While the National Assembly appears to be divided over the removal or retention of the subsidy regime, which is believed to be fraught with corruption, different parties are now quoting figures of how much has gone down since President Goodluck Jonathan’s government.
A former governor of Abia State, Chief Orji Uzo Kalu, last week said: “The Federal Government has spent N6.354 trillion as subsidy on petroleum products in the last five years, when President Goodluck Jonathan assumed leadership of Nigeria.”
This week, a former governor of Kwara State, Senator Bukola Saraki, argued that a “minimum of over $32 billion was wasted on it over the last five to six years.”
Orji, who felt the total subsidy payments were colossal, noted: “You can imagine what the N6.345 trillion spent on subsidy can be used for in terms of infrastructure development in this country.”
He maintained that the subsidy regime is nothing but fraud, which is only benefitting a few people.
He said: ”The subsidy is not benefitting the poor because the marketers smile to the bank after collecting the full benefit on the over 40 million litres of products (PMS and DPK) consumed by Nigerians per day, leaving a lopsided distribution network, where not all Nigerians are able to get the products at the regulated price of N87 per litre.
“In fact, a recent study showed that it is only in Lagos and a few urban centres that the products are sold at regulated prices. The larger chunk of the populace buys the product still at exorbitant prices despite subsidy.”
In Saraki’s opinion, subsidy has never provided any solution to the fuel crises in Nigeria because of the corruption associated with its management, which he described asthe biggest platform for fraud among marketers andgovernment officials.
The law maker, who insisted on the scrapping of subsidy, also noted that the fraud in the scheme was allowed to fester by government through issuance of import licenses to very bogus number of companies totalling 82.
“It has impacted on our exchange rate, it is going to impact on our infrastructure, there is no money for capital budget,” he added.
In May 2012, Reuters had reported a $6.8 billion fuel subsidy scam, during which President Jonathan was pressured to prosecute top officials or face protests. But he was unable to because many of those implicated were allies he needed to protect to keep his power base intact.
Reuters said: “A string of investigations, audits and committees were set-up to investigate the fuel subsidy scheme…The national oil company, central bank and other government agencies have defended themselves against some accusations.”
Endemic corruption and entrenched inefficiency
It also listed some observations of the House of Representatives report that:
The subsidy regime between 2009-2011, the period the report covered was fraught with “endemic corruption and entrenched inefficiency.”
Importers were being paid for 59 million litres a day, while the country only consumes 35 million.
Mismanagement and theft by fuel marketers and government officials cost $6.8 billion over three years – about a quarter of Nigeria’s annual budget.
Nigeria spent N2.587 trillion ($16.46 billion) on the fuel subsidy in 2011, 900 per cent more than the N245 billion in the budget. The overspend is equivalent to over half of the 2011 federal budget.
NNPC is accountable to no one. It owed the government N704 billion for various violations of the subsidy scheme and it owes a string of fuel traders, including Trafigura, $3.5 billion – about the amount in the Excess Crude Account, meaning that Nigeria essentially has no savings.
Petroleum Minister, Mrs Diezani Alison-Madueke, has a conflict of interest by being both on the board of NNPC – a fuel importer – and the supervisor of the subsidy regulator, the Petroleum Products Pricing and Regulatory Agency (PPPRA).
The number of fuel importers rose from five in 2006 to 10 in 2007, 19 in 2008 and 140 in 2011. This decision taken by PPPRA was one of the biggest causes of fraud. Many firms only existed on paper and collected subsidies on fuel that never existed.
In one example of mismanagement, the Accountant-General’s office made 128 subsidy payment transactions of N999 million each in the space of 24 hours between January 12 and 13, 2009 — equal to about $6.36 million almost every 10 minutes.
Recommendations
President Jonathan should reorganise the oil ministry to make it more effective in carrying out reforms to the sector. The oil minister’s role should be divided between two people.
The management and the board of NNPC should be overhauled and those involved in any infractions should be investigated and prosecuted. The company should be unbundled to make it more transparent and efficient.
NNPC should be audited to determine its solvency due to a plethora of claims of indebtedness.
NNPC through local refining, swap arrangements and offshore processing should be able to provide enough fuel for Nigeria.
Therefore, the government has no reason to grant subsidy import licenses to other companies.
The chairman of PPPRA between 2009-2011 and its entire board during that time should be reprimanded. The executive secretaries of the PPPRA during that period should be investigated and prosecuted by anti-corruption agencies.
PPPRA should conduct a full performance assessment on all companies who import fuel into Nigeria.
All those in the Finance ministry, Budget Office and the Accountant General’s office involved in the overspend on subsidies between 2009-2011 should be sanctioned.
No one has been sanctioned
Despite the findings and recommendations, no one has been brought to book or truly punished for any infraction; just as nothing has changed the widely-held belief that subsidy regime is fraudulent, with billions gone down the drain.
Ironically, subsidy is not free money to marketers or importers, rather, it is meant to reimburse those importing refined products for the market differentials between the local and the international prices.
However, the scam that has trailed the system is so big that it has overshadowed the essence of the programme, so much that many insist it must be scrapped because billions were paid just for getting allocation papers without importing one litre of any product.
According to the former CBN Governor, Sanusi Lamido Sanusi, “just forge documents and have them stamped without bringing in anything and collect the subsidy; PPPRA pays based on documents.”
Not even the Economic and Financial Crimes Commission, EFCC’s declaration after the revelations in 2013 resulting from the multiple probes of subsidy that “oil subsidy scam,” has led to the conclusion of any case brought against the subsidy suspects.
Recall that the EFCC’s spokesman, Mr. Wilson Uwujaren, had told journalists then that about 17 oil marketers were being tried in court for subsidy scam.
Apart from the 17 oil marketers, the EFCC also said some 23 oil marketing companies and 81 suspects have been arraigned for alleged oil theft as well as seized 11 tanker vessels and 16 tanker trucks used for alleged oil theft.
Uwujaren further said: “But if you add the individuals and their companies, we have over 40 cases on trial for obtaining subsidy from the Federal Government without supplying products. Those cases are ongoing; they are progressing in court at different stages. Apart from the one we have in court, there are also a number of investigations that are going on.
“Investigation of subsidy is not a straight-forward thing; it is a very complicated procedure. It is not something you can just conclude within a country; you have to deal with organisations with proper jurisdiction, and these things take time.
“That is the reason some people think we don’t have enough people standing trial in court. It is a complicated procedure, and that process is still on.
“In terms of whether or not we have recovered money from the subsidy thing, I say yes. I recall that about two months ago, the Executive Chairman of the EFCC announced that the commission had recovered N4.3 billion from the subsidy scam. That is very significant, considering the complicated nature of those transactions. We are not relenting in our determination to get to the root of the matter.”
But analysts argue that government enforcement agencies have not done enough, as some cases should have been concluded by now.
They also believe that the inability to really bring the arrow heads of the fraud to book might