Officials of the Ministry of Petroleum Resources, the Nigerian National Petroleum Corporation (NNPC) and the Pipeline and Products Marketing Company (PPMC) yesterday again scuttled the House Committee on Petroleum (Downstream) investigative hearing on kerosene subsidy, with last minute excuses, writes OLUKOREDE YISHAU
Dakuku Peterside, who chairs the House of Representatives Committee on Petroleum (Downstream), and members of his committee were upbeat on Sunday. They had put in place everything for the investigative hearing on the kerosene subsidy and were looking forward to a good outing. The public hearing is sequel to resolution HR84/2013, directing the committee to establish the actual amount spent on kerosene subsidy from 2010 to December last year; establish the source of the money used in financing kerosene subsidy and the relevant budgetary approval; determine the companies benefiting from kerosene subsidy; establish the extent (if at all) to which the subsidised kerosene gets to the consumers at the regulated price; and investigate all incidental issues relating to kerosene supply and distribution.
Some weeks earlier, they had been forced to postpone the hearing after key government officials expected to shed light on the matter bailed out. Peterside and his men were hoping yesterday’s event would not suffer the same fate, especially when none of those invited notified the committee that they would not attend. But as the committee was awaiting the officials, the letters of excuse started coming in. The Ministry of Petroleum Resources, the Nigerian National Petroleum Corporation (NNPC) and the Pipelines and Products Company Limited (PPMC) sent letters giving excuses why for the second time the hearing must be postponed.
All the letters were dated February 7, but were not received until some minutes before the hearing was to start, which did not go down well with the committee. The ministry’s letter reads: “I wish to inform you that the Honourable Minister together with the top management of the Ministry and its agencies will be participating in the International Summit on Power Financing starting today, 10th February, 2014.
“As a result we regret to inform you of our inability to honour your invitation. We are also currently engaged with the Senate Committee on Finance and it is not clear when their hearing will end. ”
The NNPC and PPMC letters also asked for more time. The NNPC said: “I am further directed to appeal to the Chairman to allow NNPC and its subsidiary sufficient time to collate the required documents and reschedule an alternate date for the appearance of our organisation at the hearing, please.”
Peterside, in a letter to the minister yesterday, faulted the excuses. He said the excuses were unacceptable to the committee. He described the excuses as belated and not justified, adding that the ministry was long aware of the hearing and was even reminded last Friday.
Peterside said the minister, NNPC GMD Andrew Yakubu and the PPMC must appear before the committee on February 18.
Others expected are Min
ister of Finance and Coordi
nating Minister for the Economy Mrs Ngozi Okonjo-Iweala, Central Bank of Nigeria (CBN) Governor Sanusi Lamido Sanusi, Executive Secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA), Director, Department of Petroleum Resources (DPR), Accountant General of the Federation, Director, Budget Office, all inspection companies working for NNPC and the Controller-General of Customs, among others.
At a news conference to announce the postponement of the hearing, Peterside said the committee was forced to postpone the hearing.
“We owe you a duty to carry out the investigation; we will not let you down. We want to apologise once more, we will move on with the hearing February 18th,” he said.
Of those expected to attend the hearing, many will look forward to the session with Sanusi, who while appearing before the Senate Committee on Finance, described kerosene subsidy as illegal, given a presidential directive stopping any form of subsidy on the product. He described kerosene subsidy as a racket.
He said: “NNPC, in paying what it calls kerosene subsidy, is confessing to a number of serious infractions. First, I have shown, based on Nigerian Bureau of Statistics (NBS) data, that kerosene is not a subsidised product, and therefore the so-called subsidy is rent generated for the benefit of those in the kerosene business. Second, I have produced evidence that the late President Yar’Adua had issued a presidential directive eliminating this subsidy payment as from July, 2009. Third, these huge losses inflicted on the Federation Account have not been appropriated.
“The burden of proof on NNPC is to show where they obtained authorisation to purchase kerosene at N150/litre from Federation Funds and sell at about N40/litre, knowing full well that this product sells in the market at N170-N220/litre. At what point was the presidential directive reversed? The Nigerian Ports Authority (NPA) records would suggest that NNPC imports about four to six vessels of kerosene a month. Industry sources place the value of each vessel at $30m and the amount of “subsidy” per vessel at $20m. This means, at an average of five vessels a month, the Federation Account loses $100m every month to this racket.”
