1 January 2013

Nigeria: Remembering Petroleum Subsidy Removal

On January 1, last year, President Goodluck Jonathan presented a New Year's gift to Nigerians by removing 100 percent subsidy on Premium Motor Spirit otherwise known as petrol. The gift was rejected by Nigerians, who came out in their multitude to protest against the policy.

The policy was announced by the Petroleum Products Pricing Regulatory Agency on December 31, 2011 with intention to commence full deregulation of the downstream oil sector, but the take off was marred after several days of strike and protests by Labour Unions and other concerned Nigerians.

The pressure from the protests and strike forced government to bend backwards a little and reduce the amount of subsidy from the about N76 to N44 per litre with a promise to reinvest the N32 per litre balance into developmental projects under the watch of the Subsidy Reinvestment and Empowerment Programme (SURE-P).

Several probes were initiated by both executive and the legislature in an effort to ascertain the truth about the figures claimed to be paid on subsidy.

In 2011 alone, over N1.3 trillion subsidy on petrol was paid to marketers with outstanding amount close to N300 billion. Government said it cannot continue with subsidy because if it does, there will be no money to carry out development projects.

Many questions were raised on the subsidy payments. First, 2011 was the first year to witness such unprecedented figure as subsidy payment. Secondly, there are concerns that before the strike nobody was interested in knowing how such figures were arrived at.

In 2010, N480 billion was paid as a petroleum subsidy under the Petroleum Support Fund Scheme. The amount tripled within a year.

Among the several probes initiated was the Farouk Lawal-led House of Representatives Ad hoc Committee to probe the petroleum subsidy payments.

The committee which probed the subsidy payments between 2009 to 2011, received several memoranda from members of public and professional groups and traced billions of dollars overpayment to marketers.

Some of the groups that testified before the committee include the Nigerian Navy, auditors appointed by the Ministry of Finance to verify subsidy claims, Federal Road Safety Corps, the Nigerian Labour Congress, Trade Union Congress, Revenue Mobilisation and Fiscal Allocations Commission, about 93 oil marketers and importers, Department of Petroleum Resource, PPPRA, Nigerian Extractive Industries Transparency Initiative, managing directors of the three nation's refineries in Warri, Port Harcourt and Kaduna and other concerned individuals and associations among others.

Till today, the Farouk Lawan-led committee report adjudged to be the most comprehensive and thorough in the industry that investigated the activities of all the agencies involved and the marketers, is yet to be acted upon. The committee received in evidence about 3,000 volumes of documents and took testimonies from about 130 witnesses between January 16 and February 9, 2012.

Since the revelations by the Farouk Lawan-led committee report, both government and pro-subsidy removal groups have remained silent because it was clear that the billions of naira claimed to be paid as subsidy were wrong.

Though, the committee's work is said to be inconclusive due to the bribery allegations linked to its chairman when Femi Otedola, one of the oil barons and Chairman of Zenon Oil claimed he had been forced by the committee chair to offer him $3 million bribe in order to clear his company from indictment.

Some observers said that it was the handiwork of some marketers with support of government that stage-managed the bribe scandal against the chairman of the committee in order to rubbish the outcome of the report.

Among the fears by many Nigerians during the subsidy removal protest was lack of trust in government officials to handle the excess amount properly and channel them to the right places.

Labour unions and activists accuse government officials of high level of corruption and believe that the present administration lacks the will to fight it.

When the decision to remove the subsidy came to public, a lot of people were not against it because of its impact to Nigerians but because there was no certainty that the amount generated will be put into use.

Others opposed it because of the wrong timing, more especially when there was no infrastructure to support the free market in the oil industry.

The Nigerian Labour Congress and the Trade Union Congress, the two unions that spearheaded the January protest, argued that deregulation of the downstream oil sector is not the problem but import-driven deregulation is what they are opposed to.

The labour unions, with the support of other Nigerians said that government should make sure that our dying refineries are brought back to life, while at the same time new ones should be built.

One of the activists in the country, the Executive Director of the Civil Society Legislative Advocacy Centre, Auwal Rafsanjani, said that government did meet any of the conditions set by Nigerians before attempting the deregulation in January.

According to him, till today nobody has been prosecuted for subsidy fraud even in the face of litany of probes; refineries are still epileptic, new ones have not been built; and Nigeria is still importing fuel massively.

Rafsanjani asked what has the government done to convince Nigerians to change their mind on deregulation? Nothing!

In the last 11 months government has generated some money out of the partial subsidy removal, but many people are worried that government is not tackling the challenges of the downstream oil sector.

Going by the estimates, about N336 billion was realised from the partial subsidy removal by government in the first 10 months of 2012 based on the 35 million litres daily consumption of petrol.

But the Chairman of SURE-P, Christopher Kolade, told the National Assembly Joint session on the programme that only N135 billion was released to the Agency as at October, 2012. He said the agency was allocated N15 billion per month and the money has been channelled into construction of abandoned road projects and maternal mortality care facilities.

The legislature, though disagreed with Kolade over his claim that what is being done by SURE-P has already been carried out by other agencies.

Even the N135 billion said to be earned the by Kalade-led SURE-P, is quite a huge amount, because this is far above the 2012 budget for the Ministry of Agriculture and some other ministries.

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