The Kero-Direct scheme initiated by the Nigerian National Petroleum Corporation (NNPC) in July 2011 to help distribute household kerosene (HHK) to consumers nationwide may have been a scam to defraud Nigerians and extort money from the Petroleum Support Fund (PSF), the House of Representatives Adhoc Committee on Fuel Subsidy Probe has said in its report.
Under the scheme, which enjoyed the full support of the Minister of Petroleum Resources, Diezani Alison-Madueke, the Pipelines and Products Marketing Company (PPMC), a subsidiary of the NNPC in charge of petroleum products marketing and distribution, provided the product sold to end users at N50 per litre using the facilities of an independent marketer, Capital Oil and Gas Industries Limited.
But the committee said the scheme was not only implemented in defiance of a subsisting presidential directive removing kerosene from the subsidy regime, but also designed in a way the product would not get to the target beneficiaries at the approved price.
The committee found that the product, which was supposed to be distributed to consumers nationwide at the subsidized price, sold only at the 36 NNPC mega stations out of over 24,000 retail outlets across the country.
Outside the mega stations, the committee said there was massive diversion of the product, which was resold to consumers at between N130 and N150 per litre in the open market, because the NNPC chose to use operators that did not have the outlets to handle the distribution.
Consequently, the committee has asked the NNPC to refund the over N310.42billion deductions it took illegally as subsidy arrears for kerosene supplied in 2009 and 2010, pointing out that this was made in spite of a presidential directive specifically addressed to the minister, who is also chairman of the NNPC Board of Directors.
“The Committee could not find any reason why the minister, if convinced on the need to reinstate subsidy on kerosene, did not take any action on that, instead of condoning the illegal payments,” it said.
It was gathered that late President Umaru Musa Yar’adua had in memo Memo No. SH/PSP/24/A/819 of June 17, 2009 to the Minister of Petroleum Resources directed that subsidy on kerosene be removed, as the continued payments by government did not get to the intended beneficiaries.
In spite of the directive, the NNPC reportedly pressurized the Pipelines and Products Pricing Regulatory Agency (PPPRA) into processing the payment of subsidy arrears on the product, despite that consumers hardly got the commodity at the controlled price in the open market.
“When the Ministry of Petroleum Resources discovered that the removal of subsidy on kerosene was not expedient, it should have gone back to the President for the vacation of the directive,” the committee noted in its report. “Having failed to do that and with the evidence that the product was never sold at N50 (apart from the 36 mega stations) since 2009, there was no basis for seeking any vacation of the order in 2011.”
The committee also criticized the agreement entered into with Capital Oil & Gas Limited for the use of its tank farm to store about 94,330,030 litres of products, which was later confiscated and sold off by the company to recover a nine-month storage fees debt by NNPC.