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PPPRA, DPR fail to checkmate abuse of subsidy scheme


News » Business
Lagos

Petroleum Product Pricing Regulatory Agency (PPPRA), the regulatory custodian of the Petroleum Subsidy Scheme and the Department of Petroleum Resources (DPR), which has responsibility for checking quality of products brought into the country, failed to block loopholes that were exploited by a number of petroleum product traders to abuse the scheme, a forensic report written by the Aigboje Aig-Imokhuede-led Technical Committee on Payment of Fuel Subsidies has revealed.

The Committee found that the PPPRA overlooked a simple, outlined process of document verification required for subsidy claims payment. “All the committee did was to call up all the documents in possession of PPPRA for subsidy paid, but found that in many cases, the required number of documents before subsidy can be paid, was not there, yet subsidy was paid,” said a source at the Ministry of Finance.

For instance, the report noted that the process flow for subsidy verification and claims presented to the committee by a member of  the Major Oil Marketers Association of Nigeria (MOMAN) involved:

•PPPRA provides quarterly import allocations to oil marketing and trading companies •The oil marketing and trading company applies for and obtains import permit from DPR •The oil marketing and trading company approaches a bank to approve form M and issue an LC [Letter of Credit] •The cargo is booked with the supplier •Notice of arrival of the vessel is declared to DPR, PPPRA, Federal Ministry of Finance, Nigerian Navy, Nigerian Customs, e.t.c. •The vessel arrives •Ship-to-ship transfer (STS) takes place if vessel is bigger than the draft of the jetty (only two private jetties in Nigeria have the capacity to discharge vessel of 30,000MT) •The cargo is inspected by PPPRA, DPR, independent marine inspector, Federal Ministry of Finance (through the Budget Office of the Federation) appointed auditors, Nigerian Navy, Nigerian Customs, e.t.c. •Storage tanks are fiscalised before discharge •Vessel discharges cargo into storage tanks •Storage tanks are fiscalised after discharge to determine the quantity of the cargo •Certificates of quantity and quality are issued and signed by all the parties involved in the inspection •Documentation is forwarded to PPPRA for subsidy claim •PPPRA computes applicable subsidy in line with their template and deducts the applicable PEF [Petroleum Equalisation Fund] and PPPRA administrative charges •PPPRA issues a Sovereign Debt Statement to the oil marketing and trading company (attaching PPPRA and PEF charges payable) •The oil marketing and trading company provides evidence of payment of PPPRA and PEF charges to DMO [Debt Management Office] •PPPRA transmits verified documents to Federal Ministry of Finance and advices the Federal Ministry of Finance to deduct applicable PEF and PPPRA administrative charges •Federal Ministry of Finance (through Budget Office of the Federation) appointed auditors verify documents •DMO issues SDN [Sovereign Debt Note] •SDN discounted or liquidated at maturity But when the committee checked with PPPRA it found that many subsidy payments were made without corresponding documentation, raising serious questions about PPPRA’s role in the whole subsidy scheme, especially how it came to approve payments without complete documentation.

Files at PPPRA were found to be incomplete for payment and payment was made; signatures were found incomplete on documents, yet payments were made; records of sales proceeds were not verifiable, with banks disclaiming many transactions.

It also found that “the inclusion by PPPRA of oil marketing and trading companies that did not meet the eligibility criteria set in the guidelines for that administration of the Petroleum Support Fund in import allocations created opportunities for abuse of the process,” noting especially that “this was also in conflict with the mandate of the PPPRA to prevent collusion and restrictive trade practices.”

PPPRA dropped the requirement of proof of ownership of retail outlets when it reviewed the PSF guidelines. As a critical determinant of the capacity of the oil marketing and trading company to distribute the products locally within Nigeria, “the removal of this requirement opened up participation in the scheme to entities who were clearly incapable of fulfilling the requirements of importation, supply and distribution and whose practices were clearly not consistent with the spirit and intent of the PSF scheme,” the report noted.

Although some oil marketing and trading companies have pointed out that they did legitimate business, Finance Ministry sources explained that the report has only pointed out that from their check at PPPRA, there was no documents in the custody of the agency to support some subsidy payments that were made and that a window had been left open for those who say they have documents to support the subsidy they collected to bring them forward.

“This is basically a forensic report and as such, it is fact based. The committee has had to go through all the available and sighted documents with respect to the issues. If there are those who believe that they have documents to support, for instance, that the ship that they claimed brought fuel and was on Nigerian waters, but which was found to be in another part of the world at the time, let them come forward with such documents and prove it,” said one Finance Ministry official.

“How can documents relating to payment for subsidy be with importers and not be with PPPRA?” asked a source familiar with the work of the committee.
BusinessDay has also learnt that the committee’s work was actually spearheaded by President Goodluck Jonathan, who had asked the Coordinating Minister for the Economy and Minister of Finance, Ngozi Okonjo-Iweala , to get to the bottom of the subsidy mess.

Article credit: Businessday Newspaper

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Updated 7 Years ago
 

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