Nigeria is looking to tackle the recent shameful dispute the Nigerian National Petroleum Corporation (NNPC), her state oil company, had with state governors over how much petrol the country consumes every day, using two key measures, writes Chineme Okafor
The recent dispute between the 36 state governors and the Nigerian National Petroleum Corporation (NNPC) over volumes of petrol imported into the country and on which the corporation claims subsidy, brought to fore unhealthy details of how poorly managed Nigeria’s downstream petroleum sector has been.
From the dispute, Nigerians got the feeling that the country really may not have an accurate statistics on the country’s daily petrol consumption capacity, and that without such vital statistics, the country may have planned and implemented her petrol supplies schedule uneconomically.
Also, because of this, reported incidences of smuggling and theft of products may have flourished considering the country may have become an available market for supplies.
Trouble, however, started when the governors questioned and doubted NNPC’s petrol supply figures upon which it claimed billions of subsidy payments. The governors had based their argument on a reported record provided them by the Department of Petroleum Resources (DPR), and which under quoted NNPC’s figures.
Looking for answers to questions about the situation, the governors asked for a forensic audit of the country’s consumption pattern and NNPC’s operations in this regard, to which the National Economic Council (NEC) was rather forced to ask the NNPC and Ministry of Finance to undertake.
As it were, the governors claimed the NNPC was short-changing the federation with exorbitant financial claims as subsidy over volumes of petrol it imports into the country, and this resulted in shortfalls of revenue available for sharing in the Federation Accounts Allocation Committee (FAAC) monthly meetings. The meeting for June was reportedly deferred a couple of times on account of the dispute.
Alleging the NNPC claimed higher petrol importation figures of 50 million per day as against what the DPR told them was not more than 30 million litres, the governors called for an audit of NNPC’s petrol importation to determine the true situation.
Their call for an audit was subsequently heard by the NEC and as disclosed by the NNPC, the audit team was put in place to review the country’s consumption status.
But beyond the audit, the Federal Executive Council (FEC) also approved the sum of N17 billion for the installation of a device by the Petroleum Equalisation Fund (PEF) to monitor fuel distribution and perhaps abolish fraud in petrol subsidy management.
The FEC, according to the Minister of State for Petroleum Resources, Ibe Kachikwu, decided on this recently to perhaps back up the need for Nigerians to truly and really know how much petrol they consume every day.
Kachikwu disclosed this new move to State House correspondents at the end of the council’s weekly meeting presided over by the Acting President Yemi Osinbajo, at the Presidential Villa in Abuja.
Perhaps to put things right and find answers to questions and allegations raised by the governors against the NNPC, the NEC asked that the audit be done.
The Chief Operating Officer (COO), Downstream of the NNPC, Mr. Henry Ikem-Obih, first disclosed this would happen when he spoke about the situation at a recently concluded oil and gas conference in Abuja.
At that time, Ikem-Obih indicated the audit exercise would include the World Bank and other agencies of the government.
His claims were subsequently backed by the Group Managing Director of the NNPC, Dr. Maikanti Baru, who disclosed this in a letter to Minister of Finance, Mrs. Kemi Adeosun, during the ‘consumption’ fracas with the governors.
In the letter THISDAY sighted, Baru even stated that the National Bureau of Statistics (NBS) would be part of the audit team.
But according to Ikem-Obih: “We are presently in a joint project with the Federal Ministry of Finance. We are doing a study around consumption, to determine the actual consumption by the people. We have to determine what we call the daily load out or the evacuation as against the actual consumption; what people go to the pump every day to buy for their cars, for their generators at home and for other uses of petrol.”
Ikem-Obih further explained that in terms of daily truck out from depots around the country and the records of the Petroleum Products Pricing Regulatory Agency (PPPRA) and Department of Petroleum Resources (DPR), the NNPC trucked out 48 million litres daily in 2016 and 50 million litres in 2017.
However, he said the NEC had mandated that these figures be verified through the audit.
“This is why NEC has mandated that we work with the Federal Ministry of Finance. We also had a meeting with the World Bank, and we are trying to progress in a global study that would help us get around the actual numbers of what we consume in Nigeria,” he added.
According to him, the country had challenges with cross-border smuggling. He said Nigeria remained the cheapest source of petrol in the West African sub-region because its neighbours sold petrol at over 200 per cent higher than its price.
“If you go to Niger, Cameroon, then it is in the 400 per cent region; for the rest of the countries, it is about N360 to N370, as against the N145 per litre that we sell. That is sufficient incentives for those who want to take the product across the border to sell and make a good margin,” Ikem-Obih, explained, adding the corporation was working with the Nigeria Customs Service, Department of State Services (DSS) and other security agencies to put an end to this.
Additionally, Baru explained there was an ongoing engagement by the NNPC with an inter-ministerial team comprising the Ministries of Petroleum and Finance with the participation of the DPR, PPPRA, PEF, OAGF and the CBN to put in place a monitoring system for the entire fuel supply and distribution system in the federation.
He said in his letter to Adeosun: “Also, the Ministry of Petroleum Resources is engaging the National Bureau of Statistics to establish actual consumption of petroleum products in the country. The outcome of these exercises may establish the actual fuel consumption in the country.”
Beyond the forensic audit, the FEC according to Kachikwu, also approved the PEF to introduce a tracking device to also help put an end to the conflicting figures on Nigeria’s actual fuel consumption per day.
Kachikwu explained that although the project was for three years, it would start yielding results by the time the 2020 budget was prepared next year.
According to him: “The narrative is that we have all struggled with this whole subsidy payment and how much is consumed in Nigeria, volumes of products moved out illegally and the whole impact on Federation Accounts Allocation Committee.
“The essence of what PEF is doing is that this will enable us to track refined petroleum products’ movement from the point of the LC (Letter of Credit) opening from the vessels that come into Nigeria, up until the point where they are discharged into tanks in Nigeria; and from the tanks into trucks in Nigeria. Monitor the trucks till they deliver the products into the storage tanks for the filling stations and they are discharged and sold.”
He said the adoption of the PEF initiative had become imperative in view of discrepancies in figures being bandied as daily fuel consumption in the country, adding that when the network becomes operational, every truck conveying fuel would be licenced with a driver and transport company, which would take responsibility for any missing truck.
The minister also said with the advent of the network, the exact daily fuel consumption in the country would be known for the first time, adding the NNPC, DPR and PPPRA would work together to achieve this.
“The president has given a very serious mandate that we ought to rein in on his process. So that will produce a 100 per cent holistic monitoring of this production. For the first time, we will be able to tell how much petroleum products we consume in this country because there has been so much going on in terms of the movement of consumption numbers from 30-something million litres a day to 70 million litres to 18 million litres a day during the difficult times.
“And the challenge the president has given me is to rein that in. Let’s know what we consume in reality. Let’s know where these products are going and this process will be able to track every truck. So, a typical truck will be licenced with a driver, with a transport company. So, if a truck misses, you can find the transporter and the company that takes responsibility,” added Kachikwu.
Continuing, he stated: “So, we expect this to be over a period of three years but we promise that within one year, the real effects of this will begin to show. Obviously, you need time to train and to continue to improve the system. We hope that by the time we start doing the 2020 budget in 2019, we would have got to a point, where the losses that you are seeing are being tracked and substantially, impact will be made in monies that come into the federation accounts
“It will help us keep proper data repository of consumption in this country, data on all trucks that operate, total number of products received, what is sold out of filling stations and it is going to be a collaborative system that involves NNPC, DPR and PPPRA but situated quite frankly in PEF.”