Fuel scarcity: Petrol cabals are back at work

BDSUNDAY investigation reveals startling scam about the current petrol scarcity sweeping the nation now. This is how the cabals overseeing the squeeze, according to our sources,perpetrate the fraud. Deliberately, the federal government (NNPC) devised a way to pay importers irrationally. The NNPC, also an importer, arm-twists the other importers to keep mum and pick their payment intermittently. Where payment is made and fuel is imported, most times half of it is discharged and the other half re-routed to another country to sell at international price or returned at another date to sell in Nigeria market creating another version of “round tripping” and scarcity.

Back through the back door created an artificial scarcity in the market through the irrational payment. Second they have created their own illegal market where they preside as cabals and where they (NNPC) and other importers are unrepentantly feeding their pockets fat on the difference between the subsidized price and the illegal pump prices pervading the market. Third, they (NNPC and the importers) through their actions have forced marketers to become an extension of the cabal with prices ranging between N100 to N120 per litre (depending on where you are in the country), prices the federal government and the NNPC pretend don’t exist.

“So they chop the subsidy paid them by the federal government which is the difference between the landing cost of the fuel and recoverable cost, then they twist the price for the marketers and chop the difference. The marketers in turn, extract their own from consuming Nigerians,” our source added. He said that the most annoying aspect for him is the constant abuse and suspicion motorists and other consumers heap on marketers.

“Everybody blames us because they see us, they don’t see the havoc these cabals are causing for the country because of subsidy money. You should also hold the petroleum minister and NNPC responsible,” he said.

They are there (the cabals) and they know that this government cannot take any drastic action perhaps because of the president’s political ambition,” confirms Adeola Elliott, the chief executive officer, Steeving Enterprises, who worked in the oil and gas for many years.

“There are cabals, and these are people who are feeding fat on this government. Some are in the ministry of petroleum, some are in the presidency and some are outside. They are benefitting from this horrible situation,” again pointing directly at the now infamous group.

He said the current issue is quite disheartening. A drastic action has to be taken. Some heads have to roll in NNPC and the ministry of petroleum resources because everything is shrouded in darkness. We need to clean the Augean stables. But it appears the political will is lacking because of the forthcoming elections.

A top executive who currently works as a controller in an upstream oil and gas company put the blame squarely on the petroleum ministry.

“The ministry of petroleum is responsible for the fuel scarcity because the minister is grossly incompetent and she is incompetent in advising the government. The ministry of petroleum resources has collapsed,” he told BDSUNDAY.

He said the fuel importation subsidy account is in disarray that is why the marketers are being owed huge amount of money and they were not able to import.

“The so-called subsidy is a racket. There has always been a cabal. The pump price of premium motor spirit (PMS), if you look at all the members of the Organisation of Petroleum Exporting Countries (OPEC), Nigeria is probably the highest or among the highest. And that is not supposed to be so. We are having a case of incompetent management of our resources by the government.”

He said the cabals started from the Obasanjo regime that failed to fix the refineries and preferred to build tank farms to import fuel and pay subsidies. Since then the cabal machinery has been unleashed in the country.

“So, you find the refineries are not working. Pipelines are being vandalized. There are powerful people behind the stealing of crude oil.”

Worst still, there is no concerted response from the federal government, the petroleum ministry or NNPC to the groans of consumers around the country who in turn have seemingly accepted the scam as a new way of life in modern Nigeria.

Today, there is a huge difference between what is imported and what is consumed. It is claimed that about 59 million liters of fuel is imported daily into the country but industry watchers believe the country consumes just about 35 million liters daily leaving about 24 million liters of oil whose subsidies have been paid for by government and which will never get to the consumers they were intended for. Abdullahi Umar Ganduje, Deputy Governor of Kano State was once quoted in the media as saying that the imported fuel intended for Nigerians end up in neighboring countries like Cameroon, Chad and Niger where petrol prices are far higher.

BDSUNDAY investigation also shows that the cabals have so entrenched themselves that this new strategy may make the current long queues at the fuel retail outlets a permanent fixture for the rest of the year unless the federal government musters the will power to break the chain which is most unlikely given that elections are around the corner and part of the illicit money made by these cabals goes into building election war-chest.

