Petroleum Equalisation Fund (PEF): A temporary agency? – Part 2

PEF is proud of its computerised systems for all these processes which it has named the Aquila Platform. Billions of litres are moved yearly, so PEF officers are present at over 100 locations throughout Nigeria.

The PEF (M) B is funded by the Bridging Allowance and the National Transportation Average – which is jargon for saying that all petroleum marketers pay N6.80 per litre to the Fund for every litre imported into the country. The National Transport Average (NTA) is what is paid or collected depending on whether the tanker is moving products between 50 to 100 kilometres of the depot or further than 100km where the country is divided into further seven zones i.e. zones 3-9. The main catch here is that with the near certainty that the landed cost of petroleum product will be higher than the government stipulated selling prize, the marketers have to produce all the PEF documents, before they qualify for the subsidies to be paid by Petroleum Products Pricing Regulatory Agency (PPPRA).

So if one is to get a subsidy for landing products in Nigeria, where the only reliable logistic for transportation is by road, is it any wonder that we have so many tankers, un-serviced and unserviceable pipelines and tank farms, unused barge transportation, and the near permanence of transportation cost, including the escalation of road transport usage up to 50 per cent and rising?

With its pivotal role in the subsidy regime, there is no more talk about the PEF being temporary. It has become a permanent physical and financial feature in Abuja: its office building is better than any other structure in the whole of the oil producing South-South (Niger Delta). Its permanence is assured. It boasts of having a first class super-efficient staff and a state of the art information technology. Its Aquila Platform is in three phases – 1 and 2 are completed i.e. the bridging aspect of the programme and secondly the efficient monitoring of products. It is now poised for phase 3 which is the monitoring of product importation.

If all the Excess Crude Account had been used more judiciously except in sharing the money, Nigeria would have made more progress: that money could have been used to repair and maintain the pipelines throughout Nigeria which would have reduced our dependency on the now uncontrollable nuisance of road transportation of products – port congestion, road congestion, heavy destruction of the road system through these tankers, opening Nigeria occasionally to blackmail by tanker drivers and owners, the continued neglect of rail transportation and a host of other problems following dependence on road transportation.

I believe the time has come to end this odious subsidy system. It will be painful but we can replace this seemingly roguish character with another system. Nigeria is not the only oil producing country: others have refineries, pipelines; differential reasonable price indexes etc. a market system that could better be regulated without the accompanying possibility of unrestrained and ever inventive ways of promoting corruption. Why should petroleum be the only product that has to be equally sold everywhere?

I worked in the oil marketing industry for a brief while in 1965 to 1966. Transportation of crude was entirely the business of the outlet managers but mainly by well-established transporters – SLE, Khalid and Dibbo and so on. There was no shortage of products before the coup of Chukwuma Kaduna Nzeogwu. The Port Harcourt refinery was fully working, managed by BP. TAMs came and went, no disruption. The civil war ended careers of many Igbo in the refinery in Port Harcourt but their expertise was harnessed for the production of products to run the Biafran State and even civil life.

Yakubu Gowon’s scheme of reconstruction took off in 1970: there was plenty of money and also plenty of talk of diarchy or that he should jettison the military promise of handing over to civilians in 1976. This was why he made his now notorious speech of 1974 that he would not leave in 1976 because the civilians had not learnt their lesson.

There was an avalanche of reconstruction but the planning had been poor: those projects encouraged the “cement armada” – ordering of cement when the ports and country had no ability to cope with the volume of imports. All these led to the coup of 1975 that ousted Gowon. The far North was never comfortable with Gowon and Theophilus Danjuma. The PEF was one of the projects designed to appease the North – the sales of pump price of petrol at the same price in all Nigeria. The other was the Kaduna Refinery which was part of the plan of those who ousted Gowon.

For a very long time, PEF had no plans for payment of compensation to those who carried petroleum products to the Niger Delta by water. Few towns in the Niger Delta had roads, let alone petrol stations. But they used kerosene as the fuel of choice. Till to-day kerosene is more expensive in those areas than anywhere else in Nigeria.
Conluded
Dr. Cole is former Ambassador to Brazil.