THE comments by leading public officials in the oil industry before the  Adhoc Committee on Fuel Subsidy of the House of Representatives have put in bold relief the rot in the oil industry and the complicity of top government officials in the mismanagement and corrupt practices that characterise the industry. This is one of the happy things that came out of the protests carried out by the mass of Nigerians against the fuel price hike on the first day of the year 2012. Not only were the revelations greeted with outrage, many Nigerians also felt the revelations have provided a window of opportunity for the government to frontally attack corruption, incompetence and irresponsible behaviour by the leadership of the oil sector and the public sector in general.

SUCH committees in the past were, however, notorious for not achieving anything.   One of the unfortunate fallout of the protest and the revelations before the Ad hoc Committee of the House of Representatives is that no one among the government officials has taken responsibility for the grand mismanagement and corruption in that sector  enough to resign and create the environment for a thorough investigation of the matter.

THERE were several comments from the Ministry of Petroleum Resources, the Management of the Nigerian National Petroleum Corporation (NNPC), the Nigeria Extractive Industry Transparency Initiatives  (NEITI)  and the Petroleum Products Pricing Regulatory Agency (PPPRA) that portray poor accounting for the volume of fuel imported or consumed.  There were disagreements on the figures representing the actual amount paid as subsidy on fuel.  There was also deliberate misconduct in the payment of subsidy that should lead to a refund of substantial public funds to the government.

THERE was, indeed, criminal behaviour that should be punished. Some of the more outrageous behaviour include paying subsidy on 59 million litres of fuel per day, when the consumption level is put at 35million litres per day. The Nigeria Customs Service claimed that there were no proper documentation of the importation of fuel by the NNPC. NEITI declared that its audit report on NNPC showed that the operations of the corporation lacked transparency and due process. 

Payments for fuel subsidy ought to be made only on the approval of the Accountant-General of the Federation, based on the approval by the  PPPRA as against the practice where NNPC  deducts directly from the domestic crude oil proceeds before remitting the remainder to the Federation Account.  The Minister of Petroleum Resources admitted there was a cabal and there were sharp practices.  The Minister, Diezani  Alison-Madueke, however, did not tell what effort had been  made to deal with some of these problems.  

AS the comments show, top government officials, including the president, were aware of the problems. They appeared helpless and thought the only way to address these problems was by removal of subsidy. The reality all over the world is that market forces cannot take the place of government.  A competent, effective and public interest government is essential to regulate the market and ensure that malpractices and wrongdoings by private actors do not destroy the economy.  This has been shown in the current global financial crisis and the failure of some Nigerian banks that the government had to bail out.  More importantly, we see how challenging it has been for the National Communications Commission (NCC) to regulate the activities of the telecoms service providers and reduce sharp practices within the sector.  Deregulation cannot replace the fight against corruption.

THE Federal Executive Council (FEC) has approved N363 million for payment to two consultants to audit the entire extractive industry: oil and gas, and solid minerals. This is to establish the processes and procedures, physical volumes and financial flows of the industry, and improve revenue remittance to government.  They are also to provide data for the government’s anti-corruption drive and provide ideas to enthrone competition and corporate governance. The Economic and Financial Crimes Commission (EFCC) has been called in to review and investigate fuel subsidy payments.  

THE Minister of Petroleum has promised to end corruption and speed up reforms in the oil industry.  She has set up a PIB Special Task Force headed by Senator Udoma Udo Udoma  to work with government offices to produce a clean copy of the Petroleum Industry Bill (PIB) for presentation to the National Assembly to fast-track the passage of the bill, which will provide a basis for reform.  She has set up a second body, the Special Task Force on Governance and Control to review all management controls on the NNPC and other parastatal agencies, design a new governance code to ensure transparency and good governance and design a blueprint to separate policy from operations in the NNPC and other agencies, set key performance indices, eliminate rent-seeking opportunity and arbitrage, and design a road map for transition to the PIB. These sound like fire brigade measures that did not emerge from a well thought out and coordinated plan to sanitise the operations of the system.  They have elicited more worries than reassurance that something will change.

WE do hope that after the current wind of concern caused by the massive protest against fuel price hike, the government will not settle down to the previous practices.  Nigerians did not just oppose fuel price hike, they kicked against corruption and political irresponsibility. The signs of a general breakdown of institutions as a result of irresponsible behaviour and failure to punish malfeasance are ominous signs of a future complete systemic failure.  We call on the lawmakers to ensure that the report of the ad hoc committee on fuel subsidy leads to concrete steps to turn the drift in governance.  The president must find the will and the means to do what is right by not just overhauling the operations of the oil sector by punishing those involved in the criminal financial haemorrhage.

Comments (3)

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Economic sabotage
written by Pamilerin, February 01, 2012

There is no other name by which the activities of NNPC, PPPRA, and DPR can be called than 'Economic Sabotage' !. Why is the government not executing the equivalent of the 'Economic sabotage decree under the Abacha regime ? Why have heads not rolled in these institutions if only to make way for a proper and unbiased and uninfluenced audit be conducted ? Or are the hands of governement officials marred in this hwole saga ? Uhmm...... I wonder.

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written by Sandra Udeh(Caleb University,imota), February 01, 2012

"Some of the more outrageous behaviour include paying subsidy on 59 million litres of fuel per day, when the consumption level is put at 35million litres per day" this is the main reason why the fuel subsidy was removed, which is a very good reason because the people citizens were being cheated. The government just have to make the people understand this reason. Also the price hike was also too much,65 to 150 but now that it has been reduced to 97naira i think its better now and should probably be left at that because the country doesn't need anymore strike and riots.

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written by Sandra Udeh(Caleb University,imota), February 02, 2012

the removal of the fuel subsidy was a very good thing to do, but the government have to explain this patiently to the people so that they can understand the advantages of the removal of the fuel subsidy but also the hike in the fuel price was way too high but now that it has been reduced to 97naira its okay.

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