Oando denies benefiting from oil subsidy, claims N4bn outstanding
BY PETER EGWUATU
The Group Chief Executive Officer of Oando Plc, a quoted company on the Nigerian Stock Exchange (NSE), Mr. Wale Tinubu, has denied alleged reports that his company was a beneficiary of fuel subsidy, just as he disclosed that the company has outstanding N4 billion of unpaid subsidy in 2011.
Tinubu noted that Oando Plc is the largest publicly quoted energy company in Nigeria and sub-Saharan Africa's largest indigenous energy company, based on revenues, with primary listing on the NSE with a secondary listing on the Johannesburg Stock Exchange.
Speaking at the public hearing on the management of subsidy being organised by an ad–hoc committee of the House of Representatives, the Oando boss noted that the money paid to marketers as subsidy was not a profit or windfall but under-recovery, arising from the differentials between the landing cost of petroleum products and the official pump price.
He stated that the use of the word 'beneficiary' was a misconception as the money was not a special favour from the government but a refund of the actual cost incurred by marketers in the importation of petrol.
Tinubu stated that the marketers spent an average of $30 million to import a 30,000 metric tonnes cargo of petrol but sold the products at almost $15 million; while the balance was paid to marketers as subsidy.
"The Petroleum Support Fund (PSF) expected that there would be under-recovery. For example, when the landing cost was higher than the pump price, the government owed us money, which is paid as subsidy. When there is over-recovery, that is, when the landing cost is less than the pump price, we pay back to the government. For example, during the Yar'Adua administration, when the petrol price was N65 and the crude oil price dropped to $50 per barrel, the marketers paid back to the fund. I remember that Oando paid N1.6 billion back to the Federal Government," he said.
Tinubu stated that when the subsidy regime was introduced in 2006, three major marketers, including Oando Plc, participated in the scheme, along with NIPCO Plc and the Nigerian National Petroleum Corporation (NNPC).
According to him, Oando accounted for 53 per cent of petrol importation in 2006 and 47 per cent of subsidy payment. He, however, stated that the company's market share in terms of subsidy receipts and petrol importation dropped to 11 per cent in 2011 due to proliferation of companies that participated in the PSF scheme.
Tinubu stated that when the subsidy regime was introduced in 2006, only companies that had at least 25 petrol stations and 5,000MT storage capacity were allowed to participate, according to the PSF guidelines. He said the scheme was abused when companies that did not have retail outlets and storage facilities were allowed to participate in the importation business, at the detriment of companies that built capacity.
"In terms of summary of our subsidy payment, we collected approximately N120 billion by the end of 2011 and we imported well in excess of one billion litres or about 700,000 metric tonnes as at August 2011. By the end of 2011, we had imported about 1.3 million MT into the country," he said.
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