2012 in Review: The Fuel Subsidy Saga, By Shola Adekeye

The Minister of Finance, whose 83-year-old mother was kidnapped for five days should also be commended for staying the course.

The year 2012 ends in a few days. It has been an interesting year what with the thorny issues that hugged newspaper headlines.

There were notable events: the flood tragedy; air disasters which hit the confidence of the aviation industry following the loss of 153 lives in the ill fated Dana Airline; the plane crash that has left the Governor of Taraba State, Danbaba Suntai, in critical condition; and most recently, the loss of six passengers, including the Governor of Kaduna State, Patrick Yakowa and former National Security Adviser, Andrew Azazi, in a helicopter crash in Bayelsa State.

There was the abysmal performance of the Nigerian contingent at the Olympics in London. The country did not win a single bronze to show for the millions of Naira spent. Enter Boko Haram, which has caused so much havoc by killing and maiming innocent people.

The planned fuel subsidy removal that saw many Nigerians taking to the streets to protest, also shook the nation to its core. The Federal Government obviously did not foresee that type of response. It subsequently bowed to pressure and partially reinstated subsidy. Some likened that incident to the Square March in Egypt, which brought down the government of Hosni Mubarak, although I beg to disagree.

After that incident, it became imperative to investigate the so called subsidy regime, which I have always thought is a monumental fraud that needs to be stopped. This much was confirmed when corrupt oil marketers went after the Minister of Finance and the Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala who fought tooth and nail to uncover fraud in that sector.

Recall that the Federal Government had set up a Committee on Verification and Reconciliation of Fuel Subsidy payment, chaired by Aigboje Aig-Imoukhuede to investigate subsidy claims by oil marketers. The findings were mind boggling. It was discovered a total of N1trillion as money fraudulently collected by oil marketers as subsidy since 2009.

A report submitted to the Presidency showed that there were 17 broad categories of infringements used to defraud the country. In fulfilling its assignment, the committee used a team of Central Bank of Nigeria (CBN) examiners of the Banking Supervision and Trade Exchange Department, experienced bank auditors selected by the Chairman, Committee of Chief Inspectors of Banks and chief compliance officers of banks to review the subsidy payments and went on to recommend that the N422 billion be refunded to the Federal Government and the companies investigated.

The process by which corruption thrives in this system is eye opening. There were no evidence of sales proceeds in the banks – N157,549,854,482.55, meaning that the marketers did not have evidence of sales proceeds based on banks’ available records at the date of verification; subsidy payments without the signatures of external auditors and independent inspectors on shore tank certificates – N121,897,757,962.56; subsidy payments for which mother vessels were not found in locations claimed at the time of transshipment – N21,361,071,313.24; subsidy payments for which there were no shipping documents or evidence of payment for the products in foreign exchange – N20,463,525,859.79; and $10 additional margin given to traders from November 2010 to 2011 with approval of the Federal Government contrary to the Petroleum Support Fund (PSF) guidelines.

The committee’s report recommended that indicted companies should refund monies to the treasury. The committee also mentioned a second tier of companies that had “relatively minor” infractions. This group of companies went into discussion with the government for a quick resolution of their issues.

But for oil marketers under investigation for possible refunds to the government, their 2012 outstanding claims were netted out against their expected refunds to the government and those with a positive net balance, i.e. outstanding claims greater than expected refunds, were processed and paid.

For marketers with a negative balance with the government, that is, they owe the government more in refunds than the government owes them, the committee worked to accelerate the review of their documents so that their claims could be processed and settled.

The Ministry of Finance made a bold move by going public with the names of companies that were involved. In this clime, that can be a dangerous. Indeed, the Finance Minister admitted to receiving threats to her life.

In a twist, Unions which were obviously largely controlled by these companies went on strike, demanding that subsidy payments be made to the same marketers that the government was trying to verify. This led to fuel shortages as some marketers withheld deliveries. Queues surfaced at petrol stations. Essentially, it seemed they were trying to twist the arm of the minister by whipping up sentiments and moving public opinion against the government.

In early December, President Goodluck Jonathan sent a letter to the floor of the House asking for the approval of a supplementary budget totalling N161.6 billion from the National Assembly.

The letter expressly stated that the supplementary budget was needed “to settle accumulated fuel subsidy arrears owed oil marketers.” The president equally explained that, “a provision of N888.1 billion was made for payment of fuel subsidy for the nation” in the year under review, stressing that “following the forensic audit carried out, the provision for fuel subsidy in the 2012 budget was underestimated.”

The supplementary budget brings the total fuel subsidy budget for 2012 to N1, 041,881,608,594 trillion. This was after the Finance Minister had earlier disclosed that N29 billion has been recovered so far.

This brings us back to the question: do we want to continue to throw money down the drain in the name of subsidy? I personally think that we would should stop the fraud by killing subsidy altogether.

On the one hand, Nigerians have the right to demand that they pay for cheaper fuel because we are an oil producing country. But things have not exactly worked out well. Refineries are not working and we have this powerful cartel feeding fat on our collective resources in the name of fuel subsidy. For long, institutions managed by government have proved to be inefficient. It would therefore make sense to open up the sector to private individuals who can build and maintain refineries. We may have to pay a little more at the beginning. But prices will eventually fall in the face of competition.

We must make sacrifices as a nation. Without that, there will be no meaningful progress. I want to believe that public officials will also make sacrifices just as they demand of ordinary Nigerians.

The Minister of Finance, whose 83-year-old mother was kidnapped for five days should also be commended for staying the course. Nigeria is at such a challenging stage of its development that we must support the few that are fighting to make a difference. If those few shinning lights are frustrated and defeated, then we have no hope as a nation.

We must not allow that to happen. Finally, we must also commend the President Goodluck Jonathan administration for this initiative. His attempt at sanitizing this sector should be supported by all means.