Startling figures

In 2011, only N250 billion was budgeted for fuel subsidy but Petroleum Products Pricing Regulatory Agency (PPPRA) claimed that over N1trillion was spent. Between 2006 and 2012, Nigeria spent more N4.987 trillion on fuel subsidies. In 2006, subsidy cost on petrol was N151.9 billion, N188 billion in 2007, N256.3 billion in 2008 (from January to July); in 2009, N421.5 billion was spent, N673 billion in 2010, and N1.3 trillion spent in 2011 was revised up to 2.19 by the Ministry of Finance, after arrears were paid in 2012 for PMS consumption in 2011.

In 2012, the sum of N888bn was allocated for subsidy payments in the budget for petroleum product importers, but in December a supplementary budget of N161.6bn for payment of arrears of fuel subsidy was submitted by the president and later approved by the National Assembly.

For 2013, PPPRA has said that it paid a total subsidy claims of N832 billion to fuel marketers under the Petroleum Support Fund (PSF) in 2013.

In addition to diverting the subsidy funds, the new strategy ensues that all those along the fuel import and retail chain now triple what they used to make just depending on subsidy handouts alone.

Paradox of plenty

Domestic crude oil refining capacity has fallen into ruin with none of the four refineries producing anything near half installed capacity despite

abundant crude oil production. Nigeria relies almost solely on imported petroleum products for local consumption. Thus, most of refined petroleum products used to energise the industrial and transportation sector has to be imported.

The huge wealth derived from the export of the hydrocarbon resources itself has in no way impacted positively on the people with over 70 per cent of the populace living below poverty line. The wealth has not also revolutionised infrastructural development. However, the allusion that government guards the population against the high import costs of the petroleum products through subsidy has somewhat become a mantra.

It is far more viable for the government to restore domestic refining capacity in addition to encouraging private investors instead of depending solely on imported petroleum products. However, the latter thrives on corruption which seems to be the driving force behind the policy of petroleum products importation and sabotaging local refining of crude oil. In May 2010, for instance, China State Construction Engineering Corporation Limited (CSCEC) signed a $28.5 billion deal with Nigerian National Petroleum Corporation (NNPC), to build three new refineries. Beyond the signing ceremony, the Chinese refinery projects never took off.

Contending positions

The issue of subsidy on petroleum products in Nigeria has always been controversial. There have been various price adjustments especially on premium motor spirit (PMS) in the name of partial subsidy removal to the effect that there are four contending positions. The first group of people strongly feels that there is no longer any kind of subsidy at the moment while the second group feels subsidy still exists on petroleum products (petrol and kerosene). The third group agrees that subsidy should be removed because the economics makes sense but that should be done after government has restored the refineries and put in place the structure to combat the massive corruption in the oil sector. The fourth group feels that fuel subsidy should never be removed as that is the only thing Nigerians enjoy from their “God-given natural resources”. Majority of Nigerians favour the last position irrespective of status even with the full knowledge that enormous fraud exists in the subsidy business and most of these subsidy funds eventually end up with the oil cabals.

Subsidy masterclass made in Nigeria

Usually, the task and responsibility of importing petroleum products ought to have been the sole responsibility of the NNPC who will then sell to the oil marketers for onward retail to the public. This has been the practice. However, the marketers never got around to settling their debts with the NNPC and the state oil company was owed mind boggling sums. Thus, what is obtainable at the moment is that the PPPRA awards petroleum products’ import quotas to marketing companies, which has created different levels of corrupt practices, and patronage, which the cabals have capitalised on.

In 2012, the House of Representatives set up a committee, the Lawan Farouk Ad-hoc Committee, to probe the payment of subsidy in the downstream sector of the Nigerian economy. The leaked report documented that at least $4 billion annually is taken from taxpayers in fuel industry corruption by the entrenched oil cabals in the guise of subsidy and other claims.

Frank Uzuegbunam & Charles Ike-Okoh