This Day (Lagos)

Nigeria: A Tale of Two Subsidy Reports

analysis

Aig-Imoukhuede fuel subsidy report reveals gaps in Farouk Lawan-led House of Representatives probe, write Festus Akanbi and Vincent Obia

The presidential committee set up by President Goodluck Jonathan to verify and reconcile all fuel subsidy claims and payments made between 2009 and 2011 submitted its report on Friday with the revelation of significant gaps in the report of the House of Representatives ad hoc committee on fuel subsidy.

Jonathan had constituted the committee, headed by Access Bank managing director and chief executive officer, Mr. Aigbo Aig-Imoukhuede, on July 5 and given it one week to verify and reconcile all claims made in the report of the Technical Committee on Fuel Subsidy Payments set up by the Federal Ministry of Finance and identify cases of overpayment or irregular payment. It was also mandated to identify for possible criminal prosecution all likely fraudulent cases, review any other pertinent issue that may arise from its work, and make appropriate recommendations.

Protest

The presidential subsidy review committee submitted its interim report to the president at the weekend. Although, details of the latest report were yet to be made public at the time of going to press, reliable sources said it merely confirmed the earlier report which had nailed a number of fuel marketers for abuse of the fuel subsidy funds.

The presidential committee came on the heels of denials and allegations of witch-hunting from the camp of indicted fuel marketers following the publication of the report of the Technical Committee on Fuel Subsidy Payments, which incidentally was also headed by the Access Bank helmsman.

The technical committee was constituted by the Federal Ministry of Finance after the outbreak of the bribery scandal that tended to taint the earlier probe of the subsidy regime by an eight-man ad hoc committee of the House of Representatives headed by Mr. Farouk Lawan.

Lawan, who initially alleged to have come under severe pressure from the indicted oil marketers, was later to be embroiled in the bribery scandal that exposed his committee's report to public ridicule and angst.

It was the mountain of misgivings that trailed the report by the Lawan committee and the subsequent complaints by oil marketers that prompted the setting up of the presidential committee to confirm all the claims. That decision has seemed to pay off with the discovery of about 50 companies that allegedly abused the fuel subsidy regime but which were given a clean bill of health by the House committee.

Lawan Committee

It would be recalled that on January 8, the House of Representatives met in an emergency session and decided, among other things, to set up an ad hoc committee to probe the management of the fuel subsidy scheme. This followed nationwide protests against the federal government's January 1 decision to remove subsidy on petrol, leading to a sharp rise in the price of the premium motor spirit, from the regulated rate of N65 per litre to nearly N150 per litre.

The House named an eight-member ad hoc committee led by Lawan to probe the subsidy regime between 2009 and 2011 to try to uncover a widely suspected cabal that had been feeding fat on the federal government's Petroleum Support Fund at the expense of the masses.

The Lawan committee conducted its probe in public, received memoranda from members of the public, and invited major stakeholders in the oil industry to testify before it.

Among stakeholders invited to testify before the House subsidy committee were the Nigerian Customs Service (NCS), Petroleum Products Price Regulatory Agency (PPPRA), Nigerian National Petroleum Corporation (NNPC), the Ministries of Finance and Petroleum Resources, and all the relevant agencies of government.

Also invited during the hearing that lasted about three weeks were 93 oil marketers and importers, the Nigerian Navy, the auditors appointed by the finance ministry to audit and verify subsidy claims, Federal Road Safety Corps, the professional bodies in the downstream oil sector, foreign oil traders, the Nigerian Labour Congress, Trade Union Congress, the managing directors of the Port Harcourt, Warri and Kaduna Refineries, Revenue Mobilisation, Allocation and Fiscal Commission, NIETI, and private individuals.

The committee took testimonies from 130 witnesses and received in evidence 3, 000 volumes of documents from January 16 to February 9.

One of the most startling details that emerged from the Lawan committee's probe was how in 2011 the country paid subsidy on 59 million litres of petrol per day when in fact the daily consumption was 35 million litres.

