The Nation Newspaper

Tag: Subsidy

  • Subsidy: Tank farm owners urge FG to pay all importers

    Tank farm owners on Friday appealed to the Federal Government to pay the subsidy due to all petroleum products importers to enable the association members be in business.

    Mr Enoch Kanawa, Executive Secretary, Jetty Owners and Petroleum Tank Farm Owners Association of Nigeria, made the appeal in an interview with the News Agency of Nigeria (NAN) in Lagos.

    Kanawa said that for weeks now, tank farm owners had not had petroleum products to distribute.

    “This has affected majority of our members because the Depot and Petroleum Products Marketers Association of Nigeria, (DAPPMAN), which supply products to the tank farms, had not been paid,” he said.

    When contacted, an official of DAPPMAN, who preferred anonymity, said the association members were yet to get subsidy for products imported.

    The official said the 47 members of the association were being owed N47 billion.

    He said that the interests to be paid on the loans which the members took from the banks to import petrol had risen to N7 billion.

    He said that the government had always advocated that there should be a level playing ground where all parties should be treated equally.

    He said that the association members should also be settled to stop the scarcity if other oil marketers had been paid.

    Kanawa appealed to the Federal Government to pay the association members to ease scarcity of petroleum products.

  • Let the subsidy be

    Let the subsidy be

    •Nigerians should not carry the burden of govt’s inability to tame corruption in the downstream sector

    Why would the Federal Government – after inflicting the latest round of crippling fuel scarcity – turn round to exploit it to ramp up its jaded idea of removal of subsidy on petrol and kerosene?

    It seems an inevitable part of the strange ways of the government and the Nigerian National Petroleum Corporation (NNPC) that the drumbeats for the removal of subsidy hit high octane levels in the last one week or so. After confessing to their complicity in the making of the latest round of fuel scarcity that paralysed economic activities across the country, perhaps only the insensitive duo would dare to broach the idea of removing the subsidy at this time.

    But then, it is not only the Federal Government that wants the subsidy removed. If reports are anything to go by, the body of states’ finance commissioners in the 36 states has since enlisted in the remove-the-subsidy orchestra. The position of the latter would seem understandable – most of them have fallen on hard times in the last one year, courtesy of the shrinking accruals into the federation account, hence their need for additional sources of finance – earned or unearned – to bridge financing gaps in their budgets. So, where else to look if not in the direction of the subsidy, with its seduction to revenue without sweat?

    The truth of the matter is that the nation is no less hung on the old debate on the fuel subsidy now as it was some 10 years ago. Clearly, to the extent that the views credited to the Minister of Petroleum Resources, Diezani Alison-Madueke at the Oil and Gas Conference in Abuja last week represents the latest thinking at the highest levels of government, nothing appears to have changed. It was the same old arguments about the hefty subsidy payout (on imported Premium Motor Spirit and Kerosene) to fuel marketers being unsustainable; the usual argument about the deregulation of the downstream sector of the petroleum industry being overdue; the current regime of petroleum pricing not just unsustainable but discourages investment and benefits the rich and not the masses in the society for which the policies were intended.

    Now, they are so wearisome.

    In vain did this newspaper struggle to detect any shift in the position of government – on a subject on which the government and the governed have been in diametric opposition all these years. It is as tragic as it is unfortunate.

    Now, to start with, the very idea that the Federal Government has the monopoly of knowledge – or that it could do no wrong – is not only absurd but baseless. However, in this case, conceit appears not to be the only affliction suffered by the government; as far as the issue of the subsidy goes, the government has opted to be so blind in its fixation with an outmoded paradigm – to the extent that it now elevates the debate on the subsidy above everything else.

    What do we know about the subsidy arithmetic or economics? Given the revelations at the various subsidy probes, it would appear that not even the government is in a position to deny that a huge chunk of the figures bandied around for the purpose of claims payment do not even qualify. Unfortunately, rather than concentrate on measures to reduce graft in the fuel supply and distribution chain, the government would seem content to punish its innocent victims – the fuel consumer.

