Oando denies benefitting from fuel subsidy
The Group Chief Executive Officer of Oando Plc, Mr Wale Tinubu, has explained that oil majors did not unduly benefit from the government’s fuel subsidy as they were only paid the differentials between their costs and government approved retail price.
Speaking at the public hearing on the management of subsidy being organised by an ad–hoc committee of the House of Representatives, Tinubu said the money paid to marketers as subsidy was not a profit or windfall but under-recovery, arising from the differentials between the landing cost of petroleum products and the official pump price.
He stated that the use of the word ‘beneficiary’ was a misconception as the money was not a special favour from the government but a refund of the actual cost incurred by marketers in the importation of petrol.
Tinubu said the marketers spent an average of $30 million to import a 30,000metric tonnes cargo of petrol, but sold the products at almost $15million; while the balance was paid to marketers as subsidy.
“The Petroleum Support Fund (PSF) expected that there would be under-recovery. For example, when the landing cost was higher than the pump price, the government owed us money, which is paid as subsidy. When there is over-recovery, that is, when the landing cost is less than the pump price, we pay back to the government. For example, during the Yar’Adua administration, when the petrol price was N65 and the crude oil price dropped to $50 per barrel, the marketers paid back to the fund. I remember that Oando paid back N1.6billion back to the Federal Government,” Tinubu said.
He noted that when the subsidy regime was introduced in 2006, three major marketers, including Oando Plc, participated in the scheme, along with NIPCO Plc and the Nigerian National Petroleum Corporation (NNPC).
According to him, Oando accounted for 53 per cent of petrol importation in 2006 and 47 per cent of subsidy payment.
He however, stated that the company’s market share in terms of subsidy receipts and petrol importation dropped to 11 per cent in 2011, due to proliferation of companies that participated in the PSF scheme.
