By Oscarline Onwuemenyi
It all started with the New Year day announcement of subsidy withdrawal by the Federal Government and the resultant crises that shook the oil and gas industry and the entire country.
Many saw the protests that greeted the announcement as a clear signal that the centre can no longer hold in the nation’s petroleum industry. Many Nigerians had used excuse of the fuel subsidy removal to vent their pent-up anger and frustrations over the horrendous management of the nation’s vital oil and gas resources, and the revolt that greeted the announcement would reverberate in the industry for a long time.
In the aftermath of the nation-wide protests, many stakeholders have blamed the secrecy and corruption in the management of the subsidy process by government officials and regulators, calling for a review of the entire subsidy regime. In addition to the reversal of this policy, they demanded that the issue of corruption in Nigeria, and in the oil subsector in particular, be addressed at this time.
One of such views was from the leader of the Save Nigeria Group (SNG), Mr. Tunde Bakare, who note that, “The subsidy probe is a golden opportunity to clean the Augean stable, which the nation’s oil and gas industry has become.” According to him, “the monumental corruption in Nigerian National Petroleum Corporation, NNPC, stinks to high heavens.
As at today, nobody in Nigeria, with the exception of a few NNPC officials, knows how much we make from the oil sector. For example, if crude oil is sold in naira today and payment is made 90 days after at a higher dollar denomination, the figures usually released in Abuja are based on the lower naira denomination at the time of sale. The question is, what has happened to the difference? The obvious answer is corruption.”
As part of measures to resolve the crises in the subsidy management, the Federal government had directed a review and investigation into subsidy process and the Economic and Financial Crimes Commission, EFCC, the nation’s prime anti-graft agency, has since swung into action with visits to the headquarters of the Petroleum Products Pricing Regulatory Agency (PPPRA), the agency responsible for the management of the subsidy regime. The EFCC also has continued to grill petroleum products importers and marketers on their involvement in the entire subsidy mismanagement.
The National Assembly, not to be outdone, also announced extensive inquiries into the role played by different agencies of government including industry stakeholders in the subsidy mess. Expectedly, the investigation by the House of Representatives Ad hoc Committee on the Fuel Subsidy management led by Hon. Farouk Lawan, opened the Pandora’s box to reveal the massive corruption and fraud that has overrun the subsidy management system, and the general rot in the nation’s oil and gas industry.
The 61-page report by the House committee revealed names of some government agencies and institutions and private enterprises that ran a well-organised corruption regime, where both state officials and their private cohorts denied Nigerians the benefits of the subsidy policy, diverted public funds, over-invoiced fuel imports, and collected rebate for them.
According to the report, some of the industry regulators overpaid themselves under the subsidy regime. In this regard, the Nigerian National Petroleum Corporation (NNPC) and Petroleum Products Pricing Regulatory Agency (PPPRA), were named as the chief culprits in the looting spree where fuel marketers acted for themselves and also as conduit pipes for state officials to defraud the government.
The panel, therefore, recommended that the NNPC, PPPRA, and other companies, which failed to appear before it, should refund N1.067 trillion to the Federal Government for reaping where they did not sow. The committee further noted that as presently constituted, Nigerians would never get value for money from the NNPC behemoth and therefore proposed that it be unbundled.
But, recent allegations of bribery and corruption against some members of the House Ad hoc Committee appear to have derailed the purpose of the investigation, and may stump the implementation of the report.
Stakeholders in the industry, however, have insisted that the bribery allegation against members of the House Committee should not deflect from the primary purpose of setting up the investigative panel in the first place, nothing that government should readily take action on the report of the committee.
Former Chairman of the National Working Group of the Nigerian Extractive Industries Transparency Initiative, NEITI, Prof. Asisi Asobie said it may be a little too early to assess the damage or impact of the oil subsidy probe and the subsequent brouhaha on the oil and gas industry, but he stressed that non-implementation of the report of the Committee would not augur well for the sector. According to him, “It may be a bit early to assess the effect of the probe on the industry. But from general practice, it can be surmised that no industry experiences growth when it is faced with headwinds of corruption and general malaise. Corruption and inadequate governance is anathema to growth and development.”
