Rich Nigerians fleece poor in biggest kerosene racket BusinessDay

Investigation undertaken by BusinessDay uncovered a raft of illegalities and underhand activities in kerosene distribution among officials of Pipeline and Products marketing Company (PPMC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC) and politicians on the directive of the Federal Government.

The investigation also revealed how politicians peddling pro forma invoices (PFI) for kerosene are fleecing poor Nigerians.

The PFI, when initially issued, is valued at N40.99 a litre for politicians who then sell to other independent marketers through their agents at prices higher than N50. (The price difference of about N10 is the subsidy the Federal Government pays per litre of kerosene.)

Going by the current pump price of N135 per litre, the politicians and marketers split a margin of as much as N94.01 on a litre of kerosene. This serves as patronage, logistics and mobilisation of supporters for their political ambitions.

The bulk of kerosene consumed in Nigeria is imported. Independent marketers control a significant share of kerosene sales (52 percent in 2009). Those who engage in the kerosene invoice racket sell to final consumers at their own discretion, depending on the price PFI holders sell to them.

Two-thirds of Nigerians live under $1.25 a day, most of their income is spent on food (transported with fuel and diesel-powered vehicles, and cooked on kerosene stoves). Most households also rely on kerosene lamps to light their homes. Food, housing, electricity, gas and other fuel are the major components of the Nigeria’s consumer price index. Higher fuel prices and electricity tariffs raised inflation to 12.9 percent in June, 2012.

Though landing cost for kerosene is cheaper than its pump price, government subsidises its importation and marketing and deems the N50 pump price affordable. However, operators still sell above this price.

BusinessDay findings revealed that on average, consumers buy kerosene for N135 a litre. At the current pump price, it implies that kerosene invoice holders and independent marketers are making N94.01 on a litre sold instead of N9.01 which is what should have been their profit if they had sold the product at N50 a litre.

The technical committee on payment of fuel subsidies (volume 1), revealed that NNPC accounted for just 6 percent or 162.11 million litres of sales to bulk purchasers of kerosene in 2011, while marketers were responsible for the remaining 94 percent or 2,650.13 million litres.

This implies that in 2011, a profit worth N249 billion accrued to politicians and marketers as against N24 billion which would have been their actual profit. This indicates that the Nigerian masses paid an extra N225 billion to marketers and politicians who are in the good book of the ruling class.

According to some oil marketing officials who spoke with BusinessDay, peddling of PFI is now a big business that politicians and independent oil marketers gladly participate in, without consideration for hapless Nigerians.

One senior official of a major marketer said that NNPC retail outlets nationwide sell kerosene at N50 a litre, but independent marketers on average sell at N135 a litre. Unfortunately, the product is often not available at the NNPC retail outlets, a situation that has made it worse for those that are eager and need it most.

Subsidised kerosene, according to those who spoke with our correspondent, is supposed to be a blessing to Nigerians but it is actually compounding their woe.



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