Fuel Subsidy Claims Verification Begins

May 25 09:18 2012 Ejiofor Alike Print This Article

The Ministry of Finance is about to commence the verification of clams for petrol subsidy by marketers, THISDAY has learnt.

The technical committee,Guest Posting headed by the Group CEO of Access Bank Plc, Mr. Aigboje Aig-Imoukhuede, will scrutinise documents provided by the marketers as government seeks to tackle graft in the fuel import regime.

Nigeria now imports 32 million litres of Premium Motor Spirit (PMS), otherwise known as petrol, daily as against 59 million litres last year.

The number of participants in the Petroleum Support Fund (PSF) scheme which was 128 in 2011 came down to 42 by the end of January and there is indication that the Petroleum Products Pricing Regulatory Agency (PPPRA) may have further pruned the figure, as part of the ongoing efforts to end graft in the PSF scheme.

Industry experts have attributed the drop in the volume of daily import to a new import regime introduced since the re-organisation of the PPPRA by the Minister of Petroleum Resources, Mrs Diezani Alison-Madueke.

For a long period, there had been debate on the actual amount of PMS needed monthly in the country, with the Nigerian National Petroleum Corporation (NNPC), PPPRA and the Department of Petroleum Resources (DPR) providing conflicting official figures.

This had fuelled speculation that that the enormous fuel subsidy incurred by the Federal Government was caused by an inflation of the consumption needs of Nigerians.

With the new figure, the payment for subsidy is expected to be significantly lower this year, although a slight increase in pump price as well as the rising landing cost of fuel imports are also expected to impact on the final figures.

For instance, when the official pump was increased to N97 per litre in January, the government was paying a subsidy of 46 per litre, as the landing cost of PMS from the international market was N143 as at January.

But with the rising cost of crude oil at the international market, government’s burden has increased as the landing cost is now N153.64, with the government now paying N56.64 on every litre of PMS imported into the country.

Following his appointment as the Executive Secretary of the PPPRA last November, Mr Reginald Stanley introduced a two-pronged approach to stem the tide of sharp practices in the fuel importation regime.

These measures include the introduction of the Certified Cargo Inspectors aimed specifically at enhancing operational efficiency and accountability in the area of products receipts, in line with international best practices.

Another measure was the introduction of the Double Three Two (3-3-2) inspection system to monitor products.
The report for January 2012, according to sources, has shown a significant improvement in the saving costs.

Presidency and the Ministry of Petroleum Resources are said to be excited about a first quarter report that will convince the public that sanity has finally returned to the fuel importation business, which has been a subject of parliamentary probe.

A Presidency source said: “There are reasons to be upbeat about reports from PPPRA. For instance, the introduction of the certified cargo inspectors by the new management of the agency has led to the reduction in average PMS daily discharge from 59 million litres in 2011 to below 32 million litres in January 2012.”

Until Stanley introduced the chartered cargo inspectors, product discharge was supposedly witnessed by the Federal Ministry of Finance-appointed auditors, PPPRA representatives, DPR representatives and importing marketers appointed cargo inspectors.

The introduction of the Double-Three-Two inspector System to monitor products imports has also recorded some impressive results, according to a Presidency source.

“Indeed, the number of participants in the Subsidy Scheme which was 128 in 2011 has now come down to 42 by the end of January, a reduction of about 67 per cent and we still expect even more cheery results for February and March,” he said.

Only actual owners of downstream facilities are engaged in the current exercise which is in agreement with the regulations guiding fuel importation in the first place.

THISDAY could not get the exact figure of how much has been saved so far, but insiders said it would be “enormous”.
About N888 billion was budgeted for subsidy this year, but there are fears that the figure may hit N1trillion by the end of the year following spikes in crude oil prices and, consequently, landing cost of imports.

But this is still considerably less than what was spent last year, which was estimated at N2 trillion by the House committee that probed the subsidy saga.

The source explained: “Subsidy computation is a function of both quantity supplied and product landing cost, which moves in tandem with international crude oil price that has been highly volatile in recent times. Also, the 2012 first quarter average daily discharge is still provisional, so specifying the amount of savings at this time may not be accurate.”

The source however admitted that given the drastic reductions that had been recorded in quantity imported and the number of importers as indicated in the January 2012 report and the agency’s performances thus far, the nation’s savings from the subsidy regime “could be in billions by the time the first quarter report is compiled and released”.

PPPRA, which has been placing emphasis on local participation in the import regime through ownership of downstream facilities, announced last week that it had attained 18-day PMS sufficiency despite the reduction in quantity imported and number of importers.

There is no impending shake-up in the oil sector, according to Presidency sources who said Alison-Madueke had late last year requested and secured the approval of President Goodluck Jonathan to embark on a reorganisation exercise, including the PPPRA.

“Americans say if it ain’t broke, don’t fix it,” the source said, insisting that the results being recorded so far are “very encouraging”.

There were rumours recently that seven members of PPPRA management had spent the maximum eight years in positions equivalent to that of directors and are therefore due for retirement.

“The agency is just nine years old and none of the present staff resumed there as a director,” he added.

Stanley, however, refused to comment on this development, when contacted by THISDAY.

“It is distracting and petty. In any case, issues of appointments, promotion, postings and even retirement are purely administrative and routine and therefore totally devoid of controversies and rancour,” he said.

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