Summary of reccommendations of House of reps fuel susidy probe

More sordid details of the multi-billion naira petrol
subsidy bazaar emerged yesterday.
A waste disposal firm got N1.9b subsidy for products it
never supplied, according to the report of the House of
Representatives Ad-Hoc Committee which probed the
controversial subsidy.
More than 126 oil marketers and top officials of the
Petroleum Products Pricing and Regulatory Agency (PPPRA)
should be investigated and prosecuted by anti-graft
agencies – if the authorities accept the recommendations
of the Committee.
They are to be probed by the Economic and Financial
Crimes Commission (EFCC) and the Independent Corrupt
Practices and Other Related Offences Commission (ICPC).
But the panel cleared three firms of misconduct. These
are: Conoil Plc, AMG Petroleum Energy Ltd and Rainoil
Ltd.
The committee discovered that about 3, 171,644, 336
litres of petrol, allegedly subsidised, never got to the
market.
But the committee reprimanded a former Chairman of the
PPPRA, Senator Ahmadu Ali, and the board members
(2009-2011) for their “decision which opened the
floodgate for the bazaar” in the agency.
It did not recommend any sanction against Ali, a former
National Chairman of the ruling Peoples Democratic Party
(PDP), and the erstwhile board members.
These highlights are contained in the report of the
committee that was made available to the media
yesterday in Abuja.
The report reads: “The PPPRA is expected to assign
independent inspectors interchangeably referred to as
Independent Monitors/ and or Industry Consultant to
measure and certify the quantity of products imported
and supplied by the importer-companies. They are also
required to analyse the quality specifications of the
products and ascertain the quantity of Bunker Fund in the
Vessel to avoid adulteration and volume distortions.
“The committee could not confirm the presence or the
identity or even the existence of this category of
participants under the PSF Scheme.
“It appears to the committee unlikely that this category of
stakeholders exists, especially in the light of the following:
•the widely reported many cases across the country of
domestic fire as a result of adulterated HHK and the
vehicle engine knocks attributed to the availability of
adulterated fuel in Nigeria; and
•the inability of any of the government agencies to
produce incontrovertible evidence of or even present any
consistent data on the quantity of products imported into
Nigeria provides a firm basis to conclude that these
Independent Inspectors are non-existent.
“The Committee tasked itself to specifically identify
marketers and the transactions that gave rise to claims to
subsidy on products that may not have been brought in.
“The Committee identified that the marketers were often
awarded superfluous quantities of products to supply but
often did not meet the target.
“In 2009, PPPRA approved a supply of 11,341,507,500
litres of PMS for the marketers. However PPPRA confirmed
the marketers discharged only 5,085, 206, 983 litres or
55.16% under-discharge.
“Despite being aware of the under-performance by the
marketers in 2009 or the defect in its procurement
process and management, PPPRA increased the 2010
Approved Deliverables to 12,410,955, 000 litres. The
marketers delivered only 6,226,586,543, that is 49.8%
under performance. In spite of the under performance,
there were no crises of product availability throughout
2011.
“This same ugly trend was maintained by PPPRA in 2011
during which it increased its approved quantity to
13,589,510,000 litres but, however, confirmed a delivery
of 9,317,145,231 litres, an under performance by 31.4%.
“(i) By PPPRA’s representation, the marketers received
N680.982billion as subsidy for supplying 9,317,145,275
litres of PMS in 2011. (ii)Curiously, PPPRA made another
presentation that the marketers were paid
N975.896billion for supplying 12,488,789,611 litres of
PMS in 2011.
“Between (i) and (ii) above, PPPRA has confirmed that
N294, 914billion was paid on 3,171,644,336 litres of PMS
that might not have been supplied.
“The anomaly is hereby referred to the relevant anti-
corruption agencies for further investigation.
“The situation in 2011 wherein it was deduced that PPPRA
may have paid subsidy higher than what the bank
reflected, is a pointer to the fact that the official bank
accounts disclosed by CBN may not be the only ones used
by PPPRA during the subsidy regime. PPPRA was identified
to have received payments from PSF account in 2009 and
2010.
“It is clear that PPPRA had no good understanding of
effective procurement procedures and management and
may have adopted incremental budgeting process in
determining Approved Quantity without recourse to the
performance in preceding periods.
“The PPPRA staff in charge of procurement between 2009
to 2011 should be reprimanded and punished according
to Civil Service rules.
“We established that subversion of the PSF guidelines
propelled by unashamed urge to swindle and defraud
government were the real reasons the subsidy claims rose
dramatically.”
The committee condemned the subsidy bazaar in the
PPPRA where novices and unregistered firms were allowed
to import fuel.
