Revealed: The Untold Story Of The War Between Oando & PPRA

. The Accusations & Counter Accusations

. How Oando Made Billions Of Naira At The Expense of Nigerians!

. How Company Tried To Influence Pricing

With the heat generated by the sudden removal of the subsidy on Premium Motor Spirit (petrol) on January 1 yet to cool down, bitter wars have started within the petroleum sector. Accusations have started flying left and right as regards the reasons behind the unholy amount paid as subsidy in the past year, especially in the first eight months. And with the names of the beneficiaries of the subsidy now known to every citizen, the noise made by Nigerians, the investigation ordered by the Minister with the consent of the President and the cold war that has started in the sector, answers to some questions will be generated.

The controversy in the fuel importation under the petroleum subsidy in Nigeria took a different dimension recently when Oando, one of the leading oil companies in the country and a major beneficiary of the fuel subsidy made allegations that the change of the pricing approach by some former top government officials in the Petroleum Products Pricing Regulatory Agency resulted to the astronomical increase of the funds paid as subsidy.

While the company made the alleged that the activities of the then senior members of the PPRA was what cost the government about N 1.3 trillion, the agency on the other hand described the company’s claim as an attempt to divert public attention from its fraudulent involvement in cargo discharges.

Street Journal’s investigation revealed that some of the oil marketers have used their postures as leaders in the industry have become notorious for always trying to manipulate government policies in their own business interests. It was discovered that Oando successfully influenced the initial pricing policy using a model of 30days moving average with an inclusion of standard deviation.

It was an open secret within the petroleum industry that the oil company succeeded in achieving this by maintaining chummy relationship with the pioneer General Manager operations in the PPPRA .  It was also found out that the Company tried unsuccessfully to install him as the Executive Secretary of the Agency just in order to perpetuate its selfish business interest.

The implication of 30-days moving average pricing model statistically in a highly volatile market is that there is heavy disparity between the 30days moving average on the pricing template and the actual Platts quotation on daily basis. Street Journal found out that by aiding this policy, the company had defrauded Nigeria of billions of Naira on each Cargo transaction.

Things however changed when a new management came on board early in 2009, the Agency removed the application of standard deviation (SD) on the pricing template thereby saving the Nigerian economy over N 40 billion naira per year on domestic fuel consumption.  It was also found out that the company tried all it could to cause a reversal of the policy but all its efforts proved futile. It is still fighting the government officials that initiated the policy till today.

By  2010 when the market began an upward swing, with tendencies of under –recovery in market transactions, the PPPRA observed a pricing disparity between the actual market prices based on platts quotations and 30-days moving average on the template in a highly volatile market and proposed a change of the pricing model to reflect the international convention of 5-days pricing average around the bill of lading after a scientific pricing simulation. This was done at an enlarged Stakeholders meeting comprising of other industry experts and government technocrats and approved by the Board of the Agency in line with due process.

The resolutions arrived at are:

  1. That the PPPRA should ensure the issuance of import approvals at least 15 days prior to the commencement of a quarter to enable Marketers fulfil their quarterly supply obligations. However, due to operational exigencies in approvals in the last quarter of 2010, the Agency should give additional period of grace after permit expiration with a view to allowing for discharge of Cargoes that may arrive late.
  2. That the Agency should adhere to the new products allocation model approved by the PPPRA Board. However, it should ensure mid-quarter product review and promptly bridge supply gap if necessary, to avoid scarcity in the quarter. In view of this, the Agency should consider issuing additional volume allocations to Marketers that have performed impressively to date based on Q4 approvals and possess capacity for additional supply in order to forestall products scarcity
  3. That the Agency should implement the Board approved ground rules for implementation of the PSF scheme, inclusive of the policy on calculation of subsidy payable to Marketers based on 5-days around the Bill of Lading date, with effect from 1st January 2011 as earlier communicated to Marketers. The Agency was mandated to adopt the PPMC approach in the implementation of this policy.
  4. That the allowable demurrage provision on the Template does not ensure cost recovery to Marketers in view of the current market realities and therefore should be subjected to a review by the Agency.
  5. That the winter premium as recognised on the Template should be triggered from November to February annually, based on the seasonal reality while the relevant winter premium is applied accordingly.
  6. That the PPPRA should ensure that the sanctity of the 45 days payment deadline for subsidy re-imbursement to Marketers is maintained.
  7. That PPPRA should continue to encourage investments in the downstream sector and as such continue to give due priority to Logistic Facilities owners in the product allocation process, without compromising level playing field as enshrined in the mandate of the Agency.
  8. That henceforth, shoretank figures (gross observe volumes in litres) be applied in verification of subsidy. However, in cases where shoretank figure exceeds arrival figure, an average of the two (arrival figure and shoretank figure) should be applied subject to a variation of 0.03%.
  9. . That Marketer that was short-paid based on adoption of understated volumes be reimbursed without further delay through a reconciliation exercise to be conducted by the Agency with the affected Marketers in respect of the cargoes concerned. The outcome of the exercise should be forwarded to the Government appointed auditors for audit and be included In the next batch of payment to be issued by the Agency.

10.  Stakeholders examined the Pricing Template and noted the inadequacy of some cost parameters and requested the Agency to put machinery in motion for a review, in line with the current market realities, to guarantee seamless product supply in the system.

11. Stakeholders noted that the Platts posted price as adopted by the Agency is credible and should continue to apply. Accordingly, Marketers and Traders were urged to be innovative in hedging against market risks.

12.  That there is a need for sensitization programme on alternative import financing scheme and other industries issues for all Stakeholders. Consequently, Access Bank on behalf of other Banks offered to finance the programme.

13. Stakeholders commended the Agency on the hosting of the periodic    midquarter operational review meeting and urged that such should be conducted regularly in the interest of serenity in the industry.

Investigations revealed that Oando, being uncomfortable with the policy resorted to blackmail of government officials in the agency. It also intensified its move to ensure that it becomes a force in the Agency’s policy formulation. It made efforts to install its own candidate as the CEO of the Agency just to reverse the pricing policy in its advantage.

Street Journal gathered that the company was so engrossed in the actualization of its aim that at a point it flew its “anointed candidate”) in a private jet to lobby a Minister for the Agency’s Executive Secretary’s position.

It has become an open secret that Oando was one of the biggest beneficiaries having received one of the highest amounts of money under the subsidy regime. It was also gathered that the company has continued to fight for the retention of oil subsidy in Nigeria not for masses, though but for its business interest.

Though the cabal behind the fuel subsidy scandal has been named, it remains a matter of debate whether anyone will be made to answer for allegedly ripping the government off.

Author: NewsAdmin

3095 stories / Browse all stories

Related Stories »

Provide your email below, and we will notify you the latest news freely.

sjdating    

calendar »

January 2012
M T W T F S S
« Dec   Feb »
 1
2345678
9101112131415
16171819202122
23242526272829
3031