Feb. 8, 2014
Claims by the Nigerian National Petroleum Corporation, NNPC, that over 80 per cent of the controversial $10.8billion (about N1.728trillion) was used for subsidy on kerosene may have been a scam after all.
Multiple confidential memos exclusively obtained by PREMIUM TIMES showed that the purported subsidy on kerosene was actually in defiance of a subsisting presidential directive to the Ministry of Petroleum Resources and the Group Managing Director of the NNPC to remove the payment of subsidy on kerosene from the Petroleum Support Fund, PSF, template.
On June 10, 2009, the late President Umaru Musa Yar’adua had approved the resolutions of the Presidential Committee, which sat the previous day to deliberate on the action plan on the deregulation of the downstream petroleum sub-sector.
The committee had sought the president’s approval of the proposal to ameliorate the likely adverse impact of the planned removal of subsidies in the downstream sector of the petroleum industry.
The memo to the President, No. SH/PSP/24/A/812, had, among several prayers, requested the petroleum minister be directed to “eliminate existing subsidy on the consumption of kerosene, taking into account that subsidy payments by government on kerosene do not reach the intended beneficiaries.”
On June 2009, a memo No. SH/PSP/24/A/819, signed by the then Principal Secretary to the President, David Edevbie, conveyed the president’s directive to the Minister of Petroleum Resources.
The memo also asked the Minister to avoid public announcement of the measure to be implemented PSF template.
In spite of the presidential directive, the NNPC, apparently feigning ignorance of the directive, still submitted a request for the payment of subsidy on kerosene.
But in memo No. SH/PSP/24/A/1087 dated October 19, 2009, the President rejected the request, pointing out that based on his earlier directive “the NNPC should not be entitled to make claims from the Petroleum Support Fund, PSF, in respect of kerosene with effect from the date of Mr. President’s approval.”
It was not clear if the corporation received the subsidy after the demise of the former president.
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However, in July 2011, despite the subsisting presidential directive, the Minister of Petroleum Resources, Mrs. Alison-Madueke, announced the launch of the Kero-Direct scheme initiated by the NNPC ostensibly to make kerosene available to consumers nationwide at a highly subsidized rate of N50 per litre.
Under the scheme, the Pipelines and Products Marketing Company, PPMC, a subsidiary of the NNPC in charge of petroleum products marketing and distribution, was directed to provide the product sold to consumers using the products distribution facilities of an independent marketer, Capital Oil and Gas Industries Limited.
But the House of Representatives Adhoc Committee probing the fuel subsidy regime in 2012 had, in its report, described the scheme as “a scam to defraud Nigerians and extort money from the Petroleum Support Fund, PSF.”
The committee had noted that the scheme was not only implemented in defiance of a subsisting presidential directive removing kerosene from the subsidy regime, but also designed in a way the product would not get to the target beneficiaries at the approved price.
The committee said throughout the period, kerosene, which was supposed to be distributed to consumers nationwide at the subsidized price, sold only at the 36 NNPC mega stations out of over 24,000 retail outlets across the country.
Even then, it said the product was never available at that price as there was massive diversion of the product, which was resold to consumers at between N160 and N200 per litre in the open market.
The Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi has also faulted the NNPC’s claim that 80 percent of the $10.8 billion it admitted were unremitted to the Federation account was incurred on petrol and kerosene subsidy.
He urged the Senate Committee on Finance not to accept the argument since a presidential directive had in 2009 barred payment of subsidy on kerosene.
The directive, from former President Umar Yar’adua, remained in force long after the president’s death, Mr. Sanusi said, citing a letter to him from the Petroleum Products Pricing Regulatory Agency, PPPRA, in December 2010- long after Mr. Yar’adua’s death- which confirmed that the agency had “ceased to grant subsidy on HHK(kerosene) through a presidential directive since July 2009”.
“This may explain why NNPC waited till 2011 to claim its ‘arrears’ for 2009-2011,” Mr. Sanusi wrote. “So the first question here is: on what basis did NNPC pay itself billions of dollars as ‘subsidy’ for kerosene, in view of this directive.”
On petrol subsidy, the CBN governor said documents showed the NNPC did not make any deductions from the domestic crude sales for subsidy payment between April 2012 and 2013. In the document attached as appendix, the row showing “adjustment for subsidy” consistently shows “NIL” within the period.
Mr. Sanusi said there are two possibilities here: either the NNPC was lying to the government that it was not making deductions, or it is now lying that is made when it never did.
“Either way, this shows we cannot trust NNPC or its management to tell us the truth,” he said.
Also, a study conducted by a Lagos-based financial consultancy, Financial Derivatives Company Limited, revealed that retail price for kerosene in Lagos and environs between January 2012 to date ranges between N140 and N300 per litre despite the purported subsidy regime.
The study showed that in January 2012, kerosene, which should go for N50 per litre, sold for as much as N300 even in some major towns and cities, which represents about 500 per cent hike, while the prevailing price for the month of February and March 2012 was N250, representing 400 per cent increase.
Since April 2012, where available, the price for the commodity till date has continued to oscillate variously between N150, N175, and N225 per litre.