By Segun Adeleye:
MANAGERS of the nation’s oil business, particularly those administering the Petroleum Support Fund (PSF), popularly called oil subsidy may have some questions to answer over the deductions of N1.507 trillion from the Federation Account between 2006 and this year, and the operation of the joint venture account which remitted nothing to the government between July and November last year.
The latest report of the Petroleum Products Prices Regulatory Agency (PPPRA), on the administration of the PSF, revealed how trillions of naira were deducted from the federation account under the guises of subsidies that could not be substantiated.
The Nigerian Compass gathered that the report detailed a trend, where the Nigerian National Petroleum Corporation (NNPC) has been receiving 445,000 barrels of crude oil per day to be refined for local consumption, when its refineries could hardly operate at 20 per cent capacity.
At the same period, the corporation claimed subsidy from the Federation Account on fuel imported during the period.
The Federal Government set up the Petroleum Support Fund under the management of the PPPRA, to sustain a stable and affordable fuel prices regime in the country. Fuel importers including the NNPC are to claim extra cost incurred in bringing fuel to the country, when the landing cost is higher than the official price approved by the government (subsidy). The importers are also to refund extra gain when the landing cost is lower than the official pump price.
But the PPPRA report on the administration of PSF, between 2006 and 2009, showed that while the bulk of the subsidy was claimed by the NNPC, the money was deducted directly from the federation account without any approval from other tiers of the government.
According to the report, the NNPC claimed N134.487 billion as subsidy on PMS (premium motor spirit) popularly called petrol in 2006, representing 88.48 per cent of claims, while other marketers claimed N17.5 billion during the period. The amount of subsidy claimed by NNPC for HHK (House Hold Kerosene) during the same period was N107.404 billion (98.43 per cent) as against N1.711 billion claimed by the marketers.
In 2007, more marketers claimed subsidy from the federation account for importing petrol at N48.23 billion (25.65 per cent), while the NNPC still claimed the lion share at N139.813 billion (74.35 per cent).
Subsidy claims by NNPC for importing HHK during the same period was N87.657 billion (96.52 per cent) as against N3.158 billion (3.48 per cent) claimed by the marketers.
As more oil marketers participated in fuel import in 2008, the subsidy claims from the federation account almost tripled that of the previous year with the NNPC taking N259.142 billion (58.63 per cent) for importing petrol, as against N182.875 billion (41.37 per cent) claims by other marketers. The claims on HHK import by the NNPC during the year was N111.349 billion (59.05 per cent), as against N77.205 billion (40.95 per cent) by other marketers.
In 2009, the NNPC subsidy claims on petrol import was N172.608 billion (52.53 per cent) as against N155.989 billion (47.47 per cent) by other marketers, while claims by NNPC for HHK import was N52.673 billion (53.39 per cent) as against N45.988 billion (46.61 per cent) by other marketers.
Altogether the payment on subsidy from the federation account, between 2006 and 2009, was N1.507 trillion.
When the figure was further broken down, it showed that an average of N21.85 was paid as subsidy per liter of fuel in 2006, N23.80 in 2007, N47.63 in 2008 and N35.52 in 2009.
Another shocking revelation is the management of the joint venture account between the NNPC and the multinational oil companies over the years.
Under the joint venture, where the Federal Government through the NNPC owns about 60 per cent equity, the partners have to make monthly financial contributions (cash calls) to run the operations, while the government’s share of the profits from oil sales are to be paid to the federation account.
It was discovered that despite $562.569 million equity crude sales in July 2009, nothing was remitted to the federation account. All was paid to the joint venture account as its budget requirement. The same pattern was seen in August, when $294.57 million crude was sold, so also in September when $377.035 million was sold; the same in October when $255.555 million crude was sold and also in November when $400.49 million crude was sold.
All the earnings went to the joint venture cash calls and nothing went into the federation account for the local, state and federal governments to share.
However, it was not until December, when crude oil sales jumped to $802.967 million that the joint venture found it necessary to remit only $153.037 million to the federation account, while it kept the lion share of $649.93 million.
Altogether, while the joint venture sold $6.07 billion worth of crude oil in 2009, only $885 million was paid to the federation account as it kept $5.186 billion.
The Chairman of the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), Engr. Hamman Tukur, who was shocked by the development said: “The current trend regarding the Joint Venture Cash Calls, management and operation of the federation account and the establishment of the excess crude account should not be allowed to continue in 2010 in the interest of the nation’s fiscal federalism and the rule of law, otherwise governance at various levels of government would be grounded to a halt due to dwindling inflow of revenue.”
The RMAFC boss had earlier sent a powerful memo to the Federal Government over the loss of billions of dollars in revenue that could accrue to the federation account due to sharp practices and incompetence by government’s revenue collection agencies.
The commission also raised questions on modalities for determining joint venture cash calls, allocation for crude oil for domestic refining and deductions from the federation account.
Specifically, it noted that the NNPC is collecting 445,000 barrels of crude oil per day to be refined for local consumption, when its refineries could hardly operate at 20 per cent capacity. It is believed that the remaining of over 350,000 barrels per day, of the crude allocation valued at over $18 million per day, could not be properly accounted for by the NNPC.
The RMAFC has therefore recommended that the crude oil allocation to the NNPC should be cut to 100,000 barrels per day to check the current abuse and corruption in the system.
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