Connect with us

National Issues

PART 2: ENCYCLOPAEDIA OF CORRUPTION, OIL BARONS AT OUR JUGULAR

Published

on

The birth of oil in Nigeria that began with the first oil drill in Oloibiri(now in Bayelsa state) has turned this country into a laughing stock rather than a blessing. The crude oil discovery which was hailed as another addition to Nigeria’s catalogue of national resources, making us pride ourselves as one of the most endowed nations, has become a clog in the wheel of progress. Before dabbling into the main subject of discussion I must point out the phenomenal development that BLACK GOLD has brought to other nations.

Dubai and Abu Dhabi both in United Arab Emirate have become cities of attraction and envy for many tourists and observers around the world. These two cities which were essentially arid have been built to become cities of global importance from crude oil proceeds. United Arab Emirate is home to the world tallest building Burg Dubai standing at 829m above sea level. Dubai is a city of decorum laced with almost flawless motor ways lined by countless number of highrise buildings of magnificent architectural splendor. Social infrastructures are first rate and superb. Qatar is another pride of the Middle-East which was built from its predominantly desert topography into a global city. Russia one of the countries to emerge from the collapse of USSR has re-asserted itself on the global stage by building its economy again from the massive oil revenue within 10 years. Despite not being a member of OPEC, it has continued to have a major say in global oil prices. Not too far from us is Angola which was decimated by decades of war but has emerged within the last 10 years as an economically viable, visible and vibrant nation on the continent of Africa. Many who have visited Luanda will attest to the dramatic contrast between pre-war and post-war Angola occasioned by oil boom. Other countries which have used the finite resources of black gold to change their situation include Venezuela, Saudi Arabia, Austria etc.

While many nations around the globe have used the fortune of black gold as launching pad for economic prosperity, for Nigeria it is tale of sorry state. Over the years about USD400 billion have accrued to us in revenue but there is nothing to show for this massive wealth. The discovery of oil meant death to almost all other areas of the economy including agriculture, textile, manufacturing, maritime etc. Our quest for economic diversification and technological advancement continue to elude us as the only profession we now know is to sit in board room and share the bounty of LAZY GOLD in the Niger-Delta. Our mental faculty of innovation and ingenuity has been shut down. Even our refineries have gone from sorry to worse and all efforts to revive the already dead horse have been futile. The reason for all these is not far fetch-corruption, corruption, corruption.

Advertisement

The year 2012 will always remain indelible in the minds of Nigerians. On 1st January 2012 the president of the Federal Republic of Nigeria in his New Year broadcast shocked us with his ill-timed, deeply divisive, unpopular total abolition of fuel subsidy regime which resulted howbeit in widespread protest that almost collapsed the Jonathan’s era: he will long be remembered for this. Following all these we were awashed with revelations by the media and various committee reports on deeply seated corruption in the oil and gas industry. One committee which many Nigerians initially saw as a beacon of forthright investigation, House committee on downstream sector, ended in a tragedy as the arrowheads of the investigation were themselves enmeshed in the same web of corruption which they were charged to unravel. While many were about to give them kudos for their courage in daring the devil the Otedola/Lawal bribery scandal broke out sinking us into deeper confusion and total loss of confidence in the system. Many who once backed the committee started asking questions that the investigation ab initio may not be for the benefit of Nigerians after all but rather for their selfish interest and settling of scores. Oh what a sorry country!!!

As an observer from the sideline I had wondered why was the fuel subsidy regime introduced in the first place. It is therefore a lesson for policy/decision makers that decisions made today may backfire in the near future. Was it not obvious to the proponents/pioneers of fuel subsidy that the scheme would become a big hole in the pocket of government and at a point in future will become unbearable. Another of such not-properly- thought out policy is the introduction of free university education in the 1970s which was glaringly predictable that in the future(today) will be unsustainable. Today any attempt to change from the status quo has become a touchy issue.