The Lawan committee submitted its report to the House on April 19, after sitting for three months. The House adopted the report on April 24 for onward transmission to the executive for implementation.

Technical Committee

The Federal Ministry of Finance set up another committee in May to scrutinise the fuel subsidy payments to marketers during the 2011 financial year. The ministry had been surprised that despite paying N1.7 trillion in subsidy by December 2011 and another N450 billion this year to clear the 2011 backlog, outstanding claims still remained from 2011.

The finance ministry's committee was headed by banker and member of the Economic Management Team (EMT), Mr. Aigboje Aig-Imoukhuede, and comprised representatives of the Central Bank of Nigeria (CBN), Budget Office of the Federation, Debt Management Office, PPPRA, Independent Petroleum Marketers Association of Nigeria (IPMAN), Major Marketers Association of Nigeria (MOMAN), and Office of the Accountant General of the Federation. Managing Director/Chief Executive Officer of Stanbic IBTC Plc, Mrs. Sola David-Borha, served as secretary to the committee.

In addition to its members, the technical committee also sought the support of CBN examiners and other financial experts and consultants, including Lloyd's List Intelligence, which was also consulted by the House committee.

Whilst the House committee comprised lawmakers, the technical committee was made up of experts.

The committee submitted its report to the Minister of Finance, Dr. Ngozi Okonjo-Iweala, and the presidency six weeks after it was set up.

But the committee was criticised for not giving oil marketers and importers the chance to defend themselves, a snag that prompted President Goodluck Jonathan to set up a presidential committee, also headed by Aig-Imoukhuede, to verify and reconcile the findings of the technical committee. The presidential committee was given about a week to submit its report.

Reaction

As expected, the affected oil firms in the two reports did not hesitate to fight back in order to clear their names. An indication that the report of the Lawan-led eight-man ad hoc committee might end up in the dustbin emerged last month when the federal government declared that it would not prosecute the indicted firms based on the report.

Government's decision was said to have been informed by the harvests of allegations of blackmail and outright extortion levelled against members of the House committee by various oil firms whose names appeared in the report for various infractions.

Earlier, scores of indicted firms, which had contested the veracity of the House report, had gone to court to try to exonerate themselves. They alleged that they were not given fair hearing by the committee.

However, a fresh twist was introduced into the fuel probe with businessman and chairman of Zenon Oil, Femi Otedola, staging a sting operation, allegedly with the support of the State Security Services, to nail Lawan in a damning $3million bribery scandal. Lawan later admitted collecting $620, 000 from Otedola.

Interestingly, the report of the Aig-Imoukhuede committee was not spared from criticisms by fuel importers who, in apparent reaction to the public angst resulting from the revelations of the committee, described the technical committee's report as a hasty job.

The companies flayed the report largely on the grounds that the Aig-Imoukhuede committee did not invite them to make clarifications with regard to some conclusions reached.

Group Managing Director, Oando Plc, Mr. Wale Tinubu, said his company had nothing to fear, but noted that considering the importance of its mandate, the committee should have taken steps to "ensure the veracity of their report by listing all its queries and inviting the market operators to defend themselves." Tinubu said his company had in its possession all documents needed to exonerate it from the allegation of subsidy abuse.

Managing Director/Chief Executive Officer of Capital Oil, Mr. Ifeanyi Uba, also raised issues with the report, stating, "The association I belong to, which is the Jetty and Tank Farm Owners Association (JETFON), was not represented on the committee.

"They did not even call us to defend ourselves before coming to these conclusions. What kind of report is this? They said Capital Oil was paid without auditor's report. How am I supposed to know this?

"The government should concentrate on the full deregulation of the downstream sector instead of all these panels on oil subsidy. Government should consider full deregulation because we are losing a lot of money everyday. This subsidy thing does not favour us who are genuine marketers and we are not happy about it."

But for acting Managing Director of Forte Oil Plc, Akin Akinfemiwa, whose company was listed among those with no evidence of sales proceeds in banks, it was simply a case of documentation, which does not in itself imply any fraudulent practice.

