Senate approves N348bn subsidy payment to oil marketers

By Energy Worth

The Senate has approved the payment of subsidy claims totalling N348bn to oil marketing companies based on a request by President Muhammadu Buhari.

The approval was made at the plenary on Wednesday following the adoption of the interim report by the Senate Committee on Petroleum (Downstream) on ‘Promissory Note Programme and Bond Issuance to Settle Inherited Local Debts and Contractual Obligations to Petroleum Marketers’.

While approving that 55 oil marketers be paid verified figures totalling N275,750,415,108, the upper chamber of the National Assembly asked that 19 marketers with contentious claims and verified figures be paid 65 per cent of their claims, amounting to N73,452,639,866, pending further investigation and verification by the committee.

Some of the notable marketers to get full payment are Aiteo, Bovas, Capital Oil, Eternal, Folawiyo Energy, Hyden, Integrated Oil, Mobil Oil Nigeria, MRS, NIPCO, NNPC Retail, Obat Oil, Sahara Energy and Total Nigeria.

Notable among those to get part payment are Conoil, Forte Oil, Honeywell, IPMAN Investment, Matrix Energy and Oando.

The request by Buhari, which was considered on May 31, 2018, was referred to the committee with the mandate to determine all outstanding subsidy arrears, interests accrued and forex differentials, as well as to compute a harmonised figure as the outstanding indebtedness of the government to the marketers for consideration and approval.

In the report, the committee noted the irregularities in the subsidy claim figures presented by the Federal Ministry of Finance and the marketers.

According the report, which was presented by Chairman of the committee, Senator Kabiru Marafa, the Petroleum Products Pricing Regulatory Agency verified and sent the sum of N429,054,203,228 to the Federal Ministry of Finance as subsidy claims. The marketers, however, claimed N670,497,543,158 as of June 30, 2018.

The committee said the ministry got the approval of the Federal Executive Council to pay the amount presented by the PPPRA as the verified subsidy claims.

The ministry was said to have sent the approved figure of N429,054,203,228 to the Presidential Initiative on Continuous Audit for further verification, which did a downward review of the amount to N407,255,263,288.

The report read in part, “The Federal Ministry of Finance indicates that the verified figures in respect of 19 oil marketing companies were either higher or very close to their claims, while those of the OMCs with higher claims got lesser figures.

“This issue, including the determination of the terminal date of the subsidy programme, amount paid to the OMCs and the interest accrued from 30th of June, 2017 to date will be taken up and resolved in the final report this committee will be submitting to the Senate in due course. This submission should be able to reconcile and bring to a conclusion all issues in respect of petroleum subsidy programme implementation and payments.

“Further verification needs to be made to ascertain the discrepancies between the OMCs and the recommendations for payment made by the FMoF (PICA) in this respect; the committee is of the opinion that interim payments should be effected to the OMCs pending full verification of PICA’s recommendation and updating of the full implication of interest accruals from 30th of June, 2017 to date. Continuous delay of the approval of the promissory note request will affect the liquidity of the OMCs and undermine their crucial role in the development of the economy.”

The committee added that the government’s inability to pay the OMCs as of June 30, 2017 had further increased its liability since the interest continued running, hence, the need for further work by the panel to compile and update the level of indebtedness and the interest accruals.