The mechanism of fuel subsidy is as follows: If Mr K buys fuel from XYZ refinery in Brazil at NGN75/litre(although international trade is in USD, EUR, GBP but NGN is used for simplicity) he is expected to sell at filling stations at government-controlled price of NGN65(old price). Note that part of his overhead cost will include transportation(shipping), export duty(of Brazil where the refinery is sited), import duty(in Nigeria), landing cost, storage at oil farms and mark-up price for profit will be added. For the above scenario all his expenses amount to NGN129/litre and his profit mark-up is NGN15/litre so that ideally he should sell at NGN144/litre. But because there is a ceiling price of NGN65/litre , government through Petroleum Product Pricing Regulating Agency(PPPRA) will refund him the balance of NGN79 on each litre(144-65=79). On a daily basis we consume 33million litres and this translates to 33million litres*NGN79*365days= NGN 950 billion. If the figure remains as it is we may not complain. Note that there are different people importing different quantity of this product from different sources using different shipping lines and applying different profit mark-up price. As a result they end up with different final calculations(say Mr A 148/litre, Mr Z 149.50/litre, etc)and government must refund them accordingly. Here comes the fraud:
-Some importers of petroleum products collude with suppliers abroad to falsify unusually high prices of fuel backed up with document so that their claim to subsidy will be higher i.e while some will present NGN45/litre as price from source refinery others may present NGN85/litre. Government cannot accept one and reject the other as both importers have been licensed to do so and they must be refunded proportionally.
– Their mark-up price is non-specific. One marketer may accept NGN15.50/litre as profit while another may add NGN20/litre as profit margin. Since they are guaranteed of refund they fix whatever pleases them.
-The cost of shipping, transportation and other logistics is variable and they falsely pad these costs so as to claim more money from government.
-Worse still some do not import at all but file all necessary papers of fuel purchase overseas, shipping and all other costs. Note that PPPRA may not necessarily go on-the-spot check of fuel importation and they simply process the papers for onward payment of subsidy for fuel that was never imported. Sometimes these underhand arrangements are made in conjunction with PPPRA officials who get kick-backs once the money is released.
-Other fraudulent marketers actually import petroleum products and file all genuine claim to subsidy. Once the subsidy is paid they, rather than sell to Nigerians, re-export the product to neighbouring countries like Ghana, Togo, Niger, Chad, Benin republic and sell at full price over there making triple profit. In turn he has collected free money from Nigerian government while still making normal profit as if he were selling in a free market.
-It is very easy to falsify these documents as some of these refineries abroad are owned by prominent politicians. They can issue any invoice from their refineries even for products not supplied.
-Their refineries continue to make sales as far as subsidy regime persists. That is they have refineries abroad and they also register an oil-importing company in Nigeria that buys exclusively from their refinery abroad.

Advertisement

-NNPC is the sole importer of kerosene that also enjoys the subsidy. It means every Nigerian that wants the product at government-approved price of NGN50/litre can only get it from NNPC. This is prone to abuse as it is currently being witnessed viz
-Since the imported quantity is not usually enough for all, some large scale buyers now have a fixed stipend(inducement) for NNPC officials to guarantee their own portion.
-NNPC also pays itself subsidy as the cost price from source refinery plus logistic cost exceed the fixed price of NGN50/litre. Unfortunately most times NNPC never sells at this price. I was once invited by somebody with connection in NNPC to start selling kerosene. He assured me that I will get the product at NGN115/litre from NNPC and I can then resell to owners of tanks at NGN125/litre.
-We all know that our government is passive and inept and cannot supervise a vast and complex empire like the oil industry.
-The refineries have defied all contracts for refurbishing(Turn-Around Maintenance) as contracts are awarded to their cronies(their boys) in an attempt to settle those who supported their political career. The whole project goes under like any other contract where contractors do shabby jobs or abscond with mobilization payments without anybody asking questions. Regulatory agencies turn a blind eye as the contract was not awarded with any genuine motive for change but only as avenue for settling the boys.
-Crude oil theft is largely unquantifiable. We continue to lose unaccounted funds. These boys that specialize in oil theft are sponsored by political bigwigs in an attempt to get government money either from within or outside the pipeline at all cost.
-A member of Joint Task Force(JTF) in the Niger-Delta once admitted that they could be paid as much as NGN100,000 to permit tankers load fuel from a burst pipeline which they are suppose to guard. There could be as much as 20 such trips daily.
-Those on the high sea collect more to allow any illegally crude oil-laden vessel to get a pass. It is business the JTF wish would continue forever. These oil thieves turn in the funds to their sponsors.
-These oil marketers also suffer in the hands of government agencies as the subsidy payment could be delayed for up to several years. To remain in business they continue to borrow from banks at outrageous interest rate as they are certain one day government will pay. Out of desperation some of the marketers bribe their way through PPPRA so that their subsidy payment can be processed on time. The new cost of ‘facilitation’ is also factored into subsidy calculation by the marketers.
LESSON FOR US
-It is impossible for the government of the day in Nigeria to maintain effective regulatory control over a vast empire like the oil and gas even if other countries have done so. There is total lack of political will and there will never be such ‘will’.
-There is really no subsidy enjoyed by the masses during fuel scarcity as marketers hoard and create an undue price hike only to cash in on the high price.
-The diesel deregulation is a lesson for all to see the benefit of deregulation. There is no more scarcity and it is open to anyone to import.
-The oil subsidy regime is a total fraud since it serves as conduit pipe for oil marketers to drain the lean resources of government. Imagine what massive educational transformation that will be achieved if NGN 1 trillion paid in subsidy is channeled into educational sector.
-We never enjoy subsidy on kerosene but on paper subsidy is still being paid to NNPC

