister that payments will commence on the subsidy owed the marketers.

"It is against this backdrop that we call on the Minister of Finance to pay all outstanding payments to the Nigerian National Petroleum Corporation (NNPC) and the private depot owners, who are being asked by the same government to import fuel.

"We state that failure of the minister to meet the NNPC and marketers'

payment obligations is a ploy to create hardship for Nigerians. This is because of our traditional role of protecting workers who are Nigerians and members of NUPENG in the mid and downstream sector of the oil and gas industry, especially those working at the private depots.

"Their jobs are at stake as the marketers can no longer keep them due to huge debts owed as a result of the non-payment of subsidy. Our members are even being owed five months salaries as a result of the problem," Achese charged.

Speaking further, Achese condemned the illegal diversion of crude oil which is being sold at the open market. He described the act as a clear case of economic sabotage and called on government to commence the turnaround maintenance (TAM) of the Port Harcourt refinery and other refineries in order to boost fuel supply in the country.

He called for the creation of state police, stressing that the current security challenge in the country would be difficult to solve unless states were allowed to operate their own policing system.

Meanwhile, the Federal Government yesterday pledged that the fuel crisis that is currently rocking the nation and the threatened industrial strike by NUPENG and staff of the Power Holding Corporation of Nigeria (PHCN) would be resolved this week as serious and intense efforts at averting the crises are being made.

As part of the measures to resolve the threat by NUPENG and oil marketers, President Goodluck Jonathan has directed Okonjo-Iweala to relocate to Lagos for the purposes of holding meetings that will resolve issues with stakeholders.

This was revealed by the Senior Special Assistant to the President on Public Affairs, Dr. Doyin Okupe, who also said that the Federal Government has appealed to Nigerians for calm as the matter is being addressed.

In a statement signed by Okupe, the presidential aide said: "The approach taken by government at resolving this crisis is multi-faceted and multi-dimensional.

"The Ministers of Labour, Power, and other high level officers of government have met for several hours with the aggrieved PHCN workers and virtually all their demands have been agreed upon except for the issue of severance benefits of workers."

Okupe said that while the workers insist on their terms of employment, the government's proposition is based on the Pension Act of 2004, adding, "However, this matter will most probably be resolved favourably within the coming week by the presidency."

He explained that as part of efforts to resolve the looming industrial crises, "The Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, has shifted her base temporarily to Lagos in spite of the holidays and has been engaged intensively with the aggrieved marketers, union members and other stakeholders in the downstream oil sector."

Okupe added: "All indications are to the effect that favourable resolutions are being reached and all matters are likely to be resolved within this week, as all these efforts are being made to ensure that the crisis that has caused a lot of hardships to commuters and motorists is not unduly prolonged and does not also extend beyond the city of Abuja in the case of the fuel scarcity.

"The Federal Government therefore urges Nigerians to be calm, as all hands are on deck to ensure that normalcy returns soonest."

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