From Martins Oloja, John-Abba Ogbodo and Collins Olayinka:
GOVERNORS of the 36 states of the federation have asked the Minister of Finance Mansur Muhtar to commence investigation of the N1.15 trillion claim made by the Nigeria National Petroleum Corporation (NNPC) as petroleum subsidy from 2005 till date. Also the Federal Government may have begun the process of checking the national oil company’s claim.
Of the N1.15 trillion, N880billion accounts for direct subsidy on oil while the balance is for the cost of crude and products lost to pipeline vandalism.
Rising from their National Economic Council (NEC) meeting at the Presidential Villa, Abuja, yesterday, the governors also threw their weight behind the Federal government’s proposal to embark on the deregulation of the downstream sector of the economy. They also appealed to the organised labour to cooperate with Government to ensure early completion of the deregulation exercise.
Governor Emmanuel Uduaghan of Delta State, while briefing State House Correspondents on the outcome of the meeting said the governors expressed concern that part of the revenue from the excess crude oil, which ought to have been distributed to the states are used to settle claims by the NNPC on fuel subsidy.
Said Uduaghan: “This is where the states are very concerned. N880billion has to be paid to the NNPC. It will definitely affect the revenue coming to the states, because the money that is to be paid is supposed to be part of the money that is to be shared by the states, so the states will be short-changed. And that is why the states are worried about this issue of paying money to some persons. And the people that get this money are very few in the society. So should we continue to enrich certain persons to the detriment of all of us?”
The governor said the other thing the states were worried about was the Joint Venture Cash Call, in which money is deducted directly by the NNPC for their joint venture funds, noting that, “Last year for four to five months, NNPC did not make any contribution to the federation account. For four to five months, there was no money coming from oil revenue to federation account because the money that was got by NNPC is directly paid into the joint venture account and that really affects us.”
“We have said as economic council that a committee be put in place to look into this arrangement and see to rearrange the funding of the JVCC, such that at least the state and federation accounts gets some funds.”
Also contributing on the issues at the meeting, Gbenga Daniel of Ogun State said the governors, while throwing their weight behind the Federal Government on the issue of deregulation of the downstream sector, expressed worry that the greater chunk of the money spent on petroleum subsidy goes into private pockets. According to him, for each litre of fuel sold to motorists in this country, government pays about N35 as subsidy.
“For practical terms the illustration that one can give is that for each and every litre of fuel, the Federal Government is providing a subsidy of about N35 on the contrary that subsidy is not translated to the people on the street because people are still buying it at the free market prices.
“The issue therefore is “where are the subsidies and if the subsidy is running into billions of naira, then the NEC feels we do have a responsibility to stop this leakage one way or the other?” Daniel said.
Muhtar, while providing clarifications on some of the outcome of the meeting said: “Right now, we have an invoice from the NNPC in the amount of N1.15trillion to the Ministry of Finance for various expenditures incurred on behalf of the Federal Government, including cost of crude and products lost owing to pipeline vandalism and losses incurred from supplying petroleum products at regulated prices. So, this is the size of the whole thing we are talking about.
“There are outstanding claims from the NNPC to the tune of N880billion.This dates back to as far back as 2005. There are claims that have not been settled.”
Asked if there is proper auditing of the claims by his Ministry before payments are made to the NNPC, the minister said: “We have been doing the auditing systematically and for all payments we have an independent auditor that audits whenever the PPRA makes submissions. That is why the payment cycle takes over 45 days. We submit it to external auditors and they bring it back to us.
“What we wanted to do was a process audit, because a lot of it is based on the details, but we know that there could be flaws or weaknesses in the existing system in terms of the arrangement itself and that relates to issues of making sure that cargo that is brought is fully inspected even though we have auditors.
“But the key thing is as long as you have a distorted price mechanism, it really creates all sorts of inefficiencies and leakages. The audits we are talking about will relate even down to the filling stations and again that is where the BPR has been trying to make sure that these prices are enforced. But when you have only about 440 staff responsible for overseeing 15,000 filling stations, there is no way you can succeed in ensuring full compliance. Even the NNPC claims are being subjected to very rigorous audit.”
