Wednesday, January 18, 2012

Fuel Subsidy: Customs indicts NNPC

Culled from the Nation

Alleged subsidy fraud: Customs indicts NNPC

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•Mrs Alison-Madueke with NNPC Group Managing Director Austin Oniwon at the hearing ... yesterday        Photo: Abayomi Fayese •Mrs Alison-Madueke with NNPC Group Managing Director Austin Oniwon at the hearing ... yesterday Photo: Abayomi Fayese

FROM the streets and seminar halls, the petrol subsidy battle returned to the House yesterday, with the Customs disclosing that the Nigerian National Petroleum Corporation (NNPC) does not have documents to back up fuel importation.

According to the Nigeria Customs Service (NCS), the Ministry of Finance also aided the “illegality” by coercing Customs to overlook the essential documents to “avert undue hardship on Nigerians”.

Also yesterday, the Ministry of Petroleum Resources, which supervises the NNPC, denied being the approving authority for subsidy deductions.

The Farouk Lawan-led House of Representatives Ad-Hoc committee investigating the management of fuel subsidy heard from Deputy Comptroller-General of Customs Julius Ndubuisi Nwankwo, who represented Comptroller-General Abdullahi Dikko Inde, that most fuel importation did not follow due process.

Nwankwo said no invoices are attached during clearance of fuel, adding that “as we speak, most of the importation of PMS has no documentation”.

He said as a result of the lack of documentation, the NCS is not in a position to give the exact number of vessels imported by the NNPC.

“NNPC does not make any documentation to the Customs. Several meetings were held where the NCS was directed not to ask for documents. The Ministry of Finance wrote to NCS, warning them not to ask for documents because this will cause crisis,” Nwankwo said.

Besides, revealed the officer, NNPC never berthed the mother vessels at Nigerian ports, contrary to the provisions of the extant laws.

Said Nwankwo: “Vessels imported into this country are referred to as mother vessels. These mother vessels never get to the ports in Nigeria. The vessels are normally anchored offshore. If you see the manifest covering these imports, what you will see is ‘offshore Cotonou, offshore Lome’.

“They never get to the ports. Rather, you have smaller vessels that pick these products from the mother vessels and they come to the ports to report to the Customs – in line with the provision of the enabling Act of Customs.

“These mother vessels do not report to Customs. Customs does not board mother vessels; we can only board vessels that are anchored within our territorial waters. The smaller vessels take these products to the ports.”

Nwankwo urged the Committee to look into “the average diversion and compare with the capacity of the mother vessels with the smaller ones that their capacity are known”.

He said NNPC has failed to pay duty on imported Premium Motor Spirit (PMS) worth N45 billion to Customs from 1999 to 2002 when the duty was formally suspended by the Federal Government.

Nwankwo said to ensure transparency, NEITI should conduct forensic audit of all the ships in Nigeria and from exporting countries.

While he berated the corruption in the oil and gas sector, Nwankwo said there was no documentation of PMS imported by NNPC into the country and that only independent oil marketers attempted to document importation.

According to him, the Federal Ministry of Finance had in a letter sent to Customs warned that any insistence on enforcing Customs rules (SEMA) would cause untold hardship and petrol scarcity.

The Nigeria Extractive Industries Transparency Initiative (NEITI), corroborating the allegation by the NCS, said the management of the country’s crude oil and importation of petroleum products by the NNPC was deficient in transparency.

NEITI chairman Prof. Assisi Asobie, payments made in respect of fuel subsidy by the NNPC “lack transparency and due process”.

According to him, subsidy payments should be made from the Central Bank through the Petroleum Fund, but that has not been the case with the NNPC.

His words: “This clear due process is not followed by the NNPC. NNPC estimates the subsidy entitlements and deducts the estimated amounts directly from the domestic crude proceeds before remitting the rest to the Federation Account.”

He noted that during the audit of the oil and gas sector for 2006 and 2008, NEITI discovered inadequacies that complicated the problem of accurate determination of volume of imported petroleum products.

Asobie said from 2002, NNPC lifted domestic crude at the market price, providing incentive for export of domestic crude rather than domestic refining of all crude. From 2006 to 2008, the total oil lifted from the country was 8.8 million barrels. NNPC lifted 4.8 million barrels,” Asobie said.

According to him, “the measurement methods used by the PPMC and DPR are not in accordance with best practice. Even then, they are not consistently applied and cannot be relied upon.”

The NEITI chair noted that the systems for recording the movement of refined products through the PPMC pipeline are outdated, paper based and subject to error.

Petroleum Resources Minister Diezani Alison-Madueke told the committee that deductions by the NNPC for subsidy were legal.

She said NNPC’s action was embedded in the 2011 Appropriation Act, page 14, item no. 8 where it is stated that deductions be made on domestic subsidy and joint venture cash calls, adding that section 5 (80) (3) of the 1999 Constitution, as amended, empowers the corporation to deduct from source.

“I need to say clearly that we have done nothing unconstitutional as a ministry, particularly regarding deducting at source. We do not take money from the federally appropriated revenue,” Mrs Alison-Madueke said.

The Minister said N245b was budgeted for two months because it was calculated that deregulation was going to take off, but the budget went up to N1.3tr as the process could not begin as planned.

“It is Ministry of Finance that authorises the payments that are made for subsidy and not the Ministry of Petroleum Resources,” she said.

Mrs Alison-Madueke dismissed the existence of a cabal in the NNPC and stressed that deducting subsidy cash at source by the NNPC was in line with the provisions of the law.

Lawan asked the Minister to name the “cabal” in the oil sector. The Minister replied: “I think I have to say at this time that I’m under oath and it will be most improper to speculate on the existence or not of the purported cabal.

“Let me say for the purpose of records that I think that we cannot afford as a country to criminalise either a certain group in one fell swoop, just as we cannot afford to criminalise the policy of subsidy itself.

“The policy on subsidy, I believe, was enacted at a time when the government, was trying to do its best for the people of Nigeria, I believe it was the best of intentions at the beginning.”

She, however, clarified the roles of oil marketers, some of whom were accused of being responsible for the rot in the subsidy regime.

Said the minister: “When you have a pool of marketers, many of whom are bonafide marketers, who do very legal job for this country, and I say this because I have been severally taken to task and called all sort of names for saying this, but as Minister of Petroleum Resources, I think I have the courage to say, ‘Yes, there have been manipulations in the sector; there is no question about it’. Yes, we are looking into it very aggressively and we have made certain changes and once we have taken time to look at the situation on ground to begin to institute those aggressive changes which are already reaping rewards for us.”

Mrs Alison-Madueke restated the government’s resolve to combat corruption in the sector. She said: “I will continue to do that as I am sure the entire country can see that a lot of things are happening that we will continue to harp on, until we are able to weed out those who have actually corrupted the system and manipulated the system to their own advantage to the detriment of the entire country and the economy as a whole.

“So many of them were not found to do that, there are elements who have not done so and who have gained a lot from manipulating the system and we expect to find them in the soonest possible time.

“But I think we should not criminalise the actual act or legal marketing or the concept of fuel subsidy.”

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