He said, "It is purely a documentation issue. If we had been invited to face the committee, we would have reviewed everything with them but in the end, the committee didn't invite us to clear any grey areas they had issues with.

"It is unfair to brand everybody the way they have done. As for Forte Oil, we have everything in place; we have documents to back up all our transactions."

Chairman of MRS Plc, Alhaji Sayyu Dantata, whose company was also listed with those that had no evidence of sales proceeds in banks as well as those that were paid subsidies without the signature of auditors, said his company was surprised by the conclusions of the committee.

Dantata said, "Aig is a banker with an impeccable record of success, but investigating the oil sector is not banking. It is like asking me, an oil operator, to go and investigate the banking sector.

"Of course, I won't understand it. As for documentation, we don't have any issue with that. We are going to give them the documents. We are not bothered at all by the outcome of the committee's findings. We will vigorously defend ourselves.

"I just think the investigation would have been better done by a credible operator in the sector with a thorough knowledge and understanding of the sector."

In the same breath, Mr. Tope Shonubi of Sahara Energy Resources, whose company was listed as being paid without the signatures of auditors, said his company was not bothered by the report. He stated that the aspect that concerned Sahara had to do with the internal failings of the agencies charged with auditing before payment.

"We have nothing to do with hiring auditors, but if they want to review the process leading to payment, we have nothing to worry. We have already submitted documents to them and we are very willing to submit more to clear our name."

However, the Federal Ministry of Finance, in a response to the complaints of the affected companies decided to set up the technical committee, which was also headed by Aig-Imoukhuede, to verify and reconcile the findings of the Technical Committee on Payment of Fuel Subsidies that he had earlier led.

The essence of the committee was apparently to give marketers indicted in the first report an opportunity to provide documentary evidence to clarify the findings of the technical committee, given that most of them had complained they were not given a fair hearing. The committee, which submitted its findings on Friday, upheld the earlier verdict of the Technical Committee on Payment of Fuel Subsidy.

Names missing in farouk lawan's report

1. Valviza Petroleum Ltd

2. MRS Oil and Gas Co. Ltd

3. Aiteco Energy Ltd

4. Eterna Plc

5. Forte Oil Plc

6. Rahamaniya

7. Sahara Energy Ltd

8. Oando Plc

9. Folawiyo Energy Ltd

10. Geacon Energy Ltd

11. Northwest Petroleum and Gas Ltd

12. Venro Energy Ltd

13. Brittania-U Nigeria Ltd

14. Lloyds Energy Ltd

15. Majope Investment Ltd

16. African Petroleum Plc

17. Masters Energy Oil and Gas Ltd

18. Pvn Capital Ltd

19. Sirius Taglient Ltd

20. Tempo Energy Ltd

21. Bodej Investment Ltd

22. Practoil Ltd

23. Avidor Oil and Gas Company Ltd

24. Colbert Energy Ltd

25. July Seventh Oil and Gas Ltd

26. Mecuria Global Energy

27. Momats Oil and Gas Ltd

28. Rainoil Ltd

29. Xalon Petroleum Ltd

30. Xavier Energy Nig Ltd

31. KMCL

32. First Independent Nig Ltd

33. Tahill and Tahill Nig Ltd

34. Aquitane Oil and Gass

35. Quagga Oils Ltd

36. Reliance Petroleum Ltd

37. Crustream Nig Ltd

38. Dan Oil and Petrochemical Ltd

39. Midas Oil and Gas Ltd

40. Nupeng Venturers Ltd

41. Vita Cam Services

42. Viva Energy Ltd

43. Tamil and Tamil Nig Ltd

44. Fargo Int. Ltd

45. Mezcor Sa

46. Absaf Petroleum and Company Ltd

47. Delmar Petroleum Company Ltd

48. Tamzila Petroleum Company Ltd

49. A.A Rano Nig Ltd

50. Fatgems Pet Co. Ltd

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