Meanwhile, Minister of Petroleum Resources, Rilwan Lukman, yesterday insisted that the problems in the nation’s petroleum industry would linger unless the country embraced the controversial deregulation policy, which he said would soon be implemented by the Federal Government.
Lukman, who disclosed this during an interactive session with the House of Representatives Committee on Petroleum Resources (Downstream), also said Nigerians would experience harder times if the deregulation policy was shelved by the government.
Also, Minister of State for Petroleum Resources, Odein Ajumogobia, has said that the need to check undue profiteering by oil marketers informed the controversial deregulation policy.
Ajumogobia, who spoke in Abuja during an official visit to the corporate headquarters of the Petroleum Equalisation Fund (Management) Board, said where petrol sells above the regulated N65 a litre, marketers have the opportunity to maximise their profit margin in addition to the subsidy that government pays on each litre of the product.
Meanwhile, Chairman, House Committee on Petroleum (Downstream), Clever Ikisikpo, had raised a poser over a $53 million unspent balance in the $123 million voted for the Turn Around Maintenance (TAM) of the Kaduna Refinery and Petrochemicals.
Ikisikpo said that the refinery’s TAM cost $75 million and asked the firm’s management to explain how the balance was spent.
The committee took exception to a statement credited to the General Manager, Public Affairs of the Nigerian National Petroleum Corporation (NNPC), Livy Ajuonuma, to the effect that the committee told lies about the Kaduna refinery.
The members, therefore, resolved that the manager be summoned to appear before the committee in two weeks.
Lukman hinted that the Federal Government was already discussing with Labour unions in the country with a view to getting their nod for the deregulation policy.
“There is no way we can go back on it. If we don’t put this thing right, we should not complain. We should keep quiet. Government is working hard on it and we are almost there. We hope that the engagement we are having with Labour will be fruitful,” he said.
Stressing that deregulation of the oil industry and the passage of the Petroleum Industry Bill (PIB) would end the crisis in the oil sector, Lukman said any solution besides these would only be temporary and postponing the evil day.
His words: “Any other solution will only give us temporary relief until we face deregulation and the passage of PIB. Steps are being taken but the long-term solution is deregulation.
“Deregulation will take effect soon. Until deregulation takes place and allows more refineries to be built by investors, I am afraid, we have to live with the present problem of scarcity.”
Lukman disclosed that the NNPC was in huge debts due to fuel importation, adding that the Ministry of Finance has been under pressure to settle the debts.
The minister also said that the NNPC currently faces a lot of logistic challenges, disclosing that the corporation needs a minimum of 950 trucks to meet petrol supply requirement in the country.
Ajumogobia argued that the so-called cartel in the oil sector “is a creation of the law, which makes importation of fuel an exclusive reserve for a few people who have the financial resources to bring in the products.”
He added: “My perspective of this cartel is simply that we have a system that lends itself to greater inefficiency and corruption, where licences are given to a group of people. A group of people by definition is a small group because of the financial resources they are supposed to have in order to play in the market to bring in product and then sell it at so and so price.
“Then, they bring in product and nobody can really control where it is sold or the price at which the product is sold. When fuel is sold beyond N65, somebody somewhere is putting the differential into his pocket because all the fuel we consume in Nigeria is subsidised by the government.
“The same importer at the end of the day will still go to the Petroleum Products Prices Regulatory Authority (PPPRA) to collect the differential between the figure he ought to have sold the product and the selling price of N65. So, the country is ripped off by these people who collect double money from government in form of subsidy for selling at N65 and at the same time, when he sells at more than N65, he puts the differential in his pocket.
“The situation is whenever a Nigerian buys a litre of petrol more than N65, he has helped to enrich a particular marketer on two fronts. That is what is no longer acceptable to the government. A few people, at the expense of all of us, are racking in this money.”
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