By Adewale Sanyaolu

THAT the Federal Government paid a whopping N6,757,449.965.65 as Petroleum Equalisation Fund (PEF) popularly called bridging claims in the month of March, 2016, is a source of worry to stakeholders, es­pecially downstream operators who have consistently canvassed full deregulation of the sector.

This becomes an issue when one realises that sub­sidy on petroleum pricing template for petroleum products has since been removed.

Today Petroleum Equalisation Fund which was es­tablished by Decree No. 9 of 1975 (as amended by De­cree No. 32 of 1989) charged as reimbursement to pe­troleum marketing companies for losses suffered solely and exclusive, as a result of sale of petroleum products at uniform prices throughout the nation has become another drain pipe on government purse.

Indeed, while those in the hinterland that are sup­posed to be the major beneficiary of the fund, suffer­ing acute shortage of petroleum products as a result of scarcity of the products, those involved in that act of sabotage through diversion of products are smiling to the banks.

In the heat of the last fuel scarcity across the coun­try, for example, immediate past Managing Director of Pipelines Products Marketing Company (PPMC), Mrs. Esther Nnamdi-Ogbue, raised the alarm over the massive diversion of petroleum products to neighbour­ing West Africa countries.

“We released a total of 111 trucks into Abuja city alone. I don’t believe that all could have been sold by yesterday to warrant the long queue we are having to­day in Abuja.”

What we are suspecting was that most of the vol­umes have been diverted outside Abuja.111 trucks can refuel a total of 73,260 vehicles at the rate of 50 litres per vehicle. This week alone, we have dispatched 386 trucks inside Abuja alone and that too can refuel 254,760 vehicles at the rate of 50 litres per vehicle. This is sabotage”the former PPMC boss had said.

Nnmadi-Ogbue’s worry is just expressing the same sentiment the same as most Nigerians on the con­tinued payment of bridging fund, to the detriment of other critical sectors of the economy for which they are calling for government’s attention.

It is rather unfortunate that 41 years after the estab­lishment of PEF, an arrangement which was supposed to be a palliative or rather interventionist pending when damaged pipelines and maybe the coastal refin­eries depots would start pumping products, has ended up becoming a bigger problem than even the pipeline vandalism as it has provided a good platform for mind-blowing corruption and broad day stealing of our col­lective wealth.

“It has also created a leeway for a cabal to hold the country by the jugular by ensuring that our pipeline system never worked again in addition to ensuring that Turn Around Maintenances in our coastal refineries become unending routine exercise,” said Ifeanyi Izeze, an economic analyst.

The submission of Izeze was recently captured by stakeholders at the Lagos Chamber of Commerce and Industry (LCCI) Petroleum Downstream Group Busi­ness Clinic, which held in Lagos, recently.

Indeed, the stakeholders submitted there was an ur­gent need to refocus the objectives of PEF, adding that with the current economic reality, government cannot continue to sustain payment of bridging claims.

Analysing PEF

The Petroleum Equalisation Fund (Management) Board introduced the Inter-District Scheme upon real­izing that some products movement to certain parts of the country did not qualify for reimbursement under the bridge scheme despite the additional transporta­tion costs incurred by marketers who move their prod­ucts across depot districts under 450 kilometers but without full bridging support.

The National Transportation Allowance (NTA) or Equalisation scheme is the original function of the Board at inception and was restricted to eight (8) major marketing companies at inception. Like the bridging and inter-district schemes, it was later extended to the existing six (6) major marketing companies, Depot and Petroleum Product Marketers Association (DAPPMA) operators and over 9,000 independent Petroleum Mar­keters Association of Nigeria (IPMAN) members.

For effective implementation of the Equalisation Fund to achieve the uniform pricing of petroleum products, the country was divided into depot district, and as such districts were further sub-divided into zones. A depot district is the part of the country served by particular depot.

There are presently 21 depot districts. The districts are further sub- divided into bands of 50 kilometers each known as zones. These zones are progressive bands of 5okm radius, with the depots as the centre-point to the maximum of 9 (nine) zones, that is a to­tal of 450km. Each outlet is allocated to a depot, and the distance between them applied in determining the transport cost of moving the product, which is the only variable factor in uniform pricing. This arrangement is affected by the use of the Transportation Differential Zone (TDZ) Map.