    Contrary to what the Federal Government prefers to think of Nigerians’ attitude to the subsidy issue, Nigerians are neither dumb nor stupid as to believe that the annual payout to the merchant club of marketers is sustainable either now or in the long run. In the 2014 budget for instance, N971 billion was voted for the subsidy. Perhaps more than the government would care to admit, the citizens appreciate the massive distortions foisted by the subsidy regime, the vicious spiral of negative macro-economic waves indicated in the annual outflow of the foreign exchange on the importation reckoned in billions of dollars and exchange rate pressures, and, not least, the dangers that these pose to the economy in the long run.

    But they also understand these to be the direct effects of the current regime of importation.

    It seems that the main issue is government’s narrow interpretation of what the policy of deregulation should be. For sure, citizens have nothing to choose in the current laisez faire, all-comers policy of unbridled importation, or its twin, the hollow, incoherent policy of abdication conveniently encased in some jaded policy mumbo-jumbo. Citizens surely know enough to recognise deliberate, guided policy to usher in multiple players in the refining sub sector when they see one.

    And if we may well add, this is where the difference between the throng opposed to subsidy removal and the government comes in bold relief: the former see the subsidy as a symptom of a troubling malaise – if you like, an opportunity cost for the road not taken; for the latter it is a terminal disease that citizens must put up with – a folly of tragic proportions that must be shunned.

    To allow government to have its way on the subsidy is to expose the economy to the risk of macro-economic instability of hyper inflation. Moreover, in a nation where the cost of doing business is humongous, and where no forms of social protection exist for the poor, it seems the surest path to further constriction of business and impoverishment of Nigerians.

    This is where, unlike the Federal Government, we find no pleasure in framing the debate in terms of the option of either retaining the subsidy with its dire implications for the national treasury, or shifting the burden from the treasury to the motorist. To the extent that both do not come close to being palliatives in the context of the aspirations of OPEC’s sixth largest producer of crude, we consider them to be at best, false choices. At this time, the question we ought to be asking the Federal Government is how further we have to wait before the three promised Greenfield refineries come on stream. What about the billions poured into the Turn Around Maintenance (TAM) of the four refineries – including those from SURE-P; shouldn’t the funds have put them to work?

    In the meantime, the government should let the subsidy be.

  • Fed Govt clears oil marketers’ subsidy

    Fed Govt clears oil marketers’ subsidy

    The Federal Government has paid oil marketers’ subsidy arrears for fuel imports up to the second quarter of 2013, the Executive Secretary of Major Oil Marketers Association of Nigeria (MOMAN), Obafemi Olawore, has said.

    Olawore, who did not disclose the amount, told journalists that government has cleared the arrears of 2012, and as well has paid for the first and second quarters of 2013, adding that the payment helped marketers moved to bring in vessels laden with products last month, which in turn boosted stock and ensured availability of petrol throughout the festive period.

    He explained that what is outstanding to major marketers, is the subsidy reimbursement for the second-half of last year, adding that it takes 45 days to process each quarter’s claims and until the period lapses, the last quarter cannot be included as part of the debt owed the marketers.

    Olawore however noted that other importers, such as the Independent Petroleum Marketers Association of Nigeria (IPMAN) and depot owners, were yet to be paid, saying the Petroleum Products Pricing Regulatory Agency (PPPRA), has set up a committee to verify their claims. He appealed to the government to expedite action in processing their claims so they could place orders to avert a shortfall in the New Year.

    He praised the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke for being able to sustain uninterrupted product supply over the years. He said the minister also made efforts to ensure that the current payment was made. He appealed to her to ensure that the undue delays in payment of subsidies in 2013 do not snowball into 2014.

    He said that 2013 was a tough year for the marketers because of the undue delay of subsidy payments, but nevertheless expressed optimism that this year will be better.

    Olawore said: “The moment they (government) paid us, a lot of vessels were brought in and the stock level rose from between one and two days to 10 days. At some point, it was only the NNPC that was bringing in products because other importers stopped as a result of non-payment of subsidy. However, NNPC was not bringing in enough vessels. They (NNPC) tried their best to keep the country wet with products, but at a point we were not getting enough petrol from them.

    “But when NNPC brings in products, apart from the major marketers (Mobil, Total, Oando, Conoil, MRS and Forte), they give to Aiteo, NIPCO and Honeywell, but we do our best to share it for the overall interest of the industry.

    “To ensure continued uninterrupted supply of product and eliminate scarcity, timely payment of subsidy claims, foreign exchange component and interest is imperative,” he stressed.

