Queue in filling station

With controversy over payment of subsidy claims, Ejiofor Alike writes that either the Federal Government is not sincere or the marketers are holding the country to ransom with the lingering fuel crisis

A landmark achievement of President Goodluck Jonathan when he initially assumed the leadership of this country in acting capacity was the eradication of incessant fuel scarcity and its attendant long queues at filling stations.
That his administration was able to ensure availability of petroleum products was one of the fulcrum on which Jonathan anchored his campaign for the 2011 Presidential Elections.

The Jonathan’s administration had leveraged on the Sovereign Debt Notes (SDNs) introduced earlier by the administration of the late President Umaru Musa Yar’Adua to guarantee payment of subsidy on imported cargoes within 45 days of verification by relevant agencies.
This ensured prompt payment of subsidy claims and also availability of fuel supply in the system up till early part of this year.
Beginning of Fresh Crisis

However, after over one year of sustained availability of petroleum products as a result of regular payment of subsidy and reduction in pipeline fire, crisis engulfed the downstream at the beginning of the second quarter of this year.
The crisis started after the federal ministry of finance suspended payment of arrears of fuel subsidy for 2011, which covers the first quarter of 2012.

The action, which pitted the Petroleum Product Pricing Regulatory Agency (PPPRA) and Nigerian National Petroleum Corporation (NNPC) against the ministry of finance, was to avoid what a ministry source described as “extra-budgetary expenditure.”
Following the suspension of subsidy payment, the NNPC had raised the alarm that the ministry of finance was about to plunge the entire country into fuel crisis.
Former spokesman of the NNPC, the late Dr. Levi Ajuonuma, had told THISDAY that the ministry of finance was about to plunge the country into fuel crisis by misleading the government on the daily consumption of Premium Motor Spirit (PMS).

“I want you to alert the nation that the federal ministry of finance is about to plunge this country into fuel crisis and when this crisis starts, we know whom to hold. The ministry of finance made provision for subsidy based on 19million litres pay day, instead of over 33million litres, which the country is consuming. So, within four months into the year, they have exhausted the money budgeted for subsidy but instead of going to Mr. President to apologise for their mistake, they are looking for whom to blame,” he said.
As at the time of suspension of the payment of the arrears in May 2012, about N451billion had been paid as arrears of 2011 from the N888billion budgeted for subsidy in 2012.

But NNPC and the private marketers were still being owed outstanding claims of N384, 450,487,333.99 in arrears alone.
Probe Committees
Before the suspension of this payment, ministry of finance had in May 2012 set up a technical committee headed by the Managing Director and Chief Executive Officer of Access Bank Plc, Mr. Aigboje Aig-Imoukhuede,  to examine the claims of arrears of subsidy for 2011 being made by the marketers.

In the report of the technical committee, some oil marketers and scores of independent marketers and importers were alleged to have committed 17 infractions that cost the country N422, 542, 937, 668.59 in overpayments.
However, the marketers complained that they were not invited by the committee to defend the allegations and this prompted Jonathan to set up a presidential verification committee, also headed by Aig-Imoukhede to verify and reconcile the report of the technical committee.
After the N422billion was subjected to reconciliation and verification by the presidential committee, N18billion was found to have been duplicated, while N21 billion was cleared from the report of the technical committee, bringing down fraudulent payments to N382, 018, 250, 982.00

The committee indicted 24 companies and recommended them for investigation.
Apart from the probes by the two separate committees headed by Aig- Imoukhuede and the Lawan Farouk’s House of Representatives’ Ad-Hoc Committee, the government had also engaged the services of a globally-renowned consulting firm, McKinsey & Company, with a mandate to formulate fool-proof processes and procedures for the subsidy scheme.
An audit firm, Ernst & Young, was also commissioned by Aig-Imoukhuede Committee to assist it to verify the shore tank certificates submitted by oil marketers.

Claims and Counter-claims

As the subsidy probes were on-going, marketers were gradually withdrawing from importation of petrol, citing unpaid subsidy claims and accumulated interest charges by the banks.
Some of the associations of the marketers, as well as jetty and depot owners also threatened to shut down their businesses in protest against the continued delay in the payment of subsidy.

But the ministry of finance insisted that payment would only resume after the various verifications.
Before the payment was finally resumed, fuel queues had resurfaced in Abuja and its environs, amid claims and counter-claims.
Fresh controversy also trailed the resumption of the payment of the marketers’ claims.
As the federal ministry of finance and the marketers continued to make claims and counter-claims on the actual amount of money paid, long queues resurfaced in Lagos and spread to other parts of the country.

According to a statement by Paul Nwabuikwu, who is the Senior Special Assistant to the Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, the marketers’ threat was baseless.
He insisted that marketers with legitimate claims had been fully paid adding that only ones yet to receive payments were those indicted by the Aig-Imoukhuede Presidential  Committee.

However, the marketers denied being paid, with some of them claiming that when they presented their SDNs to the CBN, there was no cash for the apex bank to redeem the instruments.
The result of these claims and counter-claims is lingering fuel crisis as the marketers have virtually left fuel importation in the hands of only the NNPC.
Alleged Conflicts of Interest

A dangerous trend in the crisis emerged when one of the marketers accused Aig-Imoukhuede of delaying the payment of outstanding subsidy claims because of the interests that accrued on the loan facility to Access Bank, which funded the oil marketers.
Integrated Oil and Gas Limited alleged that the Aig-Imoukhuede-led committee was embarking on unwarranted and baseless fresh audit and recertification process to further delay the release of the subsidy refund owed the company.
The company also demanded the immediate payment of its outstanding payments to enable it service its indebtedness to Access Bank, major financiers of its import transactions.

In a letter written by Mr. Tayo Oyetibo, SAN of Tayo Oyetibo & Co, solicitors of the oil marketing company, noted that its monthly interest accruals on the loan facility granted it by Access Bank in respect of the fuel importations runs into about N65-70 million and it had been unable to settle these interest accruals because it had been starved of the funds to do so as a result of the continued delay in paying the subsidy claims owed.

“The stark reality is that the longer our client remains without receiving its subsidy refunds, the better for Aig-Imoukhuede and his Access Bank because they will continue to get more interest accruals on the loan facility,” the law firm stated in the letter.
Many industry stakeholders told THISDAY that it was curious that the government did not investigate this allegation since not only Integrated Oil and Gas is known to be involved.

They also argued that the fact that neither the Access Bank nor the Imoukhuede Committee  came out to deny this sensitive allegation has lend credence to the claim by Integrated Oil and Gas, potentially tainting the credibility and sincerity of  the committee’s unending probes.

Some analysts believe the government has no money to pay subsidy and has been using endless probes to stall or delay the payment of marketers’ claims, others believe the marketers are holding the country to ransom for being branded subsidy thieves.