In summary the status quo cannot continue, we must do the unthinkable and removal of subsidy will end this whole brouhaha. This may be a difficult decision but it is one that we will eternally be grateful for taking the bold step. If we refuse to do it now a time will come when half the national budget will be devoted to subsidy as fuel consumption is bound to rise since every Nigeria holds passionately the dream to own a car. Here is price of fuel in countries around the world(use exchange rate of NGN158=USD1):

Country/Territory                                     Price US$/Litre                                                   Date of price
Albania                                                              1.44                                                                       2011-08-13
Algeria                                                               0.41                                                                       2010-11-7 [2] Anguilla                                                            1.45                                                                        2011-05-19 [3] Antigua and Barbuda                                    0.84                                                                       2009-02-12 [4] Andorra                                                            1.64                                                                        2011-04-06 tcs.ch [5] Argentina                                                        0.92                                                                        2010-01-13 [6] Aruba                                                               1.10                                                                         2009-12-12 [7] Australia                                                          1.51                                                                         2012-12-09 [8] Austria (Wien)                                               1.95                                                                         2011-04-06 tcs.ch [9] Azerbaijan                                                      0.75                                                                         2010-11-14 [10] Bahamas                                                         1.24                                                                         2011-03-13 [11] Bahrain                                                           0.27                                                                         2011-09-13 [12] Barbados                                                        1.59                                                                          2011-04-03 [13] Belarus                                                           1.07                                                                          2010-05-12 [14] Belgium                                                         2.23                                                                          2012-05-08 [15] Belize                                                             1.40                                                                          2011-12-21 [16] Bermuda                                                       1.80                                                                           2010-07-30 [17] Bolivia                                                           0.54                                                                           2010-12-30 [18] Bonaire                                                         1.34                                                                            2011-04-05 [19] Bosnia and Herzegovina                           1.66                                                                           2011-04-06 tcs.ch [20] Brazil                                                            1.73                                                                            2012-03-04 [21] British Virgin Islands                               1.32                                                                            2011-05-03 [22] Brunei                                                          0.39                                                                           2008-06-05
Bulgaria                                                       1.72                                                                            2012-03-07 shofior.com [24] Burma                                                          1.06                                                                            2008-11-21 [25] Cambodia                                                    0.63                                                                           2010-06-16
Canada                                                         1.18                                                                            2012-12-19 [26] Cape Verde                                                 1.40                                                                            2009-03-23 [27] Cayman Islands                                        1.03                                                                             2009-09-11 [28] Chile                                                            1.36                                                                             2010-12-23 [29] China                                                           1.06                                                                             2012-02-08 [30] Colombia                                                    1.09                                                                             2010-11-30 [31] Costa Rica                                                  1.07                                                                              2009-10-01 [32] Croatia                                                        1.87                                                                              2011-04-06 tcs.ch [33] Cuba                                                            1.24                                                                             2011-03-02 http://www.havanatimes.org/?p=38808] Curacao                                                      1.13                                                                              2011-04-05 [34] Cyprus                                                        1.680                                                                           2012-02-16 [35] Czech Rep                                                  1.85                                                                              2011-04-06 tcs.ch [36] Denmark                                                    2.35                                                                              2012-10-09 OK [37] Dominica                                                   1.08                                                                              2011-03-29 [38] Dominican Republic                               1.62                                                                               2011-07-23 [39] Ecuador                                                     0.44                                                                              2011-11-15 [40] Egypt                                                         0.975                                                                             2012-11-29 [41] El Salvador                                              0.85                                                                                2009-12-21 [42] Eritrea                                                      2.13                                                                                 2009-06-01 [43] Estonia                                                     1.82                                                                                 2012-08-15 http://www.viispluss.ee/
