Subsidy probe: Why Senators may invite former NNPC, PPPR bosses
Anumber of top retired and serving government officials as well as chief executives of oil marketing companies could face investigation and possible prosecution, if threats by the Senate to begin probe of an alleged N10 trillion fuel subsidy spending are to be taken seriously, Daily Trust on Sunday reports.
The Senate Joint Committee on Petroleum Resources had recently announced it would begin probe of the amount spent on the importation of petroleum products by the Nigerian National Petroleum Corporation, (NNPC) and independent marketers from 2006 to date. The senators concluded that it was time to look at their books because while independent marketers whose proceed from subsidy was about N3.83 trillion, NNPC allegedly collected a total of N5.1 trillion within the period. The committee as part of the investigation into the matter is expected to summon past and present executives of NNPC responsible for the purchasing, financing, transportation and certification of products sold to Nigeria. According to the committee, Local Oil Companies (LOCs) and International Oil Companies (IOCs) are also expected to appear with relevant documents to corroborate their activities.
There were eight NNPC GMDs and five Executive Secretaries of the Petroleum Products Pricing Regulatory Agency, (PPPRA) between 2006 and 2015. This is excluding dozens of retired and serving officials of agencies involved in subsidy payment who are likely to appear before the committee to explain how abuses that led to the loss of billions to Nigeria were perpetrated under their watch. For a thorough audit that the Senate committee promised, the lawmakers would have their hands full against ex-directors general of the Debt Management Office (DMO)the office responsible for the issuance of Sovereign Debt Notes (SDN)-to oil marketers and likewise past finance ministers who audited subsidy computation of the PPPRA.
Former Accountant Generals of the Federation, (AGF), ministers of petroleum resources and a former Governor of the Central Bank of Nigeria, (CBN) through which subsidy payment was made upon the presentation of SDN issued by the DMO, may also have questions to answer. Other government agencies expected to once again come under the scrutiny of the committee are the Petroleum Equalization Fund (PEF) and the Budget Office, among numerous others.
Findings showed that a steady stream of reports and reviews have documented dismal legacy of lost revenues, inefficiency and corruption that trailed the management of the subsidy regime but the recommendations contained in them have hardly being implemented. The spontaneous social and political upheavals that greeted the removal of fuel subsidy in 2012 prompted the House of Representatives in January, 2012 to set up an Ad-hoc Committee headed by Farouk Lawan to probe the subsidies. The committee’s 202 pages report made farreaching findings including recommending the prosecution of many government officials and oil company executives who were found to have committed huge subsidy fraud. A former finance minister, Ngozi OkonjoIweala, constituted a subsidy review committee chaired by Mr Aigboje Aig-Imoukhuede. The committee submitted its report on July 13, 2012 indicting over 20 oil firms and government officials but very little has happened since then. Then came the Mallam Nuhu Ribadu-led Petroleum Revenue Special Task Force which chided the NNPC’s practice of deducting amounts for subsidy-related expenses prior to remittance of these revenues. The Nigeria Extractive Industries Transparency Initiative, (NEITI), has published several reports that corroborated past audits: its Fiscal Allocation and Statutory Disbursement Audit 2007-2011, 2012, 2013 and 2014 Oil and Gas Audit Report among other policy briefs also captured the malfeasance that trailed the subsidy regime. There was the February 2015 forensic audit conducted by PriceWaterHouseCoopers, (PwC), on allegations of unremitted funds into the Federation Accounts by the NNPC commissioned following allegation by a former Governor of the CBN, Lamido Sanusi that about $20 billion oil money was missing from the NNPC. The forensic audit established cases of fraud in NNPC’s handling subsidy. Most of the officials indicted in these reports are either walking freely or have taken up higher jobs in the present government.
