Corruption is the key problem in the petroleum-pricing regime, according to senior workers in Nigeria’s petroleum sector who claim that, by focusing on removing local subsidy, the government is only putting the cart before the horse in its bid to deregulate pricing on local fuel consumption.
President General, Trade Union Congress (TUC), Peter Esele, who is also an oil worker, put it in perspective at the just-concluded stakeholders’ meeting on the planned deregulation of the downstream sector of the petroleum industry.
Mr. Esele said: “What the oil workers have always said is that for the deregulation policy to be meaningful, government needs to look at the fuel pricing template again, to remove the corruption components that contribute to the increases in the cost of fuel in the country. The cabal that is benefiting from the high subsidy in the supply of petroleum products cannot thrive, except there are collaborators in government. If government wants to deregulate, it must address the fundamental issues, to facilitate the process. It must first overhaul NNPC and make it run like its counterparts in other parts of the world, rather than depend on importation of petroleum products.”
He piled the bulk of the problem on the Pipelines and Products Marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) responsible for the marketing and distribution of petroleum products, which he claimed remained the biggest problem in the fuel distribution chain in the country.
Mr. Esele also demanded action on the passage of the proposed Petroleum Industry Bill (PIB), and said the new law will streamline the operations of the NNPC and make it focus on its primary responsibilities, and eliminate corruption as the greatest clog in the wheel of progress in the country’s oil industry.
Apparently giving a nod to Mr. Esele’s views, the PPMC, at its 20th annual general meeting (AGM) recently in Abuja, said it lost over N43billion in the 4 years between 2005 and 2009 and conventional wisdom put these losses to corruption.
Chairman of the Board of Directors and Group Managing Director, NNPC, Austen Oniwon, in his statement at the meeting, broke down the losses in the following schema: N4.74billion in 2005; N1.83billion in 2006; N6.795billion in 2007; N7.511billion in 2008; and N19.287billion in 2009, while accumulated losses were N14.517billion, N15.348billion, N20.930billion, N25.075billion and N43.193billion for the corresponding years respectively.
Attributing the consistent poor performance to the country’s economic environment and the situation at the international oil market, Mr. Oniwon noted that though country’s crude oil was attracting steady price in 2009, the local refineries performed below installed capacity, which resulted in massive importation of petroleum products to meet growing national demand.
Mr. Oniwon also attributed the failed fortunes of the NNPC to pipelines vandalism though he said the incidents fell from 2318 in 2008 to 1,480 in 2009, adding that crude oil and petroleum products were moved less frequently through the pipelines during the year than in the previous year.
Whereas 3,074,444 metric tons of crude oil was transported through the pipeline in 2009, in the previous year it was 6,936,374 metric tons, according to Mr. Oniwon who also said 3,105,684 metric tons of white products moved this year, compared to 5,082,692 metric tons last year, and this situation, according to him resulted in lower revenue for the NNPC.
Auditors of the NNPC, PricewaterhouseCoopers, and Balogun Badejo & Co. in their joint, independent, report have drawn attention to what they call the “existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern.”
An angry observer at the meeting exploded: “It is only corruption that would make the management of a company be proud to remain in place even in the face of consistent failure to make profits for its shareholders. Until NNPC is overhauled and made to function as a business with commercial mindset and orientation, there will be no meaningful progress in the downstream sector of the petroleum industry.”