European Union (average prices)      2.05                                                                                 2012-05-08 [44][45] Finland                                                    2.33                                                                                 2011-04-06 tcs.ch [46] France                                                     2.28                                                                                  2011-04-06 tcs.ch [47] Germany                                                 2.09                                                                                 2012-05-08 [48] Greece                                                     2.20                                                                                  2012-08-13 tcs.ch [49] fuelprices.gr [50] Grenada                                                  1.23                                                                                   2011-04-15 [51] Guadeloupe                                            1.36                                                                                   2009-02-03 [52] Guatemala                                              0.64                                                                                  2009-04-14 [53] Guyana                                                    1.08                                                                                  2012-01-17 [54] Haiti                                                         0.89                                                                                 2009-01-01 [55] Honduras                                                0.87                                                                                 2009-09-06 [56] Hong Kong                                              2.21                                                                                 2012-02-21 Shell Hong Kong/[57] Hungary                                                  2.14                                                                                  2012-01-14 Holtankoljak [58] Iceland                                                    2.09                                                                                  2012-03-30 [59] India – Mumbai                                     1.43                                                                                   2012-05-24
Indonesia                                               1.22                                                                                   2012-04-01 PT. Pertamina (Persero) [60] Iran                                                         0.57                                                                                   2012-05-07 The Petroenergy Information Network Of Iran/[61] Iraq                                                         1.009                                                                                 2010-12-30 [62] Ireland                                                   2.15                                                                                    2011-04-06 tcs.ch [63] Israel                                                      2.0501                                                                               2011-05-1
Italy                                                        2.31                                                                                    2012-3-29 [64] Italy – Livigno (tax free)                    1.53                                                                                     2011-10-31 [65] Jamaica                                                 1.16                                                                                     2012-01-11 http://www.jamaicaobserver.com/news
Japan                                                     1.84                                                                                    2011-04-25 The Oil Information Center Japan [66] Jordan                                                   1.4                                                                                       2012-06-13
Kazakhstan                                          0.98                                                                                    2011-11-02
Kenya                                                   1.16                                                                                       2010-12-19 [67] Kuwait                                                 0.224                                                                                    2010-06-30 KNPC (fixed prices) [68] Latvia                                                  1.80                                                                                       2011-04-06 tcs.ch [69] Liberia                                                1.07                                                                                        2009-09-11
Libya                                                   0.17                                                                                        2010-11-07 [70] Lithuania                                           1.92                                                                                        2011-04-06 tcs.ch [71] Luxembourg                                     1.83                                                                                         2012-05-08 tcs.ch [72] Macedonia                                        1.71                                                                                          2011-09-02 tcs.ch [73] Malaysia                                            0.61                                                                                         2012-09-07 [74][75] Malta                                                 1.61                                                                                           2011-08-07 [76] Martinique                                       1.36                                                                                           2009-02-03 [77] Mauritania                                       0.94                                                                                          2010-11-7 [78] Mexico (Mexico City)                    0.77                                                                                           2012-04-14 Pemex [79] Moldova                                           1.32                                                                                            2011-04-06 tcs.ch [80] Monaco                                             1.87                                                                                           2009-12-26 [81] Montenegro                                     1.93                                                                                           2011-04-06 tcs.ch [82] Montserrat                                       1.40                                                                                           2011-05-04 [83] Morocco                                            1.19                                                                                            2010-04-18
Mozambique                                    0.77                                                                                           2009-11-17 [84] Netherlands                                      2.47                                                                                          2012-09-05 [85] New Zealand                                    1.81                                                                                            2012-08-13 [86] Nicaragua                                         0.96                                                                                           2009-08-24 [87] Nigeria                                              0.87 (NGN141/L-proposed last January)                         2012-01-01 [88] North Korea                                     0.77                                                                                           2009-12-26 [89], estimated
Norway                                              2.56                                                                                          2012-03-13 tcs.ch [90] Oman                                                 0.31                                                                                          2010-08-01 [91] Pakistan                                            0.72                                                                                           2012-12-22 Oil and Gas Regulatory Authority [92] [93] Palestine (West Bank)                   2.04                                                                                           2011-10-01