How the fleecing started was that that in view of the inadequacy of the petroleum products supplied by NNPC, the Federal Government through the PPPRA granted licenses to other independent marketers to import fuel. The government established the Petroleum Support Fund (PSF) in 2006 as an intervention from where subsidy was paid. Typical process preceding subsidy claims payment included verification and certification by PPPRA. The PPPRA through its PSF unit was charged with the responsibility of determining the amount payable as subsidy to each qualified marketer/importer. The joint senate committee that will be probing the alleged sums paid as subsidy since 2006 has put the cost of payments at about N10 trillion. Although, the committee didn’t explain how it arrived at the amount, Daily Trust on Sunday conducted in-depth and independent analyses of subsidy spending. Relying on the Farouk Lawan subsidy probe, the Aigboje Aig-Imoukhuede report, the Mallam Nuhu Ribadu task force and a greater part of the NEITI 2007-2011, 2012, 2013 and 2014 Oil and Gas Audit Reports,
the calculation claimed by oil marketers totalled N4.2 trillion while NNPC spent N5trillion. By implication, official subsidy spending within the ten year regime cost Nigeria over N9.2 trillion. Findings revealed that between 2007 and 2011 the Federal Government of Nigeria paid the sum of N3.9trillion as subsidy on fuel. The sum of N1.926trillion was paid through PPPRA to the oil marketers while the NNPC paid itself the balance of N1.997 trillion. Subsidy to NNPC accounted for 51 per cent of the total while those to marketers were 49 per cent.
The review of subsidy payments in 2012 showed that it cost the government N1.34 trillion comprising N461 billion by the PPPRA to marketers and NN893.7 billion to NNPC on behalf of the government. Relying on figures by NEITI, further findings showed that in 2013 a total of N1.315 trillion was expended on subsidy. While NNPC accounted for 41 per cent (N539.15 billion) of the amount payments to independent marketers formed 59 per cent (N775.85billion), Independent oil marketers accounted for 65 per cent of petrol importation in 2014 while NNPC accounted for the balance of 35 per cent. A total of N1.217trillion was processed for subsidy in 2014, according to NEITI audit records.
In 2015, however, over N1trillion was said to have been spent by the minister of state for petroleum resources, Dr Ibe Kachikwu, the dynamics changed as NNPC assumed more than 60 per cent of imports. A past of inefficiency before the advent of the current administration, NNPC led by the past regimes reportedly operated a very inefficient system of importation of petroleum products that led to the payments of N5trillion subsidy. For instance, the Farouk Lawan subsidy probe found out that the subsidy regime as operated between 2009 and 2011 were “fraught with endemic corruption and entrenched inefficiency. All those in the Management and Board of the NNPC directly involved in all the infractions identified for the years 2009-2011 should be investigated and prosecuted for abuse of office by the Code of Conduct Bureau,” the report recommended.
At the PPPRA, up to five Executive Secretaries have headed the agency in the last 10 years and have superintended over N4.2trillion subsidy payments, some paid to fraudulent oil marketers. Many industry audits found out that the subsidy regime operated between January 2009 and October 2011 under Mr Abiodun Ibikunle, Goody Chike Egbuji, 2011 - 2011 and Mr Reginald Stanley, 2011 - 2014 were fraught with endemic corruption and entrenched inefficiency.
For instance, the Farouk Lawan report recommended to the then government that Executive Secretaries and some field staff, who served during those periods be investigated and prosecuted by the relevant anti -corruption agencies. “The Chairman of the Board of PPPRA from 2009 - 2011, and the entire Members of the board during the period should be reprimanded for their roles individually/collectively in the absurdities that happened in the management of the subsidy regime,” the report recommended but little was heard.
