Date post: | 01-Dec-2014 |
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AN OILY AFFAIR:SUBSIDY FACTS AND
FIGURES
Winston Churchill
“In time of war, when truth is so precious, it
must be attended
by a bodyguard
of lies.”
Nigeria About 170 Million People Largest Population of Black People 159 out of 178 in Human
Development Index 70.2 % live under a dollar a day 8.2 % of the World’s Poor People
143rd Out of 183 Countries in Corruption
80% of Oil Revenues benefit only 1% of Population (World Bank)
Oil Discovered in 1956 95% of Export 11th Largest Nation in
Proven Oil Reserves 14th Largest Nation in Oil
Production at 2.2 Million Barrels per day
Mainstay of Economy $1.6 Trillion Revenue
Since Discovery (BBC) Four Refineries Source of “Resource
Curse”
Refinery Capacity First Refinery: 1965 (Port Harcourt 1) Second Refinery: 1978 (Warri) Third Refinery: 1980 (Kaduna) Fourth Refinery: 1989 (Port Harcourt 2) Combined Refinery Capacity : 455,000 BPD Capacity Utilisation: Less than 30% Estimated Domestic Demand: 550 BPD or 30
Million Liters A barrel = 159 Litres South Africa: 7 Refineries and Egypt: 9
Refineries
Why Import ?
Lack of Refining Capacity
Huge Domestic Demand
Lack of Alternative Energy
Lack of Alternative Transportation
Why not Barter ? Corruption and Greed
What is Subsidy? Government absolves
part of the real cost of refined petroleum products and passes the rest to the Consumer
Government regulates prices of the products through the Petroleum Products Pricing Regulatory Agency.
How It works ?
• Application• PPPRA Verification• Documentation
Stage 1
Why Subsidise ?
Fluctuations in Crude Oil Prices
Economic Growth and Competitiveness
Product and Export Promotion
Purchasing Power Availability of Products Strategic Importance
Growth of Subsidy Pre-democracy Era Barter
(Limited Subsidy) Democratic Era (Open) Growing Population Increased Dependence on
Petrol Increased Power of
Petroleum Marketers Increased Neglect of
Infrastructure Unsustainable
Behind The Subsidy….Sanusi “You establish an LC for importing 20,000MT of PMS and the
PPPRA says this is at a landed cost of N145 for example per litre. So u know that for every litre in that vessel you will get at least N85 as subsidy. Now you have a number of "possiblities":
1. You can off load 5,000 MT and bribe customs and other officials to sign papers confirming u offloaded 20k MT. Then do the same across the chain with a paper trail showing you delivered 20k MT to a tank farm, and maybe even that u transported it to Maiduguri entitling you to a share of the price equalization fund. Maybe for N20-N30 per liter you bribe all those who sign the papers. The 15k MT you take to Benin or Ghana or Cameroun and sell at market price thus making an additional "profit" of N55/ltr on 15,000MT!
Behind The Subsidy “You can just forge documents and have them stamped
without bringing in anything and collect the subsidy-PPPRA pays based on DOCUMENTS.
You can bring in the fuel, load on tankers, sell some at N65N some at 80 some at 100 some across the land borders.
You can do all this and no one can catch it or prove it because somebody was paid to sign off on docs. And with a high enough margin there is too much temptation to be resisted and firepower for bribing officials. ”
Behind The Subsidy When I spoke to the house of reps I told them why I was
suspecting fraud. It starts from PPPRA "allocations" based on "capacity". You will find a company like Mobil with capacity for say 60,000 MT and a relatively unknown name with a capacity of say 90k MT. Red alert number 1.
Although PPPRA is supposed to give license only to marketers with a national distribution network you see names of companies where you have never seen a filling station in their name.
I was a chief risk officer in UBA and in FBN for many years approving loans so I know the name of every big player in every industry that nigerian banks lend to as these are among the biggest banks in the country. I see names on the list I don't recognise either from portfolios. I looked at or industry studies over the years. Red alert number 2.
Behind The Subsidy I studied the papers presented to PPPRA in
a short period in 2010 (I won't tell you how I got them!). And I was surprised that on some days over 10 vessels are said to have discharged cargo in lagos on the same day-clearly the same officers stamping and "verifying" that the vessels were SEEN. Is it really realistic that on the same day 13-15 vessels can discharge in Lagos?
Red alert number 3. “
Big Scam
False Banking Transactions
Huge Debts Zero Monitoring Connivance and
Complicity Huge Personal Wealth Political Complicity Interconnectedness Lack of Transparency
Current Reality
“The debt crises currently suffered by developed economies is indication that governments have a responsibility to the people to manage revenues and expenditures wisely. With the subsidy on fuel projected to reach 118% of the Federal Government Capital Expenditures and 4.1% of the country's entire GDP, maintaining the fuel subsidy would not be a wise decision.”
Ngozi Okonjo Iweala
In English….. WE ARE BROKE! We are a borrower nation! Even our creditors have their own
problems We have been borrowing to subsidise
petroleum products We have borrowed to pay minimum
wage We have borrowed to pay political office
holders We cannot continue because or
bankruptcy beckons.
Why We Are Broke… The Senate President: N88.3 Million per Month Deputy Senate President : N50 Million per
Month Senator: N14 Million per Month 72 Ministers 20 Special Advisers N5 Trillion Internal Debt $30 Billion External Debt
*** US President : 60 Million Naira Per Annum
Conclusion
“It is an Oily Affair, We have to Tread Softly”