  • Electricity subsidy may go next year

    Electricity subsidy may go next year

    SHOULD the Federal Government accede to the recommendation of the National Electricity Regulatory Commission (NERC), low income consumers of electricity will pay more next year.

    The NERC has recommended the withdrawal of subsidy to the government.

    The commission gave the indication at Amawbia, Nnewi and Onitsha, Anambra State at its ongoing Power Consumers Assembly (PCA).

    In a statement yesterday, the commission explained that following the plan, the Federal Government will in line with the rural electrification programme channel such subsidy funds into other priority areas such as the provision of electricity to rural communities.

    NERC General Manager, Government and Consumer Affairs, Dr. Tony Akah, who coordinated the proceedings at the PCA, said the government is expected to run out of its outlay for subsidising consumers by next year and as such, it may not provide more funds if there was no need to continue with it.

    Akah said: “In the new tariff that we have, the MYTO-2, there is a component of subsidy because what Nigerians are paying now is not the full cost and because we don’t want the consumers to have a big shock, the regulator made recommendations to the government and they accepted and provided some funding.

    “That funding should be exhausted by next year and unless the government decides to extend or raise funding because the overriding idea is that as more energy is ramped up, Nigerians will spend less on alternative power. Then there will no longer be the need for Nigerians to be subsidised with regards to electricity usage and then that scarce financial resources can be redeployed by the government to other critical areas of needs; there was subsidy provided for certain amount and for certain period and after that it will go.”

    Akah, however, noted that the possibility of the government making provision for electricity subsidy was dependent on the commission’s thoughts and recommendations.

    He said: “But the regulator right now is studying everything and if there is a need for us to make recommendations to the government for more subsidy and in view of the fact that we may have to review the tariff, then that will be presented on its merits to the government.”

    The government, in 2012, planned to spend about N110 billion in subsiding electricity consumption especially the rural population in the next two years, starting from 2012. A breaking down of the expected subsidy distribution as was then shown by former Minister of Power, Prof. Barth Nnaji indicated that the government had provided to spend N60 billion for electricity subsidy in the 2012 budget and another N50 billion in the 2013 budget.

  • N963.7m subsidy ‘fraud’: ‘Oil marketer used forged documents’

    A Lagos High Court, Ikeja, yesterday heard that an oil marketer, Rowaye Jubril, allegedly forged documents to obtain N963.7 million subsidy payment from the Federal Government.

    A prosecution witness, Mr Ihechukwu Ireogbu, made the accusation when he testified before the court, presided over by Justice Lateefa Okunnu.

    The witness, who is the managing director of MGI Inspection Limited, admitted that his firm had a prior business relationship with the defendant.

    Iroegbu, however, insisted that the company did not participate in the inspection of the 13,500 metric tonnes of Premium Motor Spirit (PMS) purportedly imported by Jubril.

    Jubril was charged to court with his company, Brila Energy Limited, by the Economic and Financial Crimes Commission (EFCC).

    Ireogbu, who was being cross-examined by the counsel to the defendant, Mr Raphael Oluyede, described as false the claim by the defendant that the company inspected the product between January 26 and 27, 2011, at off-shore Cotonou in Benin Republic.

    Ireogbu said he instructed Felix Iweka, a worker at Port Cargo Services, a subsidiary of the company, to go to Cotonou for the inspection.

    Iweka, he aid, later confirmed that he did not inspect the ship-to-ship transfer of the products between the mother vessel, MT Overseas Lima and the other vessel, MT Delphina.

    “He only carried out a survey on another vessel and not this particular transaction,” the witness said.

    Another witness, Mr Akinwunmi Olarenwaju, a worker at the Petroleum Products Pricing and Regulatory Agency (PPPRA), said the agency made efforts to contact the supplier of the product.

    Olarenwaju, who was led by the EFCC counsel, Mr Seidu Atteh, said the defendant claimed that he bought the product from Napa Petroleum Trade Incorporation in Panama.

    “The EFCC requested a tripartite meeting between the suppliers, the oil marketers and the PPPRA on the transactions.

    “We invited Napa Petroleum, Mercurial Trading and Namax Petroleum for the meeting,” he said.

    Olanrewaju claimed that Napa Petroleum did not respond to its letter and failed to attend the said meeting.

