PPPRA overpaid fuel importers by N25bn —KPMG

PPPRA overpaid fuel importers by N25bn —KPMG

The Senate Joint Committee on the Subsidy Scheme reopened investigations into the payment of subsidies to oil marketers on Thursday with an audit firm, KPMG, disclosing that importers were overpaid by N25bn between January 2006 and June 2010. A Partner at KPMG, Mr Dimeji Salaudeen, gave the details of the transactions after he was compelled to appear following a subpoena by the committee on Wednesday. KPMG was appointed by the former Minister of Finance, Mr Olusegun Aganga, to audit all subsidy payments between 2006 and 2010, following allegations of round-tripping and sharp practices in the administration of the scheme. Reviewing KPMG’s report, Salaudeen, who was initially evasive in his responses to questions, said a total of N1.6tn was paid out to participants in the subsidy scheme during the period being investigated. 

According to him, the payments averaged N460bn annually, with 10 out of the 70 marketers involved getting about 82 per cent of the total payments within the period, adding that only 14 marketers participated in the scheme as of 2007. He said, “We found out that there was a net overpayment to marketers of N25bn. We found out that this was due to the application of inappropriate documentation; inappropriate CBN rates and charges; and arithmetic errors. “We also looked at the role of PPPRA in the entire subsidy regime and discovered that the government’s framework was weak, a situation where a significant discretion rested with the Executive Secretary of PPPRA because the board left significant power in his hands.” “PPPRA’s internal audit function had a major weakness. 

We took a small sample of participants and independently verified the payments made to them; we discovered certain payments were made by PPPRA based on documentation that was basically altered,” he added. Salaudeen said KPMG’s audit discovered that in issuing the import template to participants, PPPRA did not comply with all the guidelines given in the approval manual. “We found situations where people brought products but were not registered, others who had not completed the registration process got petroleum allocations, and participants with historical records of poor delivery got allocations, making it difficult to appreciate the basis for which the allocations were given,” he said. Salaudeen also noted that the government incurred a loss of $65m (N10.14bn) on demurrage at a point, even as he confirmed that a total of $200m (N32.2bn) was paid out for demurrage within the five years. 

He said after examining how long it took the Nigerian National Petroleum Corporation and other smaller players to clear their cargoes, it was discovered that NNPC took an average of 33 days, while smaller companies could do it for a far lesser number of days. Salaudeen dwelt on the management of the Petroleum Products Pricing Regulatory Agency during the period, saying approvals of product allocation, which were being done by the executive secretary without any deference to a higher authority, created room for arbitrariness. According to him, during the investigation, all the marketers, including the NNPC, were engaged, but only a few were forthcoming with documents. 

On the likelihood of political interference in PPPRA’s operations at the time, Salaudeen said, “When we sat with the executive secretary and asked him how he got the final approval for particular allocation for a quarter, all he showed were papers he signed. We did not see sufficient evidence of the involvement of the governing board in most of the decisions taken.” He noted that KPMG made far-reaching recommendations on the restructuring of PPPRA to make it efficient in discharging its responsibilities, including that the eligibility criteria for importers should be raised, while the method of documentation of imports should be automated to eliminate human limitations and errors. Read more: https://www.naij.com/697.html