‘Yar’Adua Is a Liar!’
by Ijeoma Nwogwugwu
So says the Nigerian National Petroleum Corporation and the Pipeline and Products Marketing Company, a subsidiary wholly owned by NNPC that is responsible for the marketing and distribution of petroleum products on behalf of the corporation. Both organisations have been at pains in the last one week to portray THISDAY Newspaper, as a lying, inconsistent news media organisation. Their seething rage stems from the expose published by this paper on Saturday, October 24 on the oil cartel that has been feeding fat from the multimillion dollar kickbacks resulting from the disgraceful importation regime of fuel products into the country. A regime, which I must add, has persisted for 15 years, making Nigeria the laughing stock of other oil producing countries and the whole world.
However, by stating that this paper fabricated the story that a clique within NNPC/PPMC receives N75 million in commissions for every shipment of refined products brought in by oil/commodity traders, NNPC and PPMC have unwittingly portrayed the President and Commander-in-Chief of the Federal Republic of Nigeria as a liar. Alhaji Umaru Musa Yar’Adua, it will be recalled, had during a press briefing on May 12, 2009, acknowledged that there is a powerful cartel that has been benefiting from the subsidy regime for fuel products. In an uncharacteristic flash of anger, the president vowed to crush the cartel, describing it as “the greatest institutional corruption in this country.” In the president’s opinion, this cartel had brought pressure to bear on oil marketers to resist the full deregulation of the downstream oil sector which the government attempted to implement at the time.
Before I continue it will be fair to put the president’s statement in proper perspective. It was made at the time fuel queues had resurfaced, following a decision by oil marketers from the private sector to stop the importation of products into the country over non-payment of subsidy claims. Alarmed at the unsustainable subsidy bill, the government reckoned that the timing might be right to lift the cap on fuel prices. The decision was further encouraged by relatively low oil prices which were hovering at $40 to $50 a barrel. To the surprise of the government, instead of getting the backing of operators in the sector, there was resistance to deregulation, prompting the reaction from the president that a cartel is feeding off the subsidy regime.
As I write this, I can imagine the hacks at NNPC and PPMC scrambling at a deranged pace to rush out an appropriate response to this piece. But before they get their knickers in twist, some basic facts need to be brought to the fore:
1. The Nigerian National Petroleum Corporation is not just limited to catering to the government’s interest in the crude oil exploration and production programme alone, like other major oil marketers, it is a major oil marketing firm that markets and distributes refined petroleum products through PPMC and retails directly from its fuel stations nationwide. This is an incontrovertible fact that the corporation readily acknowledges monthly in its statistical report on activities in the oil and gas sector.
2. Owing to its inability to make sure that its three and half refineries work at optimal capacity, it has been importing refined petroleum products into this country since the mid-1990s.
3. Between 1997 and 2009, NNPC has awarded turn around maintenance contracts to countless companies running into hundreds of millions of dollars to fix the refineries. Yet, they have never operated optimally. The sums expended are more than enough to have built two to three Greenfield oil refineries No one should be deceived by the excuse that the pipelines have been vandalised by militants. Its Atlas Cove jetty which suffered a similar fate less than two months ago was repaired in record time to receive imported products. That should tell anyone where the interest of the corporation lies.
4. It was NNPC’s inability to meet the domestic demand for fuel products nationwide as a sole importer that compelled the General Abdulsalami Abubakar administration to partially deregulate the downstream oil sector, paving the way for other major marketers to import products and compete with NNPC. They were later to be joined by smaller companies known as independents.
5. Ever since the policy of partial deregulation was introduction in 1998, the unending fuel shortages which prevailed non-stop for almost three years during the General Sani Abacha administration, have never resurfaced, at least not in the major cities. Where they have in the major towns and cities, they have been short-lived, never exceeding one to three weeks.
6. With the establishment of the Petroleum Products Price and Regulatory Agency and the Petroleum Support Fund, all major and independent marketers, NNPC/PPMC inclusive, are entitled to a refund of the difference between the regulated price of products pegged artificially low and the price at which they are imported, otherwise known as the subsidy claim.
7. The existence of this structure has made it possible for all marketers (NNPC/PPMC inclusive) to continue with importation. Although, often enough, delays on the part of government to refund the claims through the PPPRA compels those in the private sector to slow down on imports as was the case in April/May this year.
8. When oil marketers from the private sector held the nation to ransom early this year, a deliberate “silent” policy was taken to increase NNPC/PPMC’s importation schedule. Prior to this, major and independent marketers accounted for 60 per cent of imports while NNPC/PPMC accounted for the difference. This was altered to 70:30 in favour of NNPC/PPMC, forgetting that the corporation lacks the logistics to prevent fuel shortages, and that the creation of a monopoly would create more avenues for corruption.
9. This “silent” policy saw to it that NNPC/PPMC became the sole importer of kerosene which it currently sells to other marketers and middlemen at N41 per litre that have taken advantage of the supply gap by retailing the product at the pump at N120 a litre and more.