    Justice Okunnu adjourned the matter till January 21, 2014, for the continuation of the trial.

  • When will govt get the subsidy maths right?

    When will govt get the subsidy maths right?

    Since the discovery of the false subsidy claim made by some marketers two years ago, the Federal Government has adopted measures to enthrone transparency in payment. But the process, marketers believe, is cumbersome and costing them a lot, Samson Unamka reports.

    •Fuel supply threatened over marketers’claim

    It all has to do with swiftness of the Federal Ministry of Finance in handling the matter. If it acts swiftly, it will avert a fuel crisis. If it does not, danger looms. Why? Because of the payment of the backlog of arrears owed oil marketing companies and importing companies.

    All the ministry needs to do, experts say, is to start complying with the 2010 guideline for the administration of the Petroleum Support Fund (PSF), which stipulates payment within 45 days of submitting complete documents by importers to the Petroleum Products Pricing Regulatory Agency (PPPRA).

    Downstream sector watchers were unanimous in their contentions that the enthronement of a culture of delayed payments to genuine importers in the last three years has put many marketers’operations in jeopardy.

    Marketers are groaning under the huge accumulated bank interest charges which the loans sourced from these financial institutions to import products continue to attract. The foreign exchange differential losses which these marketers are also incurring owing to the government’s snail speed approach to effecting payment is equally mind boggling.

    Industry sources last week estimated that over N145 billion is outstanding to marketers and some of the overdue payments are for 2011 and 2012 and some N50 billion as outstanding for 2013.

    While the ministry has continued to justify the delay in payment to its resolve to painstakingly verify claims to ensure marketers’ transparency in the wake of the claims claims paid to some unscrupulous companies, observers argue that the approach is hurting importers badly and could be counter productive in the long run.

    Most marketers believe that it is wrong for the ministry of finance to hide under the guise of forensic auditing and thorough verification of claims as justification for these delays which have drained them of resources to do their business, made them to incur avoidable huge bank charges and put their credibility and credit rating on the line.

    The situation is not that many marketers are finding it difficult to source for funds to import products even when they win allocation from PPPRA, their infrastructure which cost billions of naira, are idle and most of the affected firms are set to reduce their workforce. The companies’inability to source funds to import product could throw the nation into another fuel crisis which a top major marketing company executive last Friday said was inevitable.

    Ordinarily, if the ministry and the Central Bank of Nigeria (CBN) comply with the 2010 Guidelines for the administration of PSF, the nation should not find itself in a situation of endless delay in payment for products imported.

    The PSF import cycle as laid out in the guidelines states that once a marketer is issued a licence to import products by PPPRA, the marketer imports the volume allocated it, and delivers to a depot approved by the Department of Petroleum Resources (DPR); the product is verified and confirmed by PPPRA, DPR and government appointed external auditors.

    The marketer will then submit complete and verified documents to PPPRA which, after verification and batching, issues a Sovereign Debt Statement (SDS) to the marketer. The marketer goes ahead to submit the SDS to CBN, which then issues a Sovereign Debt Note (SDN) to the marketer. Going by the guidelines, the marketer is to get value for the SDN within 45 days of submission of complete and verified documents to PPPRA.

    Executive Secretary, Major Oil Marketers Association of Nigeria, (MOMAN), Obafemi Olawore, while fielding questions on a programme on Channels Television, said the government had consistently failed to adhere to this guideline even when the importers/marketers have consistently kept their own side of the bargain.

    He wondered why the ministry only pays whenever marketers cry out and threaten to discontinue importation.

    Truly so. By August last year, many marketers had discontinued importation of products to protest the accumulated arrears owed them by the government.

    At issue was some N100 billion which the Minister of Finance and the Co-coordinating Minister of the Economy, Dr Ngozi Okonjo-Iweala was yet to sign off on. Though N888 billion had been earmarked for fuel subsidy in that year’s budget, President Goodluck Jonathan was to later request for an additional N161 billion three weeks to the end of the year which was given expedite approval by the National Assembly, bringing the total subsidy figure for 2012 to N1.042 trillion naira.

    Out of the N888 billion initially allocated, some N500 billion had been paid before mid-2012 for the 2011 outstanding. The accumulated arrears due to the oil marketing and trading firms by then had risen to N179 billion.