It cited an example of two promoters from a waste
disposal company in the US who came into the country
with a different proposal but got N1, 984,141,091.10 as
subsidy for products not supplied.
It said 121 oil marketers should be investigated by anti-
graft agencies.
They are as follows:
•17 marketers that did not obtain FOREX but claimed to
have imported petroleum products.
•15 marketers who obtained FOREX but did not import
petroleum products.
•71 oil marketers to face probe and refund N230.1billion
•18 oil marketers benefited from the fuel subsidy but
failed to appear before the committee. They also refused
to submit relevant documents
The report added: “The PPPRA Board Chairman
(2009-2011), Senator Ahmadu Ali (GCON, fss) admitted
before the committee that the Board under his
chairmanship decided to proliferate importers to allegedly
break the stranglehold which major marketers had on
system.
“He also explained that the increase in number was meant
to flood market with the products as a result of the
scarcity at that time.
“This was done without setting a target volume, leading to
supply glut in the quarter and throughout the year. The
figure then became a baseline which was increased at
every successive year.
“This carte blanche for entrants was the singular most
devastating decision of the Agency. The PSF guidelines on
prequalification and monitoring completely broke down
and the Scheme became an avenue for all forms of
patronage. The number of importers increased from an
initial figure of six in 2006, 36 in 2007, 49 in 2009, and
140 in 2011.
“A representative example was that of two promoters who
allegedly received an e-mail and came in from the USA
with a proposal of waste management with NNPC.
Instead, the two promoters came together and
incorporated Eco-Regen Ltd. on 3rd August 2010 with
corporate address as 3rd Floor, UAC Building Central
Business District Wuse Abuja, applied for PPPRA
registration on 11th September, 2010, got its first
allocation of 15,000 mt on 20th January, 2011 and was
paid N1, 984,141,091.10 as subsidy for products not
supplied.”
The committee recommended sanctions for some PPPRA
chiefs.
• Ex-PPPRA Executive Secretaries, Mr. A. Ibikunle (August
2009 to February 2011) and Mr. Goddy Egbuji(February to
August 2011) for further probe and trial by the EFCC, ICPC
•PPPRA’s GM Field Services, ACDO/Supervisor-Ullage Team
1 and ACDO/Supervisor-Ullage Team 2
•All staff in Procurement Unit of PPPRA between 2009 and
2011.
The report added: “All staff of PPPRA involved in the
processing of applications by importers, and verification,
confirmation and payment of imported products and
NNPC should be investigated/prosecuted by the relevant
anti-corruption agencies.
“The Executive Secretaries, who were the accounting
officers, and under whose watch these abuses were
perpetrated that led to the government losing billions of
Naira should be held liable.
“We strongly recommend that the Executive Secretaries,
who served from January 2009 to October 2011 should be
investigated and prosecuted by the relevant anti-
corruption agencies.”
On the NNPC, the report said: “It became apparent to the
committee that the operations of the NNPC were opaque
and not transparent. The implication on this is that it
created room for abuses, inefficiencies and manifest lack
of accountability.
“Although NNPC confirmed that it makes some savings of
about N11 per litre refining locally than importing, it
could not be established that the corporation reflects this
cost differential in its claims to subsidy.
“The implication of this is that NNPC may have been
collecting excess subsidy on locally refined products as the
corporation appears to collect the same amount of
subsidy on both the locally refined and imported
products.
“Thus, NNPC acted as importer, marketer, claimant, payer
and payee. Simply NNPC was not accountable to anybody
or authority.
“The Committee recommends that the accounts of the
Corporation be audited to determine its accounts profits
and solvency. NNPC’s petroleum products processing of
445,000 barrels of domestic crude should be subjected to
further inquiry by the committee during its monitoring
exercise.
“The Committee recommends that NNPC be unbundled to
make its operations more efficient and transparent and
this we believe can be achieved through the passage of a
well-drafted and comprehensive PIB Bill.
“All those in the Management and Board of the NNPC
directly involved in all the infractions identified for the
years 2009-2011 should be investigated and prosecuted
for abuse of office by the Code of Conduct Bureau.”
The report recommended that “Mr. President should
reorganise the Ministry of Petroleum Resources to make it
more effective in carrying out the much needed reforms
in the oil and gas sector.”
Regarding the Pipelines Products Marketing Company
Limited, the report said: “The management of PPMC
appeared not to be alive to its responsibilities and on top
of its duties. A case in point is the embarrassing failure of
the Managing Director to provide the Committee with the
retail market price of Kerosene, even though the nation
solely depends on the company for the supply and
distribution of the product.”

#CONSENSUS 2015