Kerosine Fraud:How NNPC Officials Collected N195bn Bribe From Marketers

Oil marketers may have paid over N195.5bn as a bribe to officials of the Ministry of Petroleum Resources and the Nigerian National Petroleum Corporation before getting allocations to lift kerosene between 2010 and 2012, according to investigation.

It was learnt that the NNPC compelled marketers to pay a bribe of N25 per litre which was usually described as mobilisation fee, to petroleum ministry and top NNPC officials before they could get allocations to lift kerosene.

A source, who asked not to be named but who is in the oil industry, added that marketers who could pay the NNPC and petroleum ministry’s top shots N25 on every litre got kerosene allocations.

The source said, “So many things are happening and that is why it is almost impossible to sell kerosene to end users below N170. For any marketer to get allocation, you will pay N25 per litre and this is aside from other expenses that are incurred to get the product to the end users.’’

The NNPC has been the sole importer of kerosene despite a directive by the late President Musa Yar’Adua in 2009, which asked the corporation to discontinue the kerosene subsidy.

Investigation also revealed that many portfolio marketers, who are cronies of government and top NNPC officials, among other marketers, were those able to get allocations to lift kerosene in the last three years.

An analysis of figures obtained from the official website of the NNPC showing the Pipelines and Product Marketing Company sales of household kerosene revealed that 2.996 billion litres of the product were sold in 2010.

In 2011, 2.869 billion litres were sold; while in 2012, the corporation sold 3.123 billion litres of the commodity to consumers.

When put together, the NNPC sold 8.988 billion litres of kerosene within a three- year period of 2010 to 2012.

Investigation by one of our correspondents showed that the NNPC might have spent N988.84bn on kerosene subsidy between 2010 and 2012.

This is because the corporation currently imports the product at N156.46k per litre and sells to marketers at N40.90k per litre.

With 8.988 billion litres of kerosene sold in three years, the source said about 7.819 billion litres must have been lifted by oil marketers who had to pay N25 for every litre of kerosene allocation they got between 2010 and 2012.

This, he said, was premised on the fact that marketers control about 87 per cent of retail outlets in the country, while the NNPC only operates 37 mega stations, 12 floating mega stations and over 500 affiliate stations.

In view of this, the source said if marketers had lifted about 7.819 billion litres of kerosene, a whopping sum of N195.5bn must have been paid as a bribe to NNPC officials before they could get the kerosene allocations.

He explained that though marketers would usually get allocations to lift kerosene at N40.90k, “they had to pay N25 per litre as mobilisation fee to NNPC officials without which they could not get the allocations.”

He said, “If you add N25 to N40.90k, the marketers are already paying almost N70 per litre and by the time they add their operational costs and other expenses to it, it will be practically impossible for them to sell kerosene at the official retail price of N50 per litre.

“How can such a marketer sell at N50 per litre after parting with N25 on every litre and incurring other costs,” the source asked.

The ex-depot price of kerosene is N40.90, but the landing cost plus margin, according to the Petroleum Products Pricing Regulatory Agency is N156.46 per litre.

The pricing template made available on the PPPRA website put the  cost and freight of kerosene at N130.47; lightering expenses, N4.09; NPA charges, N0.68; financing, N0.64; Jetty depot  charge, N0.80; and storage charge, N3.00.

These, according to the PPPRA, amount to N140.97 and with another N15.49 distribution margin, the total cost is N156.46 per litre.

This, the PPPRA stated, included retailers’ margin of N4.60, transporters’ margin of N2.99, dealers’ margin of N1.75, bridging fund of N5.85, marine transport average of N0.15 and administrative charges of N0.15.

Although there have been conflicting figures, the NNPC is said to be paying between N107.46 and N110 as subsidy on each litre of kerosene sold to consumers in the country.

When contacted, the acting Group General Manager, Public Affairs, NNPC, Dr. Omar Farouk Ibrahim, said, “You can’t just make blanket accusations against the NNPC. It helps for you to tell us in which of our 22 depots this thing is happening. Who are the officials involved? If you don’t come out with the fact, we will not know.

“It is unfair for people to be making wild and unsubstantiated allegations or accusations against the NNPC. If people have facts to support their allegations, they should present them to us and we will investigate and take necessary actions.”

He, however, admitted that the NNPC sold kerosene at N40.90k per litre, but lamented that marketers were selling it between N120 and N130 per litre to the Nigerian public.

Our correspondents also gathered that some consumers buy the product at prices ranging between N170 and N250 per litre, depending on their location in the country.

The Director, Centre for Petroleum, Energy Economics and Law, University of Ibadan and President, Nigerian Association for Energy Economics, Prof. Adeola Adenikinju, in an interview with one of our correspondents, said a study done in 2013 showed a huge margin in kerosene prices at filling stations across the country and the ‘official price’ claimed by the NNPC.

On the average, Adenikinju said the national pump price of kerosene deviated from the official price by about N64.38.

He said, “The deviation was most significant in Abuja with a margin of over N100 per litre. Three states, Enugu, Kogi and Cross River, recorded excess margins of N90 per litre.

“Corresponding margin for Bauchi was N85 per litre, Taraba, Lagos and Kano, N80. However, the margins were much lower in Benue, Kaduna and Ekiti.”

The professor said the analysis of variations between official price and hawkers’ market price was even more dramatic, ranging from N30 per litre in Ekiti to N150 per litre in Bauchi.

He said, “The NNPC cannot claim ignorance of this sharp practice. Some would even argue that NNPC contributed significantly to the emergence of this thriving unofficial market. These unofficial channels are not self-sufficient and they depend to a very large extent on supply from the official sources.

“Given the revelation from the probe panel and the evidence on ground, the average Nigerian does not benefit from the so-called subsidy on kerosene and should therefore be stopped.”

The Group Executive Director, Production and Exploration, NNPC, Dr. Abiye Membere, noted that it was not the fault of the NNPC that the product was sold at prices above the N50 pump price.

He said it was worrisome to see people retail the product at such exorbitant rates, adding that such a situation was beyond the NNPC.

The Governor, Central Bank of Nigeria, Mr. Lamido Sanusi, had said the NNPC sold kerosene at a subsidised rate of N40 while buying it at N150.

Sanusi said, “The burden of proof on the NNPC is to show where they obtained authorisation to purchase kerosene at N150/litre from federation funds and sell at about N40/litre, knowing well that this product sells in the market at N170-N220/litre. At what point was the presidential directive revered?”

The Chairman, House Committee on Petroleum (Downstream), Mr. Dakuku Peterside, had recently said the government spent N110bn on kerosene subsidy in 2010, N324bn in 2011 and N200bn in 2012, which came up to N634bn within the three years.

He said, “In the year 2010, we spent N110,068,533,988 to subsidise kerosene. This is not the cost of kerosene but the cost of subsidising the product alone. In 2011, it got worse and the government spent N324,089,961,319 on kerosene subsidy. Although we have yet to reconcile this, we spent N200bn in subsidising kerosene in 2012.

“So, in three years, we have spent N634bn subsidising kerosene. This is one-third of what we spend in a year on capital budget.”

He described kerosene subsidy as “a network of corruption” and “a network of fraud.”