Findings by other audits reported that under their watch, PPPRA steadily processed false claims. The PSF guidelines on prequalification and monitoring completely broke down and the scheme became an avenue for all forms of patronages. Frequent breakdown of Nigeria’s four refineries as a result of neglect, general inefficiencies and outright sabotage meant that Nigeria paid oil marketers subsidy to import product to avoid supply shortages and scarcity. Oando, Conoil, indigenous oil giant Forte Oil, downstream arm of French and American oil giants Total and Mobil were among A-list oil importers who benefited from the over N4 trillion subsidy dished out by the PPPRA between 2006 and 2016. Several others among them, independent marketers likewise benefited from the trillions of subsidy largesse. The list of subsidy beneficiaries increased sharply in 2008, rising to 23, including the six majors. In addition to Conoil, NIPCO were joined by Capital Oil and Folawiyo Energy, under the category of depot owners. The list of independents also increased from two in 2007 to 14 in 2008 as AITEO, Rahamaniyya, AMG Petro Energy, Brittania, ACORN, A-Z Petroleum, Shield Petroleum and Majope Investment Limited joined the fray. The list continued a steady jump with the curious inclusion of many relatively unknown and unheard-of companies. By 2011, the number of importers had increased from 6 to 140 as the PPPRA became overwhelmed by the sheer number of marketers.
Monitoring and evaluating this number of importers was virtually impossible for an inefficient agency such as PPPRA. A representative example given by one audit report was that of two promoters who allegedly came together and incorporated a company on August 3, 2010 in Abuja, applied for PPPRA registration on September 11, got its first allocation of 15,000 metric tons on January 20, 2011 and was paid N1.9billion as subsidy for products not supplied. Some other audits found that certain marketers collected subsidy of billions of naira on petrol that from records available were not supplied.
Apart from proliferation and non-designation of bank accounts We are not saying this money is missing but the Senate is worried that the money spent on subsidy is twice the size of the country’s annual budget for subsidy payment, PPPRA and the OAGF were said to be unable to manage in a transparent manner the two accounts they chose to disclose. Successive management and Executive Secretaries of PPPRA were also said to have failed to “maintain constant surveillance over key indices relevant to pricing policy,” as required by the law establishing it and showed lack of vigilance to the advantage of marketers and possibly themselves, and to the detriment of the nation. Efforts to reach many of the officials expected to be invited for the latest Senate committee probe was not successful but those who responded to Daily Trust on Sunday inquiry said records of their deeds were clean and verifiable. Dr. Oluwole Oluleye who served as the head of PPPRA between 2003 and 2009 said that although he had not received formal invitation from the committee, there were available records of his stewardship at the agency that the committee could refer to. “I wrote a report then of how much each marketer brought in and how much was paid. The records are available with the agency,” he said. However, calls put through to Mr Farouk Ahmed was not returned, likewise text message sent to Mr. Reginald Stanley.
Contacted, the Chairman of the Senate Commitee on Petroleum (Downstream), Senator Kabiru Marafa (APC, Zamfara) said the investigation was sequel to a motion on the subsidy regime.
He said the N10trillion was arrived at following analyses of documents used for the payment of subsidy to the NNPC and Petroleum marketers.
“Before the motion was presented on the floor of the Senate, we got all the documents used for the subsidy payment from all the agencies responsible for compilation and payment of subsidy during the regime. It was from the documents that we arrived at the N10trillion, “he said.
Out of the amount, Marafa said NNPC got N5.2trillion and that Petroleum marketers got the rest, saying” from the documents at our disposal we know the amount each of the marketers got throughout the subsidy regime “
He said the probe of the subsidy regime was necessitated by the fact that the amount spent on it was twice the size of the country’s budget.
“We are not saying this money is missing but the Senate is worried that the money spent on subsidy is twice the size of the country’s annual budget, “he said.
He said the committee has received over 50 binded copies of submissions by respective government agencies for the probe, adding that all persons involved including retired and serving top guns of the NNPC and other agencies would be invited during the investigative hearing.
Asked when the committee would complete the investigation, he said. “We have a lot of documents at our disposal and I’m assuring Nigerians that we will do the investigation painstakingly but it would take time because the exercise covers 10 years. For photocopy alone, the secretariat requires N2.5million because the documents must be made available to each member of the committee. We need to scrutinize a lot of documents “.