THE Federal Government has released the sum of N54.6 billion for fuel subsidy.
The Minister of State for Finance, Mr. Remi Babalola, yesterday disclosed in Abuja in a chat with reporters that the amount represents the outstanding petroleum subsidy payment due to products’ importers from the Petroleum Support Fund.
The immediate past Minister of National Planning, Sanusi Daggash, recently revealed that government subsidy on oil had risen to N450 billion and that there was no way to stimulate private sector investment in the downstream sub-sector of the nation’s petroleum industry unless internal pricing was addressed.
“It is internal pricing that is hindering investments in the downstream sub-sector of the nation’s petroleum industry. It is a sensitive political issue that can cause people to protest and all that and we are careful about it,” Daggash had pointed out at the Private-Public Roundtable organised by the Economist Conferences, in Abuja.
He observed that the downstream sub-sector of the petroleum industry could achieve optimal growth only if private sector operators invested heavily in it, a development, he said, would benefit all stakeholders.
President Umaru Musa Yar’Adua last April equally ordered the release of the sum of N14.864 billion to the Nigerian National
Petroleum Corporation (NNPC) and another sum of N21.417 billion to the Petroleum Products Pricing Regulatory Agency (PPPRA).
The amount is the outstanding subsidy for petroleum products for 2007. The release, according to Presidency sources, is to enable the two agencies deliver on their mandates of petroleum products supply in the country.
As part of an on-going measures to check against the continued propensity of revenue generating agencies from fleecing the Federation Account jointly owned by the three tiers of government in Nigeria, the Federation Allocation and Accounts Committee (FAAC) August last year adopted a motion to summon the NNPC and the PPPRA over discrepancies in invoices tendered by the two agencies for the last July revenue generated by the federation.
Both agencies have continued to claim subsidy from the monies generated and shared by the federation for services they claim they rendered in the production of the revenue. Most of the subsidy is deducted by the agencies before even reporting the revenue generated to FAAC, a development that does not go down well with the states.
The development has since pitched states in particular against the NNPC as they accused it of under-reporting revenue generated by it through its unilateral deductions before declaration to FAAC. The states insist that the NNPC should instead declare revenue generated alongside cost borne in the generation of such revenue.
Meanwhile, to put the nation’s four refineries back to working ways, work has begun on the Turn Around Maintenance (TAM) of the Kaduna Refinery.
According to the Managing Director of the Kaduna Refining and Petrochemical Company (KRPC), Mr. Olayinka Agoro, government is committing about N6.8 billion.
Agoro, who spoke in Kaduna at the weekend during a facility tour of Kaduna Refinery by journalists, said the target was to hit the 60,000 barrels per day installed capacity of the refinery as against its present 45,000 barrels refine capacity daily.
He disclosed that the last time there was a TAM for the refinery was 10 years ago. Agoro, who is a renowned refiner himself, blamed over-politicisation of the appointments into the hierarchy of NNPC for the staccato nature of TAM of the four refineries.
He said: “TAM is supposed to be done every two years and was not known to the press. The Kaduna Refinery was built in 1980 and the first TAM was done in 1982 and with the second coming in 1984. But when in 1984 a Group Managing Director was brought from Nigerian Electric Power Authority (NEPA), it was then everybody started knowing about TAM. Then over the years, they started politicising TAM and that was when we started having problems.”
He also revealed that the Port Harcourt Refinery would undergo TAM next year while the Warri Refinery is slated for 2010 and Kaduna will also undergo another TAM late 2010.
Although he agreed that the long term solution to fuel scarcity in Nigeria is building more refineries, he added that routine TAM is equally strategic in stopping fuel crisis in the country.
Agoro also assured that textile industry will soon begin to witness buzzing of activities, saying that all the four nation’s refineries have the capacity to meet the black oil needs once in operation.
“The textile industry case is very pathetic indeed. Out of the four refineries in the country, only Kaduna was running and not even at full capacity. But we hope that as soon as the TAM of all the refineries is completed, textile industries in the country will have enough black oil to run their factories. We know that the shut down of refineries have led to many families losing their source of livelihood,” he assured.
Agoro said the refineries’ control rooms are 30 years behind in terms of technology and therefore paid glowing tributes to the Nigerian engineers who are spearheading the TAM for taking up the challenge of making the refinery work despite its obsolete facilities.
He hinted that the Kaduna refinery would be shut down from November 15, 2008 to the middle of January 2009 to carry out the repair work.
Ajuonuma has equally dispelled any fear of fuel scarcity in the northern part of the country in the course of the repair work.