He posited that for an industry that remains the back-bone of the nation’s economy, government needs to do more to ensure there is clear transparency and effective governance structures so that resources from the sector would be used to the benefit of the citizens. Asobie, meanwhile, warned that the report of the fuel subsidy probe should not be thrown aside because of the alleged involvement of House Ad Hoc Committee members in the bribery scandal.
He said, “A lot of people may be tempted to think that because of the recent allegations of bribery, that the report should be discarded. I don’t think so. If you read the report you will find out that some of the things contained therein, especially the critical issue of people getting paid for not supplying petroleum products.
Another critical issue raised by the report is that the Nigerian National Petroleum Corporation was paying subsidy to itself, which is very irresponsible and illegal. There is no law empowering the Corporation to do so; in fact, the constitution says the opposite. So, there are critical issues that were identified by the report that are still very relevant and nobody should rubbish the entire report merely because somebody has allegedly undermined his own integrity and disappointed Nigerians.”
Asobie blamed the current bribery mess in the National Assembly’s on the refusal of the legislators to act on several reports of corruption in the nation’s oil and gas industry presented before it over the years.
He asserted that issues of corruption revealed in the fuel subsidy probe by the National Assembly was “the first time that Nigerians were made aware of the presence of huge reports that have been in the public domain already about the issues in the nation’s petroleum industry, which was produced by NEITI over the years.”
The former chairman of the National Stakeholders Working Group (NSWG) of NEITI, stressed that, “Government owes it as a duty to Nigerians to ensure that the several critical points highlighted by the report are taken apart and implemented diligently. Issues to do with the fiscal regime, subsidy management where people were paid huge sums for products not delivered, and the NNPC issue, these should be addressed and redressed so that people who have been found culpable will be punished accordingly. That is the only way to inspire investor confidence in the sector,” he added.
According to David Ugolor, Executive Director of the Afri-Network for Environmental and Economic Justice, that the probe report pointed out that subsidy was fraught with endemic corruption and entrenched inefficiency in the downstream sector of the petroleum industry, was enough reason for government to go ahead with its implementation.
“Over N1.06 trillion was discovered to have been paid out through corruption means, which seriously amplified corruption allegation against the NNPC, a Federal Government’s agency that appeared to be unaccountable to nobody or institution except itself. The other recommendations of the committee, including the unbundling of the NNPC to make it more operational and efficient would only be possible if the Petroleum Industry Bill (PIB) is passed into law,” Ugolor stated.
Ugolor further argued that the subsidy probe had further magnified the state of corruption in the industry, which has led to further loss of confidence by international investors. He added, “This episode has reinforced the notion that for any operator to succeed in the country, he must toe the path of corruption. We have seen this issues before in the Halliburton scandal and several other cases involving both international and local companies operating in Nigeria. In a global operating environment where transparency and best practices are quickly taking root, the Nigerian petroleum industry surely needs to clean house before it can enjoy the level of confidence and trust requied to have the level of investment it needs to grow the sector.”
Stakeholders have also argued that little attention is paid to compelling ideas to reverse the malaise in the upstream and downstream sectors of the oil and gas industry that have been buried in the entire subsidy morass. Indeed, many of these ideas are not entirely new; many of them are contained in the long-maligned Petroleum Industry Bill (PIB), which has failed to pass the National Assembly in years.
Speaking in an interview with Vanguard recently, the Executive Secretary of the PPPRA, Engr. Reginald Stanley, pointed out that the nation’s oil and gas industry could be spared a lot of the headache brought about by the subsidy removal if only the PIB was passed into law, adding that the bill contains appropriate and robust legislations that will ensure the sustainability of government reforms in the industry.
“The proposed PIB explicitly provides for the phased deregulation of the downstream petroleum market, which will free government funds for infrastructural development. It also provides for the development of a sustainable Strategic Fuel Reserve Policy for petroleum products as a security against emergency situation in the country,” he stated.
Other ways of getting out of the subsidy mess, he proffered, include the provision of incentives to encourage private sector participation in refining, jetties and pipelines operations, as well as restructuring government owned oil corporation (NNPC) in a matter that her subsidiaries will not hold dominant market positions. He also called for a revisit of the implementation of the aborted Open-Access, Common-Carrier Regime in the operations of strategic logistics facilities to reduce bridging cost, and the monitoring of the Ship-to-Ship transfer at offshore Cotonou by the cargo inspectors, among other issues.