    Following subtle threat to scale down on importation, the ministry paid N79billion, leaving a balance of N100billion.

    Before long, another fuel crisis started rearing its head; in parts of the country and Abuja, long queues at the gas stations resurfaced. It spread to Lagos, the nation’s commercial nerve centre.

    Initially, the official line was that the development followed vandalism of the major supply channel – the pipelines at Arepo in Ogun State.

    It was not long before it became a common knowledge that it was only the Nigerian National Petroleum Corporation (NNPC) and a few marketers that were importing products. Most marketers halted further importation and pressure was brought on government to pay the N100 billion outstanding.

    To reverse the trend, Mrs Okonjo-Iweala, who had warned earlier that she would not be stampeded into paying the marketers because she was embarking on forensic auditing of the claims, quickly made more payments. This development also led to the President requesting for additional N161 billion appropriation from the National Assembly to enable the government to meet the marketers’ request.

    But the normalcy which the nation has witnessed over the months appears to be under threat again.

    By mid-June, this year, the marketers’discomfort with another round of overdue payment from the subsidy support fund had come into the open.

    Indeed, the marketers, who import close to 70 per cent of the nation’s fuel requirement, are threatening to halt importation if something was not done about their predicament soon.

    At issue again is another N100 billion outstanding for the first two quarters of the year. While the marketers acknowledge that they have been paid twice this year, the payments, according to them, were for last year’s outstanding.

    Following their outcry, the ministry released about N48 billion to about 25 oil marketers to cover what it said was the verifiable claims.

  • How N1.1b subsidy fraud was committed, by witness

    Three oil marketers – Abdullahi Alao, Opeyemi Ajuyah and Olarenwaju Olalusi – were yesterday alleged to have forged the documents with which they committed N1.1 billion fuel subsidy fraud.

    A prosecution witness, Mr. Mohammed Adedapo, made the allegation when he testified at the resumed trial of the marketers before Justice Lateefat Okunnu of a Lagos State High Court, Ikeja.

    The marketers and their firms – Axenergy Limited and Majope Investment Limited – were charged to court by the Economic and Financial Crimes Commission (EFCC) over alleged subsidy fraud.

    Adedapo, who is an inspector of petroleum products of Q and Q Control Marine Services Nigeria Limited, told the court that Alao, the son of Ibadan business mogul, Aare Abdulazeez Alao-Arisekola, and other defendants, allegedly obtained subsidy for 15,000 metric tonnes of petroleum products, instead of the 4,000 metric tonnes of petroleum products they imported.

    The witness said the discharge was done at Lister Jetty, Apapa, Lagos, between January 22 and 23, 2011.

    Led in evidence by EFCC counsel, Mr Francis Usani, the witness said Q and Q was contracted by Oando Oil and Gas Plc to inspect the quantity of products brought in by a vessel, MT Brief, on behalf of Majope Investment Limited.

    Adedapo said the vessel, which brought the petroleum products allegedly discharged only about 4,000 metric tonnes into the facility while it took away the remaining.

    The witness added that following the discrepancy discovered in the transaction, he wrote a protest letter to the captain of the ship and stated the fact of the transaction.

    Adedapo said he issued a Shore Tank Certificate to the marketers, stating that only 4,000 metric tonnes of petroleum products were discharged.

    Following the testimony, Falana urged him to sign on a blank paper to compare the signatures. They were admitted as Exhibit P6 by the court.

    Justice Okunnu adjourned the matter till July 24 for the continuation of the trial.

    During cross-examination by the defendants’ counsel, Mr Wale Akoni (SAN) and Mr Oludare Falana, the witness said he did not sign any document indicating that 15,000 metric tonnes of fuel were discharged.

    “The Shore Tank Certificate, showing 15,000 metric tonnes, was not signed by me. The signature looks like mine but this document did not emanate from Q and Q,” Adedapo added.

  • EFCC begins trial of oil subsidy suspects

    A Lagos High Court sitting in Ikeja heard yesterday that about 20,000 metric tonnes of premium motor spirit (petrol), imported from Sweden, in respect of which three oil marketers are standing trial, never got to Nigeria.

    A prosecution witness at the ongoing trial of the three suspects, Hammed Lawal, made this known to the court presided over by Justice Lateefat Okunnu.