Reacting to the CBN governor’s claims, the NNPC said: “Regarding the subsidy claim on kerosene, it is important to note that NNPC as the supplier of last resort is the only company supplying this product in Nigeria for the benefit of the citizenry. If kerosene has been deregulated, why are the independent marketers not supplying this product in line with what is applicable to diesel (AGO)? NNPC owes a duty to Nigerians to ensure that there are adequate products in the country. This mandate has without question been accomplished in the past four years. NNPC deserves to be commended rather than battered, for ensuring adequate supply of kerosene at regulated price of N50. NNPC cannot be held responsible for any differential pricing from non-NNPC retailers. This is the basis for NNPC’s claim on kerosene subsidy.”
It also denied knowledge of the presidential directive stopping kerosene subsidy. As Sanusi noted, the late President Umaru Yar’Adua, through a memo dated June 17, 2009 to the Minister of Petroleum Resources, directed that subsidy on kerosene be removed, as the continued payments by government did not get to the intended beneficiaries.
The NNPC claims subsidy
through a scheme known as
Kero-Direct initiated in July 2011 to help distribute household kerosene (HHK) to consumers nationwide.
The House Adhoc Committee on Fuel Subsidy Probe said the scheme may have been a scam to defraud Nigerians and extort money from the Petroleum Support Fund (PSF). Under the scheme, the PPMC, a subsidiary of the NNPC, provided the product sold to end users at N50 per litre, using the facilities of an independent marketer, Capital Oil and Gas Industries Limited. But the committee said the scheme was designed in a way the product would not get to the target beneficiaries at the approved price.
The committee found that the product sold only at the 36 NNPC mega stations out of the over 24,000 retail outlets across the country. The committee said there was massive diversion of the product, which made consumers to get the product at between N130 and N150 per litre in the market.
“The Committee could not find any reason why the minister, if convinced on the need to reinstate subsidy on kerosene, did not take any action on that, instead of condoning the illegal payments.
“When the Ministry of Petroleum Resources discovered that the removal of subsidy on kerosene was not expedient, it should have gone back to the President for the vacation of the directive.
“Having failed to do that and with the evidence that the product was never sold at N50 (apart from the 36 mega stations) since 2009, there was no basis for seeking any vacation of the order in 2011.”
The committee’s report asked the NNPC to refund the over N310.42 billion deductions it took as subsidy arrears for kerosene supplied in 2009 and 2010, adding that this was made in spite of a presidential directive to the minister, who is also chairman of the NNPC Board of Directors.
The committee also criticised the agreement entered into with Capital Oil & Gas Limited for the use of its tank farm to store about 94,330,030 litres of products, which was later confiscated and sold off by the company to recover a nine-month storage fees debt by NNPC.
Peterside, while speaking at a function organised by the Lagos Chamber of Commerce and Industry (LCCI), said the Federal Government spent N634 billion as subsidy on kerosene between 2010 and 2012, describing this as a network of corruption and fraud.
He said: “No country that
spends most of its funds on
consumption will grow. And so that explains why Nigeria is not moving forward. How can we move forward when most of our funds are spent servicing corruption?
“Kerosene subsidy is a network of corruption; it is a network of fraud. So why are some people blaming the fraud on the monopoly of NNPC? Even when you ask major marketers they will tell you that the monopoly of NNPC is responsible for what we are going through today to access kerosene.
“The first challenge is that the supply of kerosene is regulated. Everywhere in the world where there is monopoly, people are likely to suffer while the monopolist tries to maximise the situation; this is because NNPC has the monopoly of importing kerosene.
“In the year 2010, we spent N110,068,533,988 to subsidise kerosene; this is not the cost of kerosene but the cost of subsidising the product alone…In 2012, although we are yet to reconcile this, we spent N200 billion subsidising kerosene.”
The NNPC believes unnecessary dust is being raised over kerosene subsidy. Surprisingly, it is also not forthcoming at a hearing meant to settle the matter once and for all. Will it, the ministry and others keep the February 18 date with the Peterside-led committee or will they give excuses again?