Panama                                            0.83                                                                                            2009-06-04 [94] Peru (Lima)                                    0.95                                                                                             2009-12-26 PSO/[95] Philippines (Manila)                     1.295                                                                                           2012-09-25 Shell Philippines [96] Poland                                              1.81                                                                                              2012-02-03 tcs.ch [97] Portugal                                           2.08                                                                                             2012-06-17 maisgasolina.com [98] Portugal – Azores (tax free)         1.97                                                                                               2011-04-06 tcs.ch [99] Portugal – Madeira (tax free)      2.09                                                                                              2011-04-06 tcs.ch [100] Puerto Rico                                    0.96                                                                                               2011-04-08 http://blogs.wwlp.com
Qatar (Doha)                                 0.22                                                                                               2011-01-22 [101] / The General Secretariat
Romania (Bucharest)                  1.78                                                                                                2012-09-11 tcs.ch [102] Russia (Moscow)                          0.94                                                                                               2011-02-24
Russia (Kaliningrad)                   0.91                                                                                                2011-07-15 [103] Saudi Arabia (Riyadh, Jeddah) 0.12                                                                                                2011-09-13 [104](fixed prices)
Serbia                                             1.92                                                                                                 2012-10-31
Sierra Leone                                 1.05                                                                                                  2011-05-27 [28] Singapore                                     1.67                                                                                                   2011-06-21 Singapore Petroleum Company [105] Slovakia                                        1.98                                                                                                   2012-01-23 AAIreland.ie [106] Slovenia                                        1.88                                                                                                   2012-02-09 tcs.ch [107] South Africa                                1.53                                                                                                    2012-05-07
South Korea                                1.81                                                                                                    2012-03-31 [108] Spain                                            1.78                                                                                                    2011-04-06 tcs.ch [109] Spain – Canary Islands (tax free)1.43                                                                                               2011-04-06 tcs.ch [110] Sri Lanka                                    1.46                                                                                                     2012-02-12 [29][30] St Kitts and Nevis                     1.40                                                                                                     2011-05-04 [111] St Lucia                                       1.00                                                                                                     2009-11-25 [112] St Vincent and the Grenadines1.11                                                                                                    2011-05-19 [113] Suriname                                   1.55                                                                                                       2011-08-15 [114] Sweden                                       2.35                                                                                                      2012-03-13 tcs.ch [115] Switzerland                               2.09                                                                                                      2011-04-06 tcs.ch [116] Switzerland – Samnaun (tax free)1.68                                                                                               2011-04-14 Service station [117] Syria                                           0.8333                                                                                                  2012-01-03
Taiwan                                       1.2034                                                                                                   2012-04-02 [118] Togo                                           1.22                                                                                                        2011-06-06 [119] Thailand                                    1.42                                                                                                       2012-11-24 PTT Thailand [120] Trinidad and Tobago              0.64                                                                                                      2011-12-01 [121] Tunisia                                       0.99                                                                                                      2009-09-24 [122] Turks and Caicos                     1.46                                                                                                       2011-04-21 [123] Turkey                                       2.72                                                                                                       2012-09-29 [124] Turkmenistan                          0.19                                                                                                       2011-09-13 [125] UAE                                           0.498                                                                                                    2011-12-31 [126][127] Ukraine                                     1.24                                                                                                       2011-04-19 tcs.ch [128] United Kingdom                     2.28                                                                                                       2012-04-01 Petrolprices.com [129] United States                          1.024                                                                                                      2012-11-5 [130] Uruguay (Montevideo)         1.52                                                                                                        2009-12-26 [131] Uzbekistan                              1.07                                                                                                        2011-01-01 [132] Venezuela                                0.023                                                                                                    2010-12-12 [133] (fixed prices) (at “non-essential” exch. rate)
Vietnam                                   1.11                                                                                                         2012-03-07 Petrolimex [134] Yemen                                     0.73                                                                                                         2009-09-09 [135] Zambia                                    1.61

Advertisement
Continue Reading
Advertisement
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Facebook

Trending Articles