Subsidy: FG Yet To Pay Marketers This Year

The federal government has failed to pay oil marketers their subsidy claims for the 2013 fiscal year, executive secretary of the Petroleum Products Pricing Regulatory Agency (PPPRA) Mr Reginald Stanley said at a meeting with the Senate Committee on Petroleum Resources (Downstream) yesterday.

The PPPRA boss traced the delay to the marketers’ inability to sort out foreign exchange claims at the Federal Ministry of Finance.

The federal government allocated N971.138 billion for fuel subsidy in the 2013 budget. A sum of N888.1 billion was officially allocated in 2012.

The fuel subsidy allocation, as captured on page xvii of the Approved 2013 Budget signed by President Goodlcuk Jonathan on February 26, indicates that the N971.133 billion is for “domestic fuel subsidy (marketers) (carry-over from 2011& 2012 provision for partial subsidy)”.

Stanley also noted that although the federal government has spent a total of N3.7 trillion in five years, the PPPRA has succeeded in cutting the number of oil marketers from 142 to 38 as at December 2012.

He added that local consumption of PMS has also been brought down from 60.25 million litres per day in 2011 to 40 million litres.

Said Stanley: “Between 2006 and August 2011, total government expenditure on petroleum subsidy amounted to N3.7 trillion. Expenditure on subsidies increased from N261 billion in 2006 to N673 billion in 2010, which represents an increase of about 160 per cent.

“Additionally, there have been unprecedented payments in 2011 that so far amounted to N1.4 trillion due, in part, to two key factors: increase in subsidy per litre as a result of rising global oil price, and large arrears due NNPC for household kerosene imports.

“When we started, the chairman was very hard on us but he’s objective. I asked for time that we will live up to the Senate’s expectation and I’m happy with this visit.

“2011 was like a gold-rush where you had briefcase marketers. Local consumption rose to 60.25 million liters per day in 2011 but had dropped to 39.66 million liters per day in 2012.

“Most of the international traders who did business with their Nigerian counterparts were also briefcase traders. They would sell and run away. That practice, I can tell you, has since been cancelled.

“One of the biggest frauds in 2011 was ‘Bills for Collection’ which was used to trade for petroleum products.

“There’s been a very dramatic transition from what obtained in 2011 and what we have today.”

Speaking on some key challenges facing the PPPRA, Stanley reiterated that the agency was yet to clarify the status of kerosene — whether it has been deregulated or not.

“There is lack of clarity on PPPRA and DPR roles in regulating the petroleum sector. Besides, there is lack of clarity on the subsidy status of household kerosene (HHK). We don’t know whether it has been deregulated or not.

“All over the country, between January 1 and December 30, we went round to determine the stock…that was how we first got the figure of 40 million litres per day as our local consumption.”

But committee chairman Magnus Abe warned that refineries should be allowed to function optimally which would, in the long run, reduce importation of petroleum products.

Abe: “We are happy that you have put in measures to control the cost of subsidy payment. We have looked at the figures and we are impressed with the progress you are making and we believe you can do more.

“At this juncture, all I want to say is that all Nigerians should be vigilant. The reason we are celebrating now is because of the attention which made some people run away. The moment we relax, they may come back. Those who ran away with their briefcases are also looking for how to come back.

“If the figures rise, we will like to know why the rise because there’s still that danger as they are still lurking around.”

Nigeria loses $20bn revenue to oil production shutdown in 1yr

Recent studies have shown that, within the last one year, Nigeria has lost about $20.7 billion to shutdowns of oil production and spillage following attacks on oil installations.

This was disclosed by an expert in oil industry security, Austin Onuoha, while making a presentation at a roundtable on business and security organised by Global Rights in Abuja yesterday.

The expert, however, noted that the huge cost could be drastically reduced if Nigeria embraced the Voluntary Principles on Security and Human Rights.

The Principles, established in 2000, is a multi-stakeholder initiative involving government, companies and non-governmental organisations that promotes implementation of a set of principles that guide oil, gas and mining companies on providing security for their operations in a manner that respects human rights.

According to Onuoha, “there have been more than 50 attacks on oil installations resulting in shutdowns and spillages with consequent losses in revenue estimated at about $20.7 billion.”

He noted that the amount excludes an estimated $3 billion lost to oil bunkering over the first five months of this year alone, with an unaccounted cost in human misery.

Onuoha also disclosed that over $53 billion was spent by operators of the oil sector to protect their facilities and personnel in the Niger Delta region between 2007 and 2011. A breakdown of the figures shows that operators spent $3b in 2007, $23.7 billion in 2008, $24 billion in 2009 and $3 billion in 2011.

He informed that oil giant Shell alone has about 1,200 internal police officers in its employ while it also engages another 1,300 armed security forces from regular government security for the protection of its installations.

“Analysts have described Nigeria as over-policed and under-secured. The security situation in the Delta fits this trend and has deteriorated sharply since the region was put under military occupation in 1998. The Nigerian government, driven to keep oil revenues flowing and working in close partnership with oil multinationals, has heavily militarized the Delta,” the expert noted.

He further explained that the security challenge is magnified by the fact that Nigeria has over the years developed a huge critical national infrastructural complex in the petroleum industry.

“Nigeria’s oil is lifted from 250 fields, drilled from 300 oil fields, 5,284 wells, made up of 7,000 kilometres of pipelines, 10 export terminals, 275 flow stations, 10 gas plants, 4 refineries and 2 liquefied natural gas plants. Securing all these in a terrain as difficult as the Niger Delta with poor governance like Nigeria is a huge challenge,” he stated.

In her presentation, Shell’s external security relations and operations adviser, Diki Omuku, stated that the company has a robust sustainable community relations programme that integrates human rights into its general business principles.

According to her, Shell signed to voluntary principles because the company believes that, if applied, it would improve security and human rights in Nigeria’s extractive industry.