Indications emerged at the weekend that the Petroleum Products Pricing and Regulatory Agency, PPPRA, that administers the fuel import regime with the Nigerian National Petroleum Corporation, NNPC, gave some influential people, including a United States-based jeweller known for designing expensive wristwatches for ministers, allocations to import fuel as ÒgiftsÓ from the Federal Government to compensate for their political support.

This confirmed that the unusually high level of political interference in the process of allocating fuel import con- tracts was largely responsible for the abuses that had resulted in huge losses to the NNPC, National Mirror investigations reveals. Findings showed that portfolio contractors, who did not have retails or storage facilities, were in some cases given priority over well known oil marketing companies in the allocation process while some were Òsmuggled into the quarterly fuel import programmesÓ or their names replaced with pre-qualified importers. PPPRA regulations require that a fuel importer must have at least 5,000 metric tonnes fuel storage capacity and retail outlets.

A former senior official of the PPPRA said: ÒOur hands were tied. In a situation where you get specific instructions to allocate fuel import to somebody with even the tonnage specified, what do you do? Many of the established marketers that we know have the capacity to fuel in quickly sometimes lose out. They are not happy but they cannot complain publicly to avoid being blacklisted.Ó It was learnt that certain companies that already had lifting rights with the Port Harcourt Refinery also obtained import licences, making it possible for some importers to sell products obtained locally from the refineries back to the NNPC and still claim subsidy.

The Federal Government said that fuel subsidy payments, which rose from N261bn in 2006 to N673bn in 2010, and more than doubled to N1.46trn in 2011, were unsustainable and must be removed, triggering the ongoing nationwide strike. The Director-General of the Nigerian Maritime Administration and Safety Agency, NIMASA, Mr. Patrick Akpobolokemi, had confirmed late last year that petrol importers had swindled the Federal Government of millions of dollars by pretending to import products from abroad. This was done by transferring products obtained locally to another vessel on the high seas and the fuel arrives Lagos port as ÒimportedÓ.

This also happened in spite of the 38 different checks on the PPPRA checklist to verify petrol imports before payment was made to the marketers and it could not be ascertained how much the economy lost to these malpractices. Our source said the PPPRA had suggested two years ago that fuel refined locally be dyed in special colours to check this practice but that no action was taken.

Akpobolokemi had noted that the level of illegal bunkering and other heinous activities along the nationÕs waterways had gone unchecked for many years and that when it swung into action and arrested some vessels for suspected illegal activities, the agency had come under pressure from top officials to release such vessels. National Mirror, however, learnt that due to the ÒembarrassmentÓ fuel subsidy affair had caused the government, efforts were being made to inject some sanity into the system and that currently the number of importers had been reduced from about 108 to 44.

Industry sources also said that some powerful interests still remained on the list. It was also learnt that the Major Marketers Association of Nigeria would take a formal stance on the Òfuel cabalÓ matter today and produce a list of authentic fuel traders. National Mirror had reported last week that about half of those involved in massive importation of petroleum products did not have depots, a major requirement of the PPPRA.

The malpractices in the fuel import regime were confirmed in an audit report prepared by KPMG Professional Services and S.S. Afemikhe & Co engaged to audit NNPC affairs between 2007 and 2009. The report had indicated that the NNPC did not follow set rules in selecting importers and allocating import contracts and in accounting for imports or determining subsidy payments. Indeed, the NNPC had estimated subsidy payments in several cases and failed to refund overpayments to government coffers.

For instance, the KPMG report showed that fuel import contracts were given to companies not prequalifies with a potential risk that such contracts could be given to companies that could not meet requirements and by extension create and incentive to engage incorrupt activities such as forging import documents and claim subsidies for products not imported.

Also, delays in discharge of products led to significant demurrage payments while the NNPC also incurred hefty penalties for late payments to suppliers. For instance, the report noted that between January 2008 and June 2010, the average demurrage day were 31 which translated into a liability of $198m (N31.6bn) or $6.6m (N1.05bn) per month, which is built into the subsidy regime.

Also the report found that instead of settling suppliersÕ bills within 45 days after submission of notice of readiness in line with contract terms, the actual payment ranged from between 220 and 240 days. This means that the NNPC has to pay interest charges based on London Interbank Offered Rate plus one per cent from the 46th day until payment is made.

The report also found that NNPC subsidy claims and PPPRA verification were based on volumes of products available for sale including those obtained from local refineries or even lost to pipeline vandalism contrary to subsidy guidelines and created the possibility of being paid on locally refined products. Losses from subsidies paid on products not consumed due to theft were estimated at N11.8bn between 2007 and 2009.

The report also found that delays in receipt of subsidy advice from PPPRA often resulted in estimation of subsidy claims by NNPC and subsequent over/under deduction from proceeds from domestic crude sales. KPMG estimated that subsidy over deduction between 2007 and 2009 totalled N28.5bn Based on the findings, the consultants made several recommendations, including the empowerment of Evaluation Committee to evaluate, determine and shortlist importers for approval based on predefined and approved criteria. They called for review and update of policies and procedures for issuance of importation supply contracts .

Bawss1:

Its high time a certain jeweler - and I don't mean Jacob - clears the air about these allegations. Or is his silence to be seen as an admission of guilt?