His words: “We know that very soon we will be having sallah, Christmas and New Year celebrations and we want to assure all Nigerians that adequate products have been made available that can last well beyond the festive periods. We will be loading because we will be bridging from Lagos and other states from the south. In addition to that, we have made reservation for extra trucks for the festive periods. The NNPC wishes to assure all Nigerians that the TAM does not mean scarcity or disruption in the products’ distribution. The TAM does not mean that crude will not come from Warri to Kaduna. As we speak, we have enough tanks and still want to fill up and have enough stock that can last months after the refinery is fully refurbished.”
He said that about 90 per cent of the materials needed have arrived Kaduna, five per cent arrived Lagos port while the remaining five per cent will be flown in.
Ajuonuma further explained that the materials were procured by the NNPC London office which has saved Nigeria about two million dollars through direct procurement from the manufacturers cutting off the middlemen in the procurement dealings.
Also, petroleum products availability is being threatened, as marketers of petroleum products are demanding payment of about N110 billion owed them by the Federal Government.
The Major Oil Marketers Association of Nigeria (MOMAN) yesterday alleged that government was owing marketers of premium motor spirit (PMS), otherwise known as petrol, a backlog of about N110 billion under its Petroleum Support Fund (PSF) Scheme.
Specifically, MOMAN alleged that its members are being owed about 50 per cent of the total sum, which was supposed to have been paid in the last six months.
Speaking with The Guardian yesterday on grounds of anonymity, a MOMAN source said unless the debt was promptly paid, the hope of Nigerians celebrating the coming festive periods without scarcity of petrol may be dashed as its members may opt out of fuel import.
According to him, the willingness and ability of the marketers to continue further importation is being threatened by the huge debt as most of the funds were sourced from financial institutions.
Giving a breakdown of the reimbursement debt, the source said major marketers are being owed about N60 billion while other importers have the remaining sum of N50 billion.
“For more than 180 days, that is about six months now, we have not received reimbursement for whatever we have done in respect of importation. This is most painful because all the monies used for this course were borrowed from financial institutions, which operate strictly on interest basis.
“As you are aware, for us to import the way we do, we have to open letters of credits with financial institutions locally and internationally. With the recent financial crisis everywhere, interest rates have been on the increase. For instance, as at October, the London inter-bank ordinary rates have been experiencing an upwards surge from 2.5 per cent to between 5 and 6 per cent, while the home interest rate is not less than 25 per cent.
This is not particularly good for us because the PSF uses the 2.5 per cent rate as a module for calculating our reimbursement.”
Speaking on the likely factor responsible for the delay, the source alleged that the process for reimbursement was characterised by bureaucracy and bottleneck.
Besides, the source revealed that it was discovered that the money is yet to be disbursed to the Petroleum Products Regulatory Agency (PPPRA) for onward payment to them.
The government early this year directed the Economic and Financial Crimes Commission (EFCC) to audit and investigate the management of PSF by PPPRA.
In September, the Minster of State for Energy (Petroleum), Odein Ajumogobia, directed the Executive Secretary of PPPRA, Dr. Oluwole Oluleye, to proceed on compulsory leave in order to pave way for independent investigation into the management of the Petroleum Support Fund.
The PSF is a pool of funds budgeted for by the government to stabilise the domestic prices of petroleum products against volatility in international crude and products prices. It is financed from two sources, namely: the Government and fund realised during the period of over-recovery which is when the PPPRA recommended price is higher than the market determined price.
Before the introduction of the deregulation policy, Nigerians have had to contend with intermittent products’ shortages, which gave rise to perennial queues at the petrol stations nationwide. In the last two years, the upward movement in the international prices of crude and petroleum products has added to the continuous upward pressure on the prices of domestic petroleum products.
In an attempt to stabilise domestic petroleum products prices and mitigate associated problems, the government deemed it wise to establish a Petroleum Support Fund effective January 2006, which in effect is an interventionist fund.
A budget of one hundred and fifty billion naira (N150 billion) was included in the 2006 Appropriation Bill. For the sake of transparency and accountability, all the various stakeholders / operators were scheduled to be involved in its implementation.
The committee, which recently investigated the non-remittance of revenue into the Federation Account by government agencies, departments and statutory corporations, disclosed that from its investigations, the Federal Government was funding the controversial fuel subsidy through the “domestic excess crude” funds.
The committee said that while it appropriated some money for the Petroleum Support Fund in 2007, nothing was provided for the fund in the 2008 budget and wondered from where else the Federal Government planned to fund the subsidy.
The Minister of State for Petroleum, Mr. Odein Ajumogobia, recently said the Federal Government would remove subsidy on all petroleum products as the status quo did not favour the masses the subsidy was supposed to benefit.
The minister had argued that contrary to the expectation that subsidy would benefit the masses, it was the rich who were actually enjoying it, buying cheap petrol to fuel their cars. He noted that the sum of N1.5 trillion had been spent on subsidy since the assumption of office of the Yar’Adua administration, while stating that the removal of the subsidy would help the government to raise funds to finance projects that would have direct positive impact on the people.