Extractive Sector Corruption: The Scam in Nigeria’s Fuel Subsidy

The Nigeria’s petrol subsidy regime has continued to be a huge scam. Huge amount of monies spent with the state and citizens not having a clear understanding of what goes on in the subsidy payment. The only knowledge the citizens have on subsidy payment is that the scheme is a huge scam with corrupt practices at its peak.

The House of Representatives committee headed byFarouk Lawal to investigate the subsidy claims Report shows, N261.1 billion was expended in petroleum subsidy in 2006, N278.8 billion in 2007 and N346.7 billion in 2008. Five companies, including the Nigerian National Petroleum Corporation (NNPC), were involved in managing the subsidy in 2006; it rose to 10 companies in 2007; and 19 in 2008. Within a year under President Goodluck Jonathan, 121 companies were added to the subsidy management list, making a total of 140 companies in 2011.

In an attempt to shield the independent marketers who have colluded with the state to steal public resources in the disguise for subsidy payment, Mr. Lawal collected $62,000 bribe from Mr. Femi Otedola, the Managing Director, Zenon Oil. He was caught, arrested and suspended by the House of Reps in an emergency sitting convened by Mr. Aminu Tambuwal, the former House of Representatives Speaker. And, Mr. Farouk was later charged to court.

In 2011, NNPC paid N310.4 billion arrears of kerosene subsidy for 2009-2011. And this happened despite the president having in 2009 directed removal of subsidy on kerosene.

The Petroleum Revenue Special Task Force, an investigative panel committee constituted by the Federal Government and headed by Mr. Nuhu Ribadu, to investigate the subsidy regime indicted Nigeria National Petroleum Corporation (NNPC). The panel report shows that NNPC could not account for $1 billion paid to it by oil companies.

At the House of Representatives fuel subsidy probe, it was discovered how Accountant-General of the Federation paid N999 million 128 times within 24 hours, amounting to N127.8 billion to subsidy scammers, and, in spite of that, he failed to disclose their identities even on demand.

The presidential committee headed by Aig-Imoukhuede in its report made a recommendation for N382 billion refunds from 21 companies, while the House of Representatives report shows that N1.7 trillion went missing.

Four out of over 40 scammers who participated in the subsidy fraud have been convicted. Two of the convicts got 10 years imprisonment each. Ada Ugo-Ngali and her boss were convicted in January 2017 and Rowaye Jubril in March 2017. Besides the jail sentence, they are to make a refund of N755 million and N963 million respectively to the Federal Government.

At the 2015 presidential electioneering, Mr. Buhari, the current Nigerian president said there was nothing like subsidy, and, accused Mr. Goodluck Jonathan, the former Nigerian President of stealing from the state resources using subsidy scheme as a justification.

By December 28, 2015, Mr. Buhari said, his administration is not interested in subsidy payment and will end it forthwith. Responding to the president statement, on May 12, 2016, Mr. Ibe Kachikwu, the Minister of state for petroleum, announced that Nigerian state has removed subsidy. And, the outcome of this led to the increase of petrol pump price from N97 to N145. Corroborating this, Mr. Yemi Osibajo, the Nigeria’s Vice President, on December 15, 2016 assured that subsidy is now a thing of the past.

Within a short period the state made pronouncement that she has stopped paying subsidy, the state contradictorily announced that it has been paying subsidy to independent marketers. By December 22, 2017, Mr. Maikanti Baru, the NNPC Group Managing Director made public that the landing cost for petrol is N171.40 per a litre. And for Nigerians to buy petrol at the N145 approved price, the government now pays N26.40 per liter in extra cost.

At the resurface of petrol scarcity in December 2017, the (NNPC) admitted having spent N112.079 billion on petrol subsidy in 10 months, covering January to October 2017. Financial documents obtained from the NNPC by the Vanguard newspaper revealed.

Confirming the Vanguard report, NNPC monthly financial and operations 2017 October report showed that in January 2017, the corporation made N37.264 billion provision for under-recover payment, ‘a new name forsubsidy payment’.

In the current subsidy regime, NNPC pays itself for subsidy and not the oil marketers as has been the practice. NNPC says it paid subsidy from the profit made in the sale of domestic crude oil allocation. And, because of that the monies that ought to be remitted to the Federation Account is deducted by the corporation.

What this means is that, obviously Nigeria state still pays petrol subsidy.And this practice has continued with the state engaging in corruption and abuse of the process with total disregard to transparency and accountability. It is most worrisome that the 2016, 2017 and 2018 budgets made no provision for subsidy payments. The question therefore becomes, where is the state getting the monies it pays subsidy from? How is the payments calculated?Who are those benefitting and who authorized the payments?

Trying to justify the payments, the state argued, NNPC pays the subsidy and not the government.  What an elementary arguments that has no basis. NNPC is an agency thatbelongs to the state and takes directive from the state on how it spends its money on behalf of the state. Thus, the monies belong to Nigerian state and not NNPC, hence the state is not telling the truth.

It is not true that oil and gas sector cannot function effectively with the government at the core of management. It is simply that the state and its agents have internalized corruption in the sector and have defied every known model that seeks to reposition the sector. And this is mainly because, both the state and its agents in the sector benefit when corruption goes on. When that happens, accountability is not encouraged and primitive capitalist accumulation continues.

Let us remind those who argue that pure deregulation and private sector investment is the only way for effective oil and gas sector reform that they are not correct. Brazil has rubbished that argument by successfully managing Petrobras since 1953. Should we do not know, Petrobras controls major oil and energy assets in 16 countries in Africa, North America, South America, Europe, Asiaand has become one of the global leading oil producing companies today. What then are we arguing in Nigeria, corruption has taking the place of state ability to manage what we have and the outcome is the abysmal practice of subsidy regime we have at the moment.

Now what is the solution? Political will and nothing more.

Audu Liberty Oseni,
Publish What You Pay-Nigeria
libertydgreat@gmail.com
@libertydgreat