10. The announcement by NNPC’s group executive director, Commercial and Investment, Aminu Babakusa in September that full deregulation will take effect from November 1, prompted PPPRA to stop the allocation of import licenses to other oil marketers in order to put a plug on rising subsidy claims. In doing that, NNPC became the sole importer of petrol (PMS), leaving marketers to continue with the importation of aviation fuel and diesel which were fully deregulated products by former administration of Olusegun Obasanjo.
11. PPPRA’s decision was ill-advised because as long as NNPC/PPMC is entitled to make subsidy claims, the objective was defeated. Although NNPC as a government parastatal might accept to be owed for much longer periods than private operators, lengthy delays will encourage the corporation to make unaccountable, irreconcilable deductions directly from crude oil receivables, and set it on a collision course with the National Assembly and the Revenue Mobilisation Allocation and Fiscal Commission.
12. The fact that oil marketers were and are still reeling from the combined impact of the clean up in the banking sector, the credit freeze, and non-payment of subsidy claims, made it easy for NNPC/PPMC to capitalise on the situation.
13. Pressure once more was mounted on the government by those with the most to lose to defer full deregulation, leading to a raft of denials from officials in NNPC and PPPRA over the November 1 date. The date for full deregulation was again shifted to January 2010.
14. The regime of partial deregulation and importation is hugely inefficient, increasingly embarrassing for an oil producing country, and has ensured that the refineries do not function. It has also discouraged private sector investment in refineries that can put those run by NNPC out of business and help to moderate prices from local production.
15. The regime has remained in place for a number of reasons: resistance by labour unions and the generality of the public to the complete removal of subsidies; lack of political will on the part of government to push the policy through, despite the fact that it knows that the burden on the treasury and illicit withdrawals from the excess crude account is unsustainable; and resistance to full deregulation by a select few who grow richer by the day from the imposition of subsidies, product diversion, and fuel imports.
From the foregoing, when President Yar’Adua spoke of a cartel that is resistant to the removal of subsidies and has been benefiting from the twisted policy, NNPC/PPMC was not excluded from the president’s statement in any shape or form. Indeed, anyone with an understanding of the downstream oil sector would attest to the depth of the corruption that has permeated the entire industry from government operators to their peers comprising major and independent markets in the private sector.
Like any self-respecting newspaper with a responsibility to get to the bottom of the flip flops on the part of government, ascertain why Nigeria, an oil producing country, continues to import refined products, and enlighten the public, THISDAY dug deep to unravel the horrid mess in the downstream oil sector. What was discovered was mind-boggling and is enough to make anyone shake their heads in anguish that a country with so much can be held hostage by a few crooked officials and their allies. Further investigation would show that what we published was just a tip of the iceberg. The rot cuts across the entire import chain involving other government departments and agencies.
That an Armada of ships can be brought in all at the same time and left on the high seas to amass demurrage bills for upwards of 40 to 50 days, is a pointer to quality of the people running NNPC and PPMC. That NNPC has to resort to the leasing of private depots rather than make sure that its refineries, pipelines and depots function efficiently, says a lot about where its preferences lie. That NNPC, a national oil company of the 12th largest crude oil producer in the world and 8th biggest exporter of the commodity, has been awarding fuel importation contracts to commodity traders for a decade and half and has the temerity to boast that it is the supplier of last resort, is an indication of the bribery and corruption in the system on a grand scale.
For the avoidance of doubt, the press releases, rebuttals and advertorials published by NNPC/PPMC and some concerned oil industry professionals have been quite entertaining. The contradictions, especially by the concerned industry professionals, were glaring to the trained eye. A recurring theme in all the statements is that this paper got caught in a rift between NNPC/PPMC and oil marketers in the private sector. In all honesty it didn’t. As far as we are concerned, no one can emerge from the cesspool that is the downstream oil sector smelling of roses. Both parties over the years have acted in concert to line a few private pockets to the detriment of 150 Nigerians.
As for the sideshow put up by the House of Representatives Committee on Petroleum Resources (Downstream), if after reading our news report its objective was to launch a sincere investigation into the NNPC clique, what transpired last week more than qualified as the perfect example on how-not-to-hold-a-public-hearing. Its deputy chairman, Aro Bamidele, a small-time oil marketer himself with a smattering of fuel station to his name, was too transparent in what the committee set out to achieve. In carrying out its oversight responsibilities, the committee failed to apply any form of rigour, independent investigation, or get widespread input from principal actors in the sector. In end, the hurriedly rushed hearing which was wrapped up in less than three hours, appeared contrived and needn’t have attracted the attention of the public. A much more appropriate alternative would have been to meet privately with NNPC and PPMC and still extract the “pound of flesh” it so badly desired.
To be fair to the NNPC and PPMC, their reactions are to be expected. Anyone or organisation confronted with the damning reports published by THISDAY for two successive weekends in a row will come out kicking and screaming. A company as powerful and wasteful as the NNPC will stretch itself to the limit to portray the stories as a pack of lies. Who are we to take them on? In fact it will be much easier to accept defeat and concede that we lied. But so did the president!
November 2, 2009
Tags: corruption, deregulate, deregulation, Nigeria, NNPC, PPMC, Yar’Adua Posted in: Ijeoma Nwogwugwu
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