Fuel Subsidy
Presidency Probes More Agencies
From Madu Onuorah, Abuja
PRESIDENCY is hiring "respectable international consulting and accounting firms" to investigate activities of the Petroleum Products Marketing Company (PPMC), the Nigerian Ports Authority (NPA) and the Petroleum Products Price Regulatory Agency (PPPRA).
Government's action is part of the efforts to get to the root of the racketeering in the petroleum-pricing sector.
The firms would review the existing structure within the sector as well as conduct process and financial audits of all payments made to marketers as subsidy in the last 10 years.
This is towards ascertaining the genuineness of the payments, where fraudulent payments were made and who the beneficiaries were.
Confirming its action yesterday, the Presidency, rising to defend the deregulation of the downstream sector of the economy, said that some Nigerians do not understand that if the current arrangement, which promotes racketeering and inefficiencies are cut off, the price of petroleum products would naturally adjust to current international reality.
It stressed that unless the current "cabal" holding the sector were dislodged, no new refineries would be built in Nigeria, as anyone built would not be profitable.
Special Adviser to the President (Media and Publicity), Mr. Olusegun Adeniyi, said that the template of the PPPRA shows that 90 per cent of petroleum products consumed in Nigeria are currently supplied through importation, "which, in itself, makes us a most vulnerable nation."
"What this translates into is that some current cost components would either reduce or be eliminated from the pricing model if we can refine local needs at home rather than continue the regime of importation with all the attendant abuses," he said.
Adeniyi stated that agencies like PPMC, NPA, PPPRA and others would be under intense searchlight in the coming weeks.
He broke down the product cost, freight, storage and distribution of PMS in February as follows:
"On the PMS template of the PPPRA for the month of February, product cost is 65 percent while freight accounts for 5.75 percent. Another component called lightering expenses account for 5.13 percent with storage charge at 4.18 percent.
"Other charges are: Jetty-Depot Throughput, 1.12 percent; NPA, 1.62 percent; financing, 0.72 percent while margins for distribution account for 18.41 percent."
While revealing that there was currently a process audit of this template, he hinted that even before that exercise was completed, "there are questions to be asked."
"In the year 2006, for instance, according to available data, the entire PMS refined locally was 1.623 billion litres while 7.701 billion litres of PMS were imported by NNPC and other marketers.
"In the year 2007, because the refineries were working at their lowest capacity, the quantum of their contribution to local supply had dwindled to 356 million litres of locally refined PMS while 9.867 billion litres of PMS were imported to the country by NNPC and other marketers.
"Last year, 2008, 1.227 billion litres were refined locally with 10.867 billion litres imported."
Adeniyi observed that "the way the whole thing works does not even lend itself to any rational or verifiable explanation."
"According to the tale from our ports, expenses claimed by marketers on 'mother vessels' are based on the allowable 10-day demurrage exposure at the rate of $28,000 per day.
"But these 'mother vessels' we are told incur demurrage for up to 60 days at much higher rate of about $32,000 per day."
He noted that sometimes, due to logistic problems, shuttle vessels could incur demurrage for up to five days at about $8,000 per day.
"Everyone knows what happens in our country when you create such incentives for leakages," he said. "Yet these are some of the costs that are passed to government and which are paid as subsidy.
"And in what has unfortunately become an oligopolistic market, any delay in payment is usually met with threats of fuel scarcity with all the attendant security implications."
The presidential spokesman explained that it was in furtherance of efforts to build a greater national consensus in support of this new policy direction that informed President Yar'Adua's request to the Nigerian Labour Congress (NLC) and the Trade Union Congress (TUC) to send one nominee each for membership of the Presidential Steering Committee on Global Economic Crisis.
He said the inclusion of the NLC and the TUC in the committee would also facilitate a mutually-beneficial exchange of views between and amongst government, labour and the private sector officials on several issues, including that of deregulation in the downstream sector of the petroleum industry.
As he said, what Nigeria needs as "contained in the Petroleum Industry Bill already before the National Assembly is a well thought-out policy direction of President Yar'Adua that is designed to remove restrictions in the procurement and distribution of petroleum products so as to increase the level of competitiveness within the industry."
