How fuel subsidy is administered, By PPPRA

The Petroleum Products Pricing and Regulatory Agency (PPPRA) has stated that it administers fuel subsidy along with other stakeholders in accordance with approved guidelines.

It also said that the agency is not the only government agency that supervises fuel importation.

Responding to recent allegations that fuel marketers collaborate with the agency to cheat the government, the PPPRA said that the structure of the subsidy scheme makes it impossible for any one of the stakeholders involved in the subsidy scheme to perpetrate fraud.

It has been alleged that when marketers secure approval to import 20 metric tonnes of fuel, they only discharge 10 metric tonnes on the coast of the West African sub-region and the remaining content at their depot in the country .

The marketers, according to the allegations, will submit claim for reimbursement to PPPRA on 20 metric tonnes and also turn around to sell to motorists above the official price.

But the PPPRA said the subsidy scheme has approved guidelines that involve many stakeholders.

"The Management of PPPRA would like to inform Nigerians and all Stakeholders that the structure of the PSF, as contained in its approved guidelines for the administration of the PSF, contains checks and balances, which make it extremely difficult, if not totally impossible, for just one organisation within the group, to connive with marketers to swindle the government of such huge amounts being claimed," it said.

According to the PPPRA, the administration of the PSF is a joint responsibility of representatives of some government agencies.

PPPRA also noted that apart from it, the Nigerian Customs, Nigerian Ports Authority, Central Bank of Nigeria (CBN), Department of Petroleum Resources (DPR), Federal Ministry of Finance (FMF), Office of the Accountant General of the Federation, marketers, and some other security agencies are also involved in the administration of the subsidy regime.

 

International audit firm appointed

In addition to these agencies, the PPPRA said that the Federal Ministry of Finance also appointed an international audit firm as an external auditor.

Similarly, in the institutional arrangement being referred to, all Marketers (including NNPC and PPMC) are the trading Operators, DPR is the Inspector, while PEF is the Monitor, according to the PPPRA report.

Both the CBN and FMF are also said to be the custodians of the fund, with the account domiciled at the CBN, while PPPRA merely acts as the Fund Administrator.

According to the PPPRA, what this means is that before any fund could be released, through the Central Bank, it must have gone through every aspect of the institutional chain, for verification.

"In other words, the CBN, as a government agency, is fully aware of the modalities for disbursement of the PSF, and for the avoidance of doubt, the real disbursement is also being done by the CBN, as the nation's apex bank. The monitoring arrangement for product reception equally involves inter-agency collaborations to ensure transparency and the overall success of the scheme. The transparency of the PPPRA is not in doubt, as it was given a clean bill of health, after being subjected to a most rigorous probe at the inception of the incumbent administration, the PPPRA said.

 

Total deregulation

The agency also said only a total sum of N680, 635, 434, 605.34bn has so far been spent on payment of subsidy between 2009 and 2010.

It stated that though it is championing the cause of deregulation, it was not true that trillions of naira had been spent on it since the past one year.

"It is our wish to state categorically that the total subsidy paid to all participating marketers in 2009 amounted to about N450, 000,000,000:00. Out of the amount, the NNPC was credited with N212, 076,306,235:75, while the rest of the Marketers got the balance. So far in 2010, N130,635,434,605:34, has been paid out, from which NNPC was credited with N61,004,532,568:49, while other Marketers received N69,630,902,036:85," PPPRA said.

The agency also noted that it has been at the forefront of the clamour for a total deregulation of the downstream oil sub-sector in Nigeria .

"Our position is informed by the urgent need to free the sector of all forms of encumbrances; be it administrative, social or economic. We believe in a free market economy as being sine qua non to a vibrant downstream oil sub-sector that is both profitable and self sustaining," it said.

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