    The Economic and Financial Crimes Commission (EFCC) had charged Samuel Bamidele, Abiodun Kayode Bankole and their company, A.S.B. Investment Company Limited, with allegedly fraudulently obtaining payments from the petroleum support fund as subsidy for the importation of petrol to the tune of N1,341,471,735.67.

    Lawal told the court that the analysis on the documents of claims by the oil marketers showed that the suspects did not supply the products.

    Justice Okunnu adjourned further hearing till June 5.

     

     

     

     

     

  • ‘How N1.1b subsidy fraud was detected’

    ‘How N1.1b subsidy fraud was detected’

    A Lagos High Court sitting in Ikeja was yesterday told how the N1.1 billion subsidy fraud allegedly carried out by Abdullai Alao, son of Ibadan businessman, Abdulazeez Alao Arisekola, and his company was detected.

    A witness in the ongoing trial of the N1.1b subsidy fraud brought against Abdullahi Alao, by the Economic and Financial Crimes Commission (EFCC), Mrs. Irene Moses, told the court presided over by Justice Lateefat Okunnu that the defendant did not discharge 15,000 metric tonnes as claimed.

    Explaining how the fraud was detected, the witness, who was led in evidence by EFCC’s counsel, Mr. Francis Usani, said it takes up to three to four days to discharge a 15,000 metric tonnes of Premium Motor Spirit (PMS).

    She said they detected that the volume of fuel discharged by the defendant’s company was done within a day and some hours.

    She said there was no way 15,000 metric tonnes of PMS could have been delivered within one day and some hours as claimed by the defendant.

    The two other oil marketers charged alongside Abdullahi Alao in the subsidy fraud are Opeyemi Ajuyah and Olanrewaju Olalusi and their companies, Majope Investment Limited and Axenergy Limited.

    Mrs. Irene, an employee of Oando Oil and Gas Plc, said they have a terminal supervisor, who oversees the discharge of the vessel and monitors the quantity of the vessel at the terminal.

    The witness said the supervisor later told her that 4,700 metric tonnes of Premium Motor Spirit (PMS) was discharged instead of 15,000 metric tonnes as agreed by Mojasope Investment Ltd.

     

     

     

     

  • N1.1b subsidy fraud: EFCC begins trial of marketers

    N1.1b subsidy fraud: EFCC begins trial of marketers

    The Economic and Financial Crimes Commission (EFCC) yesterday began the trial of Abdullahi Alao, son of Ibadan businessman Alhaji Abdullazeez Arisekola-Alao, at a Lagos High Court sitting in Ikeja.

    Abdullahi Alao and two others and their companies were charged before Justice Lateefat Okunnu with fraudulently obtaining N1.1 billion fuel subsidy payment from the Federal Government.

    The other two oil marketers are Opeyemi Ajuyah and Olarenwaju Olalusi. Their companies are Majope Investment Limited and Axenergy Limited.

    At the opening of the trial, EFCC called its first witness, Mrs. Brenda Ataga, an employee of Oando Oil and Gas Plc, to testify against the defendants.

    The witness, who was led in evidence by EFCC’s counsel, Mr. Francis Usani, said Oando entered into an agreement with Majope Investment in 2010 for the supply of 15,000 metric tonnes of Premium Motor Spirit (PMS).

    Ataga said Majope was to discharge the products at the Lister Jetty in Apapa, Lagos that was being used as a tank farm by Oando before January 4, 2011.

    According to her, Oando appointed a surveyor, Q and Q Control Services Limited, to inspect the products when it was brought by Majope Investment.

    “At the end of the day, instead of supplying the 15,000 metric tonnes as agreed, Majope Investment Limited discharged about 4,700 metric tonnes into the facility,” she said.

    She said Oando Oil and Gas Plc paid Majope Investment Ltd about N320 million for the 4,700 metric tonnes of PMS discharged into its facility.

    Ataga said Ajuyah later told her that the business relationship was suspended due to the cost of demurrage the vessel had incurred off-shore.

    The EFCC, however, alleged that Ajuyah after the said transaction, conspired with Alao and others to fraudulently obtain subsidy payment for 15,000 metric tonnes from the Federal Government.

    Justice Okunnu adjourned the matter till today for continuation of trial.