Verbatim Report of the 2012 Ad-hoc Committee on the Mgt. of Subsidy Regime by the House of Rep.

Oil & Gas
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Friday, May 11, 2018 /07:55 AM/Olusegun Adeniyi*



Fuel Subsidy: The Day of Rage

Nigerians woke up on 1st January, 2012 to learn that the price of premium motor spirit (PMS), commonly called petrol, had more than doubled. The impact of the development came with unprecedented force. Almost immediately, transport fares doubled and many people who had travelled home for the Christmas holidays were stranded.

Predictably, there was resentment against the federal government as Nigerians began to vent their frustrations on any media outlets available to them.
Even when there were (and still are) compelling arguments that Nigeria is a victim of its oil resources, critical stakeholders (including organised labour unions and the civil society groups), responded with anger and condemnation while vowing that they would challenge the federal government by calling for a strike.

To be sure, there has been so much inefficiency about the management of the oil sector and sometimes defending its excesses against even the most temperate of its critics is not an easy thing to do. Despite being a major producer of crude oil, Nigeria has not invested in the infrastructure needed to refine enough to meet national need, thus making it mandatory to import much of the petrol for domestic use. In January 2012, it was hard not to be aware of the inherent irony.

And indeed, it was one of the extraordinary times in our history. With the nation evidently on tenterhooks, the House of Representatives convened an emergency session on Sunday, the 8th of January 2012, and decided among  other things, to probe the management of the fuel subsidy scheme so as to unearth the factors responsible for the rot and find out how to tackle the structural and procedural deficiencies that have contributed to our woes as a nation. At that same session, the House also appealed to President Goodluck Jonathan to suspend the fuel price hike until a more fortuitous time. 

To achieve its objectives, the House set up two ad-hoc committees. The first one, headed by Hon. Patrick Ikhariale, was to interface with the executive and organised labour with a view to finding a common ground on what had a become a serious national crisis. Other members of this committee were: Hon. Ajibola Muraina, Hon. El-Badawy Hassan, Hon. Onawo Mohammed, Hon. Aminu Sulaiman, Hon. Peter Akpatason, Hon. Ogbuefi Ozomgbachi and Hon. Khadija Bukar Abba Ibrahim and Hon. Essien Ayi. The second ad-hoc committee, headed by Hon Farouk Lawan, was to verify and determine the actual subsidy requirement and monitor the subsidy regime. 

It had seven other members. They were: Hon. John Enoh, Hon. James Faleke, Hon. Abbas Tajudeen, Hon. Abubakar Sade, Hon. Ali Ahmed, Hon. Gerald Irona and Hon. Eucharia Azodo.

In a national broadcast in the evening of 7th January 2012, President Jonathan told Nigerians that the subsidy regime was unsustainable and that the government would not back down on its removal. Pleading for understanding, the president said he shared “the anguish of all persons who had travelled out of their stations, who had to pay more on the return leg of their journeys.” After highlighting why the subsidy regime was detrimental to national economy, the president added: “If I were not here to lead the process of national renewal, if I were in your shoes at this moment, I probably would have reacted in the same manner as some of our compatriots, or hold the same critical views about government.

But tough choices have to be made to safeguard the economy and our collective survival as a nation…the truth is that we are all faced with two basic choices with regard to the management of the downstream petroleum sector: either we deregulate and survive economically, or we continue with a subsidy regime that will continue to undermine our economy and potential for growth, and face serious consequences.”
In response to the broadcast, the Nigeria Labour Congress (TUC) and the Trade Union Congress (TUC), in collaboration with civil society groups, vowed to shut down the nation.

When the national strike started as planned, rallies and protests were organised, particularly in Lagos, Abuja, Kano, Kaduna and Ibadan. Encouraged perhaps by events in North Africa (dubbed ‘Arab Spring’), where coordinated protests uprooted some dictatorial regimes, protesters poured into major streets across the country and disrupted the daily routine of life and the economy. Many businesses, shops, offices, schools and petrol stations were shut down on the first day of the strike on 9th January 2012. In Lagos, thousands marched on the streets.

In some parts of the city, police and the demonstrators clashed, leading to some fatalities. In Kano, Nigeria’s second-largest city, at least 30 people were injured as police used tear gas and fired in the air to disperse protesters. Two demonstrators later died. In the federal capital, Abuja, trade unions and civil society groups organised a march and protesters closed the Dr. Nnamdi Azikiwe Airport.

However, on 15th January 2012, after six straight days of persistent strikes, and following series of negotiations, the labour unions suspended the protests. Bythen, the President had agreed to slash the price of fuel from N145 to N97 per litre. But the cost of the strikes was enormous. To compound the situation, it is evident that we have merely postponed the resolution of the problem.

Without any doubt, the fuel subsidy regime has been a major source of multiple- level scams that have short-changed Nigerians and enriched very few peopleover the years. And revelations from the House committee confirmed the fears of most Nigerians. Incidentally, the scope of the committee was limited to cover only three years, from 2009 to 2011; while the Terms of Reference (TOR) was simply “to verify and determine the actual subsidy requirements and monitor the implementation of the subsidy regime in Nigeria.”

The Lawan Committee conducted its sessions in public (beamed live on television), and received memoranda from Nigerians from all walks of life. The committee also invited major stakeholders in the oil industry to testify before it. From the federal government side, some of the principal testimonies were taken from the Coordinating Minister for the Economy, Dr Ngozi Okonjo-Iweala; Minister of Petroleum Resources, Mrs Diezani Alison-Madueke; Attorney General of the Federation, Mr. Mohammed Bello Adoke, SAN; two Central Bank of Nigeria (CBN) Deputy Governors (Dr Kingsley Moghalu and Mr Tunde Lemo); Chair of the Federal Inland Revenue Service (FIRS), Mrs Ifueko Omougui-Okauru; Director General, Budget Office of the Federation, Dr Bright Okogu; Chairman of the Revenue Mobilisation Allocation and Fiscal Commission, Mr Elias Nban; and the Group Managing Director of the Nigeria National Petroleum Commission (NNPC), Mr Austin Oniwon. Some other officials who testified included heads of relevant institutions (like NPA, Customs, PPPRA, PPMC, PEF etc.) that had something to do with subsidy. 

From the private sector were former Finance Minister, Dr Kalu Idika Kalu; legal practitioners, Mr. Femi Falana, SAN and Mr. Olisa Agbakoba, SAN and several others.Other stakeholders invited to the hearing (and who testified) included 93 oil marketers and importers, senior officials from the Nigerian Navy, the auditors appointed by the Ministry of Finance to verify subsidy claims, members of the professional bodies in the downstream oil sector, foreign oil traders, officials of the Nigerian Labour Congress and Trade Union Congress as well as the managing directors of the Port Harcourt, Warri and Kaduna refineries.

At the end, the committee took testimonies from 130 witnesses and received in evidence 3,000 volumes of documents between 16th January and 9th February, before submitting its report to the House on 19th April, after sitting for three months. The House adopted the report on 24th April 2012.

In response to the House report, the presidency said it would seek further investigation before prosecuting the alleged offenders. The Attorney General and Minister of Justice, Mr Mohammed Bello Adoke, SAN, said that there was need for such exercise to ensure that there were no misplaced or wrong prosecutions. There was nothing patently wrong with this position. It made sense for government to ensure that those accused of wrong-doing were not improperly charged. Essentially, that was what the plethora of committees eventually set up by the executive was to do: verify the propriety of the House probe report. But to date, nobody has been brought to justice on account of the report.

However, the report was good enough to earn the immediate termination of the two accounting firms that were engaged by the federal ministry of finance to verify and re-compute the claims submitted by independent marketing companies on the Petroleum Subsidy Funds. The report also led to the establishment by the executive of several other committees to verify and reconcile all fuel subsidy claims and payments made between 2009 and 2011.

And the reports of those committees have more or less confirmed the findings of the House of Representatives ad-hoc committee as it nailed a number of fuel marketers for abuse of the fuel subsidy funds.

From the Aigboje Aig-Imoukhuede Ministerial Verification Committee which metamorphosed into a presidential committee to the Dotun Suleiman Committee on Governance and Control Task Force to the Petroleum Revenue Special Task Force headed by Nuhu Ribadu, the conclusions were that all is not well with both the upstream and downstream operations of our oil and gas sector.

However, shortly after the House investigation sessions were completed, Mr Femi Otedola, chairman of Zenon Oil, publicly confessed to bribing Hon. Lawan, chairman of the ad-hoc committee to the tune of $620, 000 in what he described as a “sting operation” in collaboration with the State Security Services (SSS).

The House, which was on a brief recess, had to call another emergency plenary session on 15th June 2012. The House promptly suspended Hon Lawan and asked the committee on Ethics and Privileges to investigate the veracity of the bribery allegations while Hon. John Enoh was appointed as the new chairman of the probe committee to complete the exercise.

Given the controversy that trailed the Ad-hoc committee report, the credibility of its findings is now questionable. But the verbatim report of what transpired in the course of the sessions which lasted 12 working days should help in providing insight into the nature of our oil industry and the danger the subsidy regime poses to the economy. 

That precisely is the essence of this effort. I must, however, put it on record that this has not been an easy task to undertake.For several months between 2012 and 2013, I liaised with the secretariat of the committee headed by Mr Boniface Emenalo, who would later also be charged to court along with Hon Lawan (for allegedly collecting bribe from Mr Femi Otedola).

He was assisted by Mr Ezennia Nwanekezie. With the authority of the House leadership, Emenalo was kind enough to avail me all the reports, the audio tapes and the raw transcripts from the committee secretariat and was ever willing to provide clarifications when needed.

I must therefore express my special appreciation to the Speaker of the House of Representatives, Hon Aminu Waziri Tambuwal, his deputy, Hon Emeka Ihedioha, as well as Hon Lawan without whose cooperation this work would have been impossible. 

While those interested in muckraking will find enough materials with which to peddle their trade from the testimonies of all the principal stakeholders, serious minded people will find sufficient proof (in the report) of the waste and corruption that are inherent in an unbridled regime of subsidy that is beyond reforming. 

Perhaps with that, we can begin an honest conversation about whether it is indeed in the interest of our country to continue with the regime of fuel subsidy that has made emergency billionaires of some rent-seekers in the private sector and their collaborators in government while making nonsense of our oil and gas sector. 

*Olusegun Adeniyi is currently the Chairman of THISDAY Editorial Board and writes a weekly column, 'The Verdict'. 

Download The Verbatim Report (pdf) Here 

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