A Review of the Nigerian Energy Industry

NNPC insists on right to subsidy claims

Andrew Yakubu, GMD, NNPC

…Says NPDC can’t pay earnings into Federation Account

Oscarline Onwuemenyi, 10 February 2014, Sweetcrude, Abuja – The Nigerian National Petroleum Corporation, NNPC, says it is entitled to subsidy claims paid on behalf of the Federal Government and faulted the position of the Governor of Central Bank of Nigeria, Sanusi Lamido Sanusi, that about $20 billion was unaccounted for.

The corporation which accused the CBN governor of constantly changing the amount involved to suit his purpose, noted that all other agencies of government involved in the reconciliation process have agreed on the figures up to $10.8 billion.

Last December, Sanusi had in the aftermath of his letter to President Goodluck Jonathan accepted during a joint press briefing, that the missing money was $12 billion.

However last Tuesday during a Senate investigation into the earlier allegation by Sanusi that about $49.8b was missing, the CBN governor revealed that the amount (now considered to be missing) “in 19 months may be $10.8 billion or $12 billion or $19 billion or $21 billion.”

But, speaking to journalists in Abuja, the Group Executive Director of Production and Exploration of NNPC, Dr. Abiye Membere, poured cold water on Sanusi’s submissions.

According to him, CBN’s submission that subsidy on kerosene was stopped by the Presidency in 2009 was incorrect.

He said: “After Late President Musa Yar’Adua’s directive to stop subsidy on kerosene, another series of meetings were held where it was decided that removing subsidy on kerosene would be greeted with formidable opposition. In fact, the memo that was sent to the PPPRA for suspension of the subsidy was categorical in saying public announcement should be avoided. So, how can such a step be taken without the public knowing?

“So, there was a meeting the then Minister of Finance, Mansur Muktar, former Petroleum Minister, Rilwanu Lukman and the then Director of Budget Office with about nine other government officials met and observed that kerosene subsidy cannot be treated the way subsidy was removed on diesel.

“It was then reasoned that kerosene is for the poor masses. The NNPC was then directed to step down the implementation of that prudential directive and that they would go back to the President to reverse it. It was at this point that the president fell ill and never made it.”

He further noted that, “not that the NNPC has never been paid subsidy claim on kerosene before, in fact, under Olusegun Aganga as Minister of Finance, subsidy claims between 2009 and 2011 was paid to the NNPC. So, this payment has removed any doubt about the fact that the NNPC was not authorised to carry on with subsidy on kerosene.”

Dr. Membere observed that the NNPC is not the sole agency of government that determines how much subsidy claim should be. “We work with the Petroleum Products Pricing Regulatory Agency (PPPRA) and other agencies of government, which scrutinize all our documents”.

“There is a difference in government-to-government transaction as against private sector government transactions. The private sector does not have anything to do with the Federation Account, which is why they are paid subsidy claims directly into their accounts. What do people want us to do in the NNPC? They want us to first collect the money from the ministry and then pay back into the Federation Account? Nigerians must understand how these things work.”

Membere declared that the ‘missing money’ was never in the hands of the NNPC, adding, “This subsidy is not the money that the NNPC collected from government. For example, the subsidy on kerosene, it is not that government will pay the NNPC the remaining N100 on the product directly.

“What happens is that the NNPC sells the product at N50 and then pays that into the Federation Account and then expects government to balance it up in the Federation Account with the subsidy claims of the NNPC. Nigerians must understand that NNPC has never collected any money from government as subsidy claim.

“The NNPC simply paid the N50 we collected at pump into the Federation Account. Now, people turn around and say the NNPC owes government. It is simply because the Federation Account is not balance and they think that because the NNPC has defaulted simply because we have not paid the required figure forgetting that the balance of what we ought to pay is with the Federal Government. The Ministry of Finance has not denied this position. The CBN must know that that the NNPC cannot pay what it does not have.”

He explained that the corporation submits document on domestic crude and subsidy claims to the Federal Account and Allocation Committee (FAAC).

“It is therefore done in a net-in net-out basis. All we do is to submit the subsidy claim and the crude we have sold and handed it over to government.”

On the allegations of irregularities in the Nigerian Petroleum Development Company, NPDC, Strategic Alliance Agreements with Septa Energy Nigeria Limited (subsidiary of UK based Seven Energy) and Atlantic Energy, Membere noted that “neither NPDC nor NNPC has any power to stop any oil company from paying tax, royalties or any tax for that matter. However, a company that is carrying out operation is the one that is required to pay royalty and tax and not the financiers. Contrary to the erroneous belief in some quarters, Septa and Atlantic do not carry out any operation.

“It is NPDC that carries out operation and pay the necessary fees to government. These companies provided alternate funding for NPDC to carry out operation. The $2billion that is the third party funds that was paid into the CBN account that the Governor said he does not recognize is the royalty and Petroleum Profit Tax (PPT) that the NNPC paid into the federation account. The NNPC paid its royalties and PPT out of the profit that arose from the operation of the NPDC.

“The NNPC cannot pay directly into the Federation Account because the Federal Government is not the one funding the operation. In this case, the NPDC went to borrow money from third party just as Shell does not pay its money into the Federation Account but pays into its parent company, which in turn pays government tax from its profits”.

He declared that the “CBN keep on changing number they started from $49b it was later reduced to 10.8 billion and NNPC took time to explain how the $10.8b was utilized or expended but we were taken aback on Tuesday when the number changed from $10.8b to $20 b. There are a lot of questions for people to ask. Those are simple basic question to ask before a high power government official like the CBN or a parastatal like such organization, one would have expected that all facts and figures should be checked and double checked that the figure should not change.

“The public should read between the lines there are key areas we would want you to understand which is subsidy. Is NNPC entitled to subsidy claims? We would leave it to the public to judge. But here we import product at N150 and being sold at N40 or N50 and we are not entitled to the difference where would somebody get the money to meet the difference.”

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