FG scraps subsidy on kerosene •As CBN alleges fraud in fuel subsidy payments •Reps to probe PPPRA on fuel importation approvals

Written by Samuel Ibiyemi, Lagos Monday, 07 June 2010

THE Central Bank of Nigeria (CBN) has ruled out special fund to bail out petroleum marketers under the Petroleum Support Fund (PSF) , being coordinated by the Petroleum Products Pricing Regulatory Agency (PPPRA) on the grounds that the sector is fraught with fraudulent activities.

The allegation is coming as investigation revealed that the Federal Government has scrapped subsidy on kerosene.

In the past, the website of PPPRA always displayed the regulated price of kerosene until recently.

The Executive Secretary of MOMAN, Mr Obafemi Olawore, confirmed that marketers had stopped importation of kerosene for domestic utilisation because of the scrapping of subsidy and the directive by the Nigerian National Petroleum Corporation (NNPC) that they should continue to sell at N50 per litre.

“The only choice left for us was to depend on the NNPC allocation because what is available in the international market is aviation turbine kerosene (ATK) and it will be difficult for us to bring this specification into the country and sell at N50 per litre,” he said.

The Executive Secretary of PPPRA, Dr Abiodun Ibikunle, refused to comment on the reason for the scrapping of subsidy on kerosene.

The CBN Governor, Mallam Lamido Sanusi, in an interview with the Nigerian Tribune at the weekend, said reports at his disposal showed that petroleum marketers participating in fuel importation under the PSF scheme had been cheating the Federal Government, in collaboration with officials saddled with the responsibility of supervising volumes of product brought into the country.

According to him, when petroleum marketers secured approval to import 20 metric tonnes of petrol, they would only discharge 10 metric tonnes on the coast of the West African sub-region and the remaining content at their depot in Nigeria.

“The fraudulent practice is so much that the marketers would submit claim for reimbursement to PPPRA on 20MT and then sell the PMS to motorists above the official price,” he lamented.

Operators in the downstream sub-sector of the petroleum industry had, on Thursday, called for the support of the National Assembly during an inspection of fuel depots in Lagos by the House Committee on Petroleum (Downstream).

This was in a bid to get the support of the CBN in order to get special fund to support their operations.

The marketers, under the aegis of Major Oil Marketers Association of Nigeria (MOMAN) and Depot and Petroleum Products Marketers Association (DAPPMA), lamented that most of their companies were affected due to the loss suffered on fuel importation when there was a fall in the price of crude oil from $148 to $45 per barrel in 2009.

But the CBN governor said “the Federal Government has spent over N1 trillion on fuel subsidy within the last one year and it is not getting to Nigerians because they are still paying above the official price for fuel in several states in the country, contrary to the purpose of the scheme. Fuel subsidy is immoral and should be scrapped.”

Sanusi alleged that petroleum marketers benefitting from the scheme were responsible for sponsoring officials of the Nigeria Labour Congress (NLC) to resist the implementation of full deregulation, which, he said, would end subsidy of petroleum products in the country.

Besides, he noted that the CBN approved special fund for the power sector because most of the ongoing power projects were not economically viable, since they required a minimum of 10 years before they could break even.

In another development, the House of Representatives Committee on Petroleum (Downstream) has announced plans to probe PPPRA on the disparity in fuel importation approval.

Chairman of the House committee, Honourable Clever Ikisikpo, said the probe was in response to the complaint by the Managing Director of Capital Oil and Gas Industries, Mr Ifeanyi Ubah.

Mr Ubah had complained that companies with standard jetties and depots were being denied approval to import fuel, though small companies without investment in the downstream sub-sector continued to appear on the list of fuel importers.

“We are committed to ensuring justice in product allocation and approval by all relevant government agencies so that indigenous companies will continue to invest in the sector,” the lawmaker said.