Related News

To effect equalisation, all marketers are required to submit returns to the PEF (M) B in relation to products lifted from each depot to the respective zones within the district. The net effect of the returns culminates in either Claims from, or Contribution to the fund.

For every litre of petroleum product transported within zones 1 and 2, the marketer has a Transport Al­lowance built into the price of the products which the marketers holds in trust on behalf of the consumer, and is required to turn it over to the Board. Also for every liter of product transported from zone 3 through to zone 9, the additional submits claims to PEF (M) B for the additional Transportation Average (NTA). The Board will thus reimburse the marketer for the losses incurred, solely and exclusively, for transporting the products for sale at a uniform price in those zones.

A fund enmeshed in corruption

‘‘Everyone involved in the distribution of petroleum products in the country- Major marketers, Indepen­dents, and Transportation companies (Tanker owners) are taking advantage of the loopholes in the scheme to fleece the country of hundreds of billions of naira on false claims as bridging expenses,’’ Izeze said.

It would be recalled that a former official of PEF recently disclosed that what these dubious marketers do, was to lay claim to “non-existing filling stations as outlets scattered all over the country and after load­ing products in Lagos, they returned with reports that they had offloaded at these stations, whereas they had diverted the products immediately after leaving the de­pots.”

“The bridging claims and rates depend on the desti­nation from the depots. For instance, a marketer load­ing products from Lagos to Aba gets N8.02k on every litre; Lagos to Kaduna (N12.72k) and Lagos to Enugu (N7.90k). So, if a marketer loads about 20 trucks of 33,000 litres each with assumption of bridging it to Ka­duna, he will collect N839, 520:00. And if the marketer belongs to the cabal, all the trucks would be diverted to black markets as PEF detected that 90 percent of the fuel loaded at Lagos depot allegedly disappeared in tran­sit. Only 10 per cent got to the final destination,” the PEF official said.

But to tackle the rampant cases of fraud, associated with PEF, the agency introduced Acquila Project. The Aquila Project is an electronic business solution de­signed to track the movement of regulated petroleum products throughout Nigeria to confirm loading and delivery of regulated petroleum products at all depots and retails outlets.

Managers of PEF believe the Aquila project, would bring efficiency in the management of volume of regu­lated petroleum products bridged across the country, it would also ease bridging claims payment to marketers and transporters; as well as eliminate the massive cor­ruption that had hitherto characterized the payment of the bridging claims.

Regrettably, the project is facing its difficult and test moment. Cases of theft and tampering with the Radio Frequency Identification (RFID) tags affixed on trucks, especially in the Lagos area by some petroleum market­ers and haulers having little or no understanding of the workings of the project, acute shortage of the RFID tags are among the various difficulties facing the project.

Arguments for/against retention of PEF

According to statistics posted on the website of PEF,the agency paid N11,992,034,535.11 claims to mar­keters for the month of August 2015.

But despite this staggering payment to marketers of August alone, Executive Secretary, Major Oil Mar­keters Association of Nigeria(MOMAN),Mr.Obafemi Olawore, believes government should continue to fund PEF, giving the fact that prices of petroleum products are still being regulated by government.

‘‘Not until we fully deregulate, PEF will continue to remain relevant because government wanted a situa­tion that petroleum products pricing would be uniform nationwide,’’ he said.

Olawore maintained that as long as the downstream sector is still regulated and government continues to fix prices, PEF would continue to remain relevant.

‘‘Remember that the agency was created to ensure price stability of petroleum products-being a national commodity, across the country. In many ways, compa­nies try to equalise prices within the company in order to ensure that products are sold at the same price across the country,’’ he said.

On his part, Chief Executive Officer (CEO) Oando Downstream, Mr. Abayomi Awobokun, said at the LCCI forum that PEF should be converted to a Down­stream Infrastructure Development Fund where all contributions no longer go to equalisation but upkeep of downstream infrastructure and distribution assets, pipelines, critical storage, jetties co – invest in new distribution assets like gas pipelines, critical roads like PHRC roads among others

Under the arrangement canvassed by Awobokun, the role of PEF will be redefined as an infrastructure fund for disadvantaged regions.