Yar’Adua, Kerosene & the Subsidy Scam, by Olusegun Adeniyi

Posted by News Express | 13 February 2014 | 4,813 times

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Since, according to a Yoruba saying, it is the dead person that is always guilty in an unresolved dispute, it is no surprise that the late President Umaru Musa Yar’Adua is being held responsible for the continued subsidy payments on kerosene estimated to have reached N1.7 trillion. This is because, if we believe the Nigeria National Petroleum Corporation (NNPC), the late Yar’Adua never conveyed any directive to the appropriate authorities that such payments be stopped or he conveyed the directive in writing but later withdrew it by word of mouth. There are so many versions of the tale as being told by the NNPC that one does not know which one to believe but all of them are to the effect that there was never a real directive by Yar’Adua to halt subsidy payments on kerosene.

Evidently because I was spokesman to the late president, I have in the past week been inundated by mails from people who sought to know my position on the controversy. Ordinarily, I would not have joined issues with the NNPC but for the cock and bull statement put out last Friday by its Group Executive Director in charge of production and exploration, Dr. Abiye Membere to the effect that Yar’Adua’s directive was not formalised before he fell sick and died. Such dishonesty against the late president is not something I can possibly allow to just pass, especially given that this same administration has already placed it on record that Yar’Adua indeed directed that kerosene subsidy payments be stopped in June 2009.

Following the uproar that greeted the scandalous fuel subsidy payments running into several hundreds of billions of Naira in 2011, the Coordinating Minister for the Economy/Minister of Finance, Dr. Ngozi Okonjo-Iweala, on April 17, 2012 constituted a “Technical Committee on Payment of Fuel Subsidies” with Mr. Aigboje Aig-lmoukhuede, then GMD/CEO of Access Bank Plc, as chairman. Other members included: Dr. Bright Okogu, DG, Budget Office of the Federation; Dr. Abraham Nwankwo, DG, Debt Management Office; Mr. Jonah A. Otunla, Accountant General of the Federation; Mr. Reginald Stanley, Executive Secretary, PPPRA; Mr. Michael A. Arokodare, GED, Finance & Accounts, NNPC; Mrs. Onyinye Ahuchogu, a Deputy Director at CBN; Mrs. Sola David-Borha, MD/CEO, Stanbic IBTC; Mr. Mike Osatuyi, National Secretary, IPMAN and Mr. Obafemi Olawore, Executive Secretary, MOMAN.

In the “Volume One” of their report submitted in June 2012, this is what the federal government committee wrote about kerosene subsidy: “…in spite of a directive issued by President Yar’Adua on June 15, 2009 that NNPC should cease subsidy claims on kerosene, PPPRA resumed the processing of kerosene subsidy claims in June 2011 and NNPC resumed the deduction of kerosene subsidy claims to the tune of N331,547,318,068.06 in 2011. In addition, the distribution of DPK which was being imported solely by NNPC was skewed in favour of depot owners who have no retail outlets…Two-thirds of the kerosene sold by NNPC between 2009 and 2011 was sold to depot owners and ‘middle men’ who in turn sold the product to owners of retail outlets at inflated prices of between N115 and N125 per litre (compared to the ex-depot price of N40.90), leaving consumers to pay higher prices than the N50 per litre directed by Government. For several years now, the country has been incurring huge subsidy bills for kerosene and its citizens are not receiving the benefit – instead the country has been financing ‘rent’ for the middlemen.”

That summation is merely a reaffirmation of the same reason that informed Yar’Adua’s decision, three years earlier, which was conveyed in four different memos by his then Principal Secretary, Mr. David Edevbie. In one of the memos, addressed to the Minister of Petroleum Resources, Dr. Rilwanu Lukman, the late president had directed the relevant authorities to “eliminate existing subsidy on the consumption of kerosene, taking into account that subsidy payments by government on kerosene do not reach the intended beneficiaries.”

That this administration has a reputation for not implementing reports of committees it sets up is no longer in doubt. Even when the Aig-lmoukhuede committee took counsel from Yar’Adua’s earlier decision to also recommend in June 2012 that subsidy payments on kerosene be discontinued, that counsel has not been heeded. So what exactly is Dr. Membere talking about? If a committee established by this administration comprising the Director General, Budget Office of the Federation; Director General of the Debt Management Office (DMO); the Accountant General of the Federation; the Executive Secretary, PPPRA and the NNPC Group Executive Director in charge of Finance and Accounts could report that Yar’Adua indeed gave a directive in 2009 to stop payment of subsidy on kerosene, should the NNPC fat cats continue to lie against a dead man?

