Chief Executive Officer of Oando Plc, Mr. Wale Tinubu, has described as unfortunate the scenario where importers of petroleum products were regarded as ‘beneficiaries’ of fuel subsidy rather than corporate organisations engaged in a legitimate business in the petroleum sector.
Also, the Independent Petro-leum Marketers Association of Nigeria (IPMAN) has blamed the apparent abuse of the petrol subsidy regime on the granting of licence to ‘briefcase importers’ who have neither storage facilities nor retail outlets in Nigeria.
Tinubu made his views known while testifying at the public hearing organised by the House of Representatives Ad hoc Committee on monitoring of the subsidy regime.
The Oando boss noted that 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 stated that the marketers spent an average of $30 million to import a 30,000-metric-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 N1.6 billion back to the Federal Government,” he said.
Tinubu said 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 said 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.
When the subsidy regime was introduced in 2006, Tinubu said, only companies that had at least 25 petrol stations and 5,000mt storage capacity were allowed to participate, according to the PSF guidelines.
He said the scheme was abused when companies that did not have retail outlets and storage facilities were allowed to participate in the importation business, at the detriment of companies that built capacity.
“In terms of summary of our subsidy payment, we collected approximately N120 billion by the end of 2011 and we imported well in excess of one billion litres or about 700,000 metric tonnes as at August 2011. By the end of 2011, we had imported about 1.3 million mt into the country,” he said.
He however disclosed that the company had an outstanding N4 billion of unpaid subsidy in 2011.
Meanwhile, speaking at the public hearing, National President of IPMAN, Alhaji Aminu Abdulkadir, said at the inception of the subsidy scheme, importation of petroleum products was restricted to NNPC, major and independent marketers because of their storage capacities and distribution channels.
He also accused NNPC of not allowing independent marketers to lift kerosene directly from the its depots, adding that the products were first sold to some middlemen who subsequently sell to IPMAN members at premium price.
He explained that this situation was responsible for the artificial scarcity of kerosene and its being sold above the regulated price of N50 per litre.
According to Abdulkadir, the sector witnessed a drift when its relevant regulatory agencies began to deal with those he referred to as briefcase importers. This brand of businessmen, he said, import and sell petroleum products on paper.
He disclosed that whereas members of IPMAN controlled 78 per cent of the total fuel retail outlets in the country, they were only allowed to bring in about one per cent of the total volume of fuel imported into Nigeria last year.
The IPMAN boss said most of the companies that were granted import permits during the same period had no storage facilities and retail outlets, a situation that encouraged diversion of the imported products to markets outside Nigeria.
He said for the country to get out of the drift, the issuance of import permit must be tied to the availability of verifiable storage and retail facilities in Nigeria.
He also suggested that government should dredge the ports to allow ocean-going vessels conveying imported products berth and discharge at the designated coastal depots rather than the midstream discharge that gives rise to smuggling and diversion of the products.
Abdulkadir also urged the government to set aside part of the proceeds of the partial deregulation of the price of petrol for the purpose of building new refineries in the country, as the final solution to all the problems was the refining of petroleum products locally.
Executive Director, Marine and Operations at the Nigerian Ports Authority (NPA), Mr. Sotonye Ineiyenge-Etomi, said apart from the shallow nature of the harbours, foreign vessels were usually scared of berthing due to insecurity arising from the activities of pirates.
Another agency that gave testimony before the panel yesterday was the Indigenous Ship Owners Association of Nigeria which complained of being excluded from the lifting of both crude oil and imported refined products, saying the country was losing about N3.75 trillion annually as a result of its exclusion.