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FG paid zero subsidy in January – Kachikwu

By on February 4, 2016

Following the commencement of the new price regime for petroleum products, the federal government yesterday disclosed that it did not pay any subsidy on products in January 2016, despite having paid about N1.1 trillion in 2015.
The Minister of State for Petroleum and Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Dr. Ibe. Kachikwu revealed this when he appeared before the House of Representatives Committee investigating the offshore processing agreements (OPAs) and crude oil swaps between NNPC, its subsidiary, the Petroleum and Pipelines Marketing Company, and oil traders.

He added that the development was a step towards revamping the oil sector.
The minister, however, drew the ire of the committee members headed by Hon. Zakari Mohammed (Kwara, APC) for not giving specific responses to several questions regarding the execution of the swap programme.
The minister gave non-committal responses to questions regarding whether the companies who participated in the swaps were selected through a bid process, whether the programme was beneficial to Nigeria, and several others, preferring to claim ignorance, as he was not the minister or GMD at the time the swaps were awarded.
Kachikwu also said he preferred to focus on the future, rather than dwell on the past.
However, Zakari maintained while the committee was not expecting completely committal responses from Kachikwu, he expected the minister to provide more helpful responses.
“The lawyer in you keeps coming to the surface in answering these questions, but we are talking to you in your capacity as minister and GMD, you have to help this committee,” Mohammed said.
Hon. Saheed Fijabi (Oyo, APC) also added that the minister needed to take more responsibility in answering the questions.
“You need to take more responsibility, it is your job; you are GMD and also minister. You must have met and studied some files, these things did not happen in 1970, it was just 2014,” he said.
The minister, however, held his ground, insisting he could not provide answers to what he did not know, particularly as the invitation letter from the committee did not address any subject matter.
Hon. Sergius Ogun (Edo PDP), however, disagreed with the claim that the letter was silent on the subject matter.
As tempers cooled, Kachikwu expressed his readiness to maximally cooperate with the committee in the discharge of its duties.
Meanwhile officials of the Federal Inland Revenue Service (FIRS) were undecided as to whether Trafigura Ltd qualified to pay tax or not.
Trafigura, registered in Amsterdam, lifted over 12.5 million metric tonnes of crude in the swap deal, and has never paid a dime in taxes into Nigeria’s coffers.
A Director of FIRS, Mr. Peter Olayemi who listed all the conditions to be met for a company, whether registered in Nigeria or abroad, to be taxed, could not state categorically if Trafigura met the requirement.
Olayemi said the FIRS needed to peruse the agreement signed with NNPC before determination.
Responding to queries from the lawmakers, the Managing Director of Trafigura, West Africa, Mr. James Juslin, said the company does not have an office in Nigeria, but has independent agents.
“Our vessels arrive Nigerian waters and we appoint independent agents to carry out our obligations on our behalf. It can be various agents, but we consistently use one or two.
“They take the document, Notice of Readiness, and tender it to the PPMC, the vessel waits until it is programmed by the PPMC, it can wait for two weeks or three months, but Trafigura has no more responsibility to it,” he said.
As part of his testimony, Kachikwu also informed the committee that when Nigeria starts operating its new Direct-Sale-Direct-Purchase (DSDP) crude oil arrangement from March, it will be able to net up to $1 billion through cost cutting measures.
Kachikwu added that other that cost cutting, the DSDP will keep the influence of the Minister of Petroleum resources over the process under check.
He said in a statement from the spokesperson of NNPC, Ohi Alegbe in Abuja that the influence of the minister in the selection of bid winners will be checked under the DSDPs, as all the bidders will be assessed transparently based on their global and national track records before the best companies with the requisite capacities are selected.
According to him, the DSDP model was adopted to replace the crude oil swaps and OPAs, as well as introduce and embed transparency in the crude oil-for-product transactions by NNPC in line with standard practices.
Kachikwu said under the old order, crude oil was exchanged for petroleum products through third party traders at a pre-determined yield pattern.
He however explained that the DSDP option eliminates all the cost elements of middlemen.
The NNPC, he noted, will now have the latitude to take control of transactions involving the country’s crude oil with its partners.
“When I assumed duty as the GMD of NNPC, I met the Offshore Processing Arrangement (OPA) and like you know there is always room for improvement. I and my team came up with the DSDP initiative with the aim of throwing open the bid process.
“This initiative has brought transparency into the crude-for-product exchange matrix and it is in tandem with global best practices,” the statement quoted Kachikwu to have said.
He said the DSDP aims to reduce the gaps that were obvious in the OPAs and the losses the NNPC incurred from it.
According to him, the DSDP would help NNPC grow indigenous capacity in the international crude oil business, as well as generate employment opportunities for indigenous companies that would be selected.
He also said the initiative gives other government agencies such as the Bureau of Public Procurement (BPP) and Nigeria Extractive Industry and Transparency Initiative (NEITI) the opportunity to be a part of the bid process for transparency.

 

[ThisDay]