7 July 2012

Nigeria: Oil Sector Reform - All Committees, No Reports

Photo: Vanguard
Oil refinery


On Sunday, December 31, 2011, the federal government through the Petroleum Products Pricing Regulatory Agency (PPPRA) announced the removal of subsidy from petroleum products. In the statement announcing the removal, the PPPRA said a litre of Premium Motor Spirit (PMS), popularly called petrol would sell for N141 effective January 1, 2012.

Following the announcement, many motorists left whatever they were doing to refill their tanks ahead of the contentious New Year gift. Within seconds filling stations were crowded with motorists even as some refused to sell, opting to see how the new price regime would fare. By January 1, the government seemed to have had its way as many filling stations adjusted their pumps, with others selling it far above the government rate of N141.

The fuel price hike automatically sparked a hike in the price of goods and services, from transportation to food items. Nigerians felt the change was unrealistic and took to the streets in massive protests that held across most states of the federation. They were soon joined by the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), the two major umbrella bodies of the Nigerian workers. They succeeded in grounding the economy.

In an effort to end the protest, President Jonathan set up a Subsidy Reinvestment and Empowerment Programme Board headed by Dr Christopher Kolade and another committee headed by a former Chief Justice of Nigeria, Justice Alfa Belgore, to negotiate with labour and all other stakeholders. This failed to appease the protesters.

In the end, the government was forced to back down. President Goodluck Jonathan addressed the nation where he announced a reduction of fuel price from N141 to N97 per litre. But even before the reversal by government, Nigerians have made their demands loud and clear. They demanded for transparency, probe of the subsidy regime and prosecution of those found guilty.

In January, Minister of Petroleum Resources Mrs Diezani Alison-Madueke, who came under serious criticisms with some asking her to resign, inaugurated a 7-member special Petroleum Industry Bill (PIB) headed by Senator Udoma Udo Udoma, giving it 30 working days to produce a new draft bill for presentation to the National Assembly. The committee's terms of reference include reviewing all sections of the PIB and harmonising the existing different versions to produce a draft copy.

Udoma who responded on behalf of other members of the team said it was an important national assignment to which all effort would be put in to facilitate the passage of the bill into law for the betterment of the nation.

On the calls for her to step down, the minister said: "We live in a democratic country; everyone has the opportunity to speak their mind. Without criticism we cannot grow, all public officers are open to criticism."

In February, Mrs Diezani Alison-Madueke, announced the setting up of a 22-man Special Task Force on National Refineries headed by former Minister of Finance Dr Kalu Idika Kalu to recommend to government ideas that would lead to the overhaul of refining operations in the country.

The task force's terms of reference were to: Conduct a high level assessment of Port Harcourt, Warri and Kaduna refineries; Review all past reports and assessments and produce a diagnostic report complete with a change journey map; Review the operations of Port Harcourt, Warri and Kaduna refineries with a view to improving efficiency and commercial viability. The findings of this review would form part of the diagnostic report; Work with a world-class firm to audit the finances of Port Harcourt, Warri and Kaduna refineries and produce audited accounts for the companies over the past two years ending December 31, 2011.

Others are: Design a template for key production/management-critical performance indicators to be tracked on a periodic basis for ministerial review; Design an automated information work bench, to monitor the performance of Port Harcourt, Warri and Kaduna refineries on an online basis; and Review all licenses issued for new refineries in Nigeria and assess their operational, technical, and financial readiness, among others.

At about the same time, Alison-Madueke also announced the appointment of former chairman of the former Economic and Financial Crimes Commission (EFCC) Mallam Nuhu Ribadu to chair a 20-member Petroleum Revenue Special Taskforce to sanitise the petroleum industry.

The Minister, who set up the taskforce, said the move is "designed to enhance probity and accountability in the operations of the petroleum industry."

Also, the committee's terms of reference include: To work with consultants and experts to determine and verify all petroleum upstream and downstream revenues (taxes, royalties, etc) due and payable to government; To take all necessary steps to collect all debts due and owing; to obtain agreements and enforce payment terms by all oil industry operators; To design a cross debt matrix between all agencies and parastatals of the petroleum ministry.

Others are: To develop an automated platform to enable effective tracking, monitoring and online validation of income and debt drivers of all parastatals and agencies in the petroleum ministry; To work with world class consultants to integrate systems and technology across the production chain to determine and monitor crude oil production and exports, ensuring at all times the integrity of payments to government; and; To submit monthly reports for ministerial review and further action.

But even before it took off, analysts dismissed the task force's duties to be a duplication of the functions of the Nigerian Extractive Industry Transparency Initiative (NEITI) which has the constitutional mandate to ensure transparency in the oil and gas as well as other sectors of the extractive industry.

The House of Representative also set an ad-hoc committee that probed the management of the fuel subsidy in Nigeria. The committee uncovered monumental corruption in the subsidy regime until its chairman got tangled in a bribery allegation by businessman Femi Otedola. However, the opposition parties and the labour movement as well as members of the National Assembly have called on Jonathan to implement the House report, in spite of the allegations against the committee's chairman. They said the report was credible since the bribe allegations came after it has completed its work.

Meanwhile, President Goodluck has mandated another committee to verify and reconcile the findings of the Technical Committee set up by the Federal Ministry of Finance to conduct a detailed review of all subsidy claims and payments made in 2011. The 15-member committee headed by Mr. Aigboje Aig-Imoukhuede was asked to begin work immediately and conclude its assignment by 1700 hours on Friday, July 13 as a prelude to immediate action on all identified cases of fraud.

A statement by Jonathan's spokesman Reuben Abati said the move is in line with the president's commitment to ensure that those found culpable in the subsidy regime face the full wrath of the law.

However analysts say the various committees set up by the government have yet to produce any tangible result. "The government is not sincere about these committees, they were set up just to give Nigerians the impression that the government is serious about the oil sector reform. Let me cite an example; the Ribadu committee was given two months to submit its report, but almost four months after, we are not hearing anything from it. So who is fooling who?" asks Abu Mahmoud, a stakeholder in the oil and gas industry based in Abuja.

For now, all the government seems to be doing is setting up committees to review the recommendations of other committees that were also set up as a result of the work of other committees. The committees have not been able to justify their creation, and when they do the government is seemingly unwilling to implement their recommendations. This is further making it difficult for the people to trust the government.

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