Notwithstanding the foregoing, I believe we should be engaging in a more productive debate, not about what happened in the past but rather on the future of the downstream sector of our petroleum industry. That for me is the real issue because the NNPC indeed has funding challenges which actually account for why it has to resort to self-help in the management of monies that should statutorily go to the Federation Account. The issue of cost recovery has always been controversial but on that score my sympathy is actually with the NNPC, essentially because the Petroleum Support Fund (PSF) arrangement between the three tiers of government is not working.

However, it is interesting that the same CBN Governor, Mallam Sanusi Lamido Sanusi, whom NNPC now accuses of ignorance and “playing politics”, was the administration’s poster boy in the campaign for the removal of fuel subsidy late in 2011 and early 2012. At that period, Sanusi and Okonjo-Iweala were the most coherent advocates of why Nigeria should do away with the waste called fuel subsidy, even when it was not a popular campaign to lead. But the sustainability of the rent-dependent subsidy regime is a critical national conversation we cannot continue to run away from.

Because of my continued interest in our oil and gas sector, I paid close attention to the public hearing conducted in February 2012 by the House of Representatives ad hoc committee which probed subsidy payments from 2009 to 2011. The stakeholders that testified before the committee included the Minister of Petroleum, the Minister of Finance, the Accountant General of the Federation, the Director General, Budget Office of the Federation, the GMD of NNPC, the Nigeria Customs Service Comptroller General, the Managing Director of the Nigerian Ports Authority (NPA) and the Executive Secretary of the PPPRA. Testimonies were also taken from 93 oil marketers and importers, the Nigerian Navy, the professional bodies in the downstream oil sector, foreign oil traders, the Nigerian Labour Congress, the managing directors of the Port Harcourt, Warri and Kaduna refineries, Chairman of the Revenue Mobilisation, Allocation and Fiscal Commission and several other stakeholders.

By the time their sessions ended, the committee had taken testimonies from 130 witnesses and received in evidence 3,000 volumes of documents. While their eventual report was damning of the NNPC and several oil marketers, the presidency said it would seek further investigation before prosecuting the alleged offenders. But the report was good enough to earn the immediate termination of the two accounting firms that were engaged by the Ministry of Finance to verify and re-compute the claims submitted by independent marketing companies on the Petroleum Subsidy Funds.

Incidentally, all the reports of the several committees that were subsequently established by the executive to verify and reconcile the fuel subsidy claims and payments made between 2009 and 2011 came to the same conclusion about the abuse of the fuel subsidy funds. From the Aig-Imoukhuede Ministerial Verification Committee which metamorphosed into a Presidential Committee to the Dotun Suleiman Committee on Governance and Control Task Force to the Petroleum Revenue Special Task Force headed by Nuhu Ribadu, the conclusions were that all is not well with both the upstream and downstream operations of our oil and gas sector.

However, because of the revealing testimonies at the House of Representatives ad hoc committee hearing that was broadcast live on television, I sought from the chairman, Hon. Farouk Lawan, and Speaker Aminu Tambuwal, whether I could be availed copies of the entire proceedings. After several weeks of back and forth and the kind assistance of committee secretary, Mr. Boniface Emenalo, I was eventually provided the reports of all the sessions which included the raw (unedited) transcript of testimonies and the audio recordings of the entire proceedings. It took me exactly 12 months and several sleepless nights from June 2012 to May last year to sieve through the mass of documents before I completed the manuscript of what I thought would be a highly revealing book on the downstream sector of our petroleum industry.

In coming up with the extensive report, the idea was that if Nigerians can see what fuel subsidy truly means from the perspective of all the stakeholders captured in the course of the public hearing, it would be easy to understand why such a rent arrangement is bad for the economy. Unfortunately, the “sting operation” by Mr. Femi Otedola against the committee chairman, Hon. Farouk Lawan would raise questions of credibility about the committee’s work.

Even when I believe the verbatim report of what transpired in the course of the sessions which lasted 12 working days (without the disputed committee’s findings) would help in providing insight into the nature of our oil industry, there were also fears that in the political environment under which we operate, any such book at this time could easily become a weapon in the hands of opposition politicians. The point we must never miss is that the contradictions in our oil and gas sector predate President Goodluck Jonathan even when we expect him to help resolve them. So at the end, given that my interest is purely journalistic, I decided to postpone the publication till well after the general election next year.

Notwithstanding, it should be very clear to all Nigerians by now that a regime of unbridled subsidy that is both inefficient and dysfunctional – and in which on an annual basis, money expended on the consumption of just one item accounts for more than the entire vote for capital projects – is not only unsustainable but also antithetical to national growth and development. It is also clear that subsidy payments have become nothing but another byword for monumental corruption. And the earlier we do away with it, the better for our society.

•This piece by Adeniyi (shown in photo) originally appeared in his column “The Verdict” in today’s edition of ThisDay. He can be reached via olusegun.adeniyi@thisdaylive.com

Source: News Express

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