An oily affair

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AN OILY AFFAIR: SUBSIDY FACTS AND FIGURES

description

This is a presentation of the facts and figures of fuel subsidy in Nigeria. It also chronocles the sleaze, corruption and wasteful tendencies of the Nigerian nation.

Transcript of An oily affair

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AN OILY AFFAIR:SUBSIDY FACTS AND

FIGURES

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Winston Churchill

“In time of war, when truth is so precious, it

must be attended

by a bodyguard

of lies.”

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Nigeria About 170 Million People Largest Population of Black People 159 out of 178 in Human

Development Index 70.2 % live under a dollar a day 8.2 % of the World’s Poor People

143rd Out of 183 Countries in Corruption

80% of Oil Revenues benefit only 1% of Population (World Bank)

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Oil Discovered in 1956 95% of Export 11th Largest Nation in

Proven Oil Reserves 14th Largest Nation in Oil

Production at 2.2 Million Barrels per day

Mainstay of Economy $1.6 Trillion Revenue

Since Discovery (BBC) Four Refineries Source of “Resource

Curse”

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Refinery Capacity First Refinery: 1965 (Port Harcourt 1) Second Refinery: 1978 (Warri) Third Refinery: 1980 (Kaduna) Fourth Refinery: 1989 (Port Harcourt 2) Combined Refinery Capacity : 455,000 BPD Capacity Utilisation: Less than 30% Estimated Domestic Demand: 550 BPD or 30

Million Liters A barrel = 159 Litres South Africa: 7 Refineries and Egypt: 9

Refineries

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Why Import ?

Lack of Refining Capacity

Huge Domestic Demand

Lack of Alternative Energy

Lack of Alternative Transportation

Why not Barter ? Corruption and Greed

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What is Subsidy? Government absolves

part of the real cost of refined petroleum products and passes the rest to the Consumer

Government regulates prices of the products through the Petroleum Products Pricing Regulatory Agency.

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How It works ?

• Application• PPPRA Verification• Documentation

Stage 1

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Why Subsidise ?

Fluctuations in Crude Oil Prices

Economic Growth and Competitiveness

Product and Export Promotion

Purchasing Power Availability of Products Strategic Importance

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Growth of Subsidy Pre-democracy Era Barter

(Limited Subsidy) Democratic Era (Open) Growing Population Increased Dependence on

Petrol Increased Power of

Petroleum Marketers Increased Neglect of

Infrastructure Unsustainable

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Behind The Subsidy….Sanusi “You establish an LC for importing 20,000MT of PMS and the

PPPRA says this is at a landed cost of N145 for example per litre. So u know that for every litre in that vessel you will get at least N85 as subsidy. Now you have a number of "possiblities": 

1. You can off load 5,000 MT and bribe customs and other officials to sign papers confirming u offloaded 20k MT. Then do the same across the chain with a paper trail showing you delivered 20k MT to a tank farm, and maybe even that u transported it to Maiduguri entitling you to a share of the price equalization fund. Maybe for N20-N30 per liter you bribe all those who sign the papers. The 15k MT you take to Benin or Ghana or Cameroun and sell at market price thus making an additional "profit" of N55/ltr on 15,000MT! 

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Behind The Subsidy “You can just forge documents and have them stamped

without bringing in anything and collect the subsidy-PPPRA pays based on DOCUMENTS. 

You can bring in the fuel, load on tankers, sell some at N65N some at 80 some at 100 some across the land borders. 

You can do all this and no one can catch it or prove it because somebody was paid to sign off on docs. And with a high enough margin there is too much temptation to be resisted and firepower for bribing officials. ”

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Behind The Subsidy When I spoke to the house of reps I told them why I was

suspecting fraud. It starts from PPPRA "allocations" based on "capacity". You will find a company like Mobil with capacity for say 60,000 MT and a relatively unknown name with a capacity of say 90k MT. Red alert number 1. 

Although PPPRA is supposed to give license only to marketers with a national distribution network you see names of companies where you have never seen a filling station in their name.

I was a chief risk officer in UBA and in FBN for many years approving loans so I know the name of every big player in every industry that nigerian banks lend to as these are among the biggest banks in the country. I see names on the list I don't recognise either from portfolios. I looked at or industry studies over the years. Red alert number 2. 

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Behind The Subsidy I studied the papers presented to PPPRA in

a short period in 2010 (I won't tell you how I got them!). And I was surprised that on some days over 10 vessels are said to have discharged cargo in lagos on the same day-clearly the same officers stamping and "verifying" that the vessels were SEEN. Is it really realistic that on the same day 13-15 vessels can discharge in Lagos?

Red alert number 3. “

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Big Scam

False Banking Transactions

Huge Debts Zero Monitoring Connivance and

Complicity Huge Personal Wealth Political Complicity Interconnectedness Lack of Transparency

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Current Reality

“The debt crises currently suffered by developed economies is indication that governments have a responsibility to the people to manage revenues and expenditures wisely. With the subsidy on fuel projected to reach 118% of the Federal Government Capital Expenditures and 4.1% of the country's entire GDP, maintaining the fuel subsidy would not be a wise decision.”

Ngozi Okonjo Iweala

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In English….. WE ARE BROKE! We are a borrower nation! Even our creditors have their own

problems We have been borrowing to subsidise

petroleum products We have borrowed to pay minimum

wage We have borrowed to pay political office

holders We cannot continue because or

bankruptcy beckons.

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Why We Are Broke… The Senate President: N88.3 Million per Month Deputy Senate President : N50 Million per

Month Senator: N14 Million per Month 72 Ministers 20 Special Advisers N5 Trillion Internal Debt $30 Billion External Debt

*** US President : 60 Million Naira Per Annum

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Conclusion

“It is an Oily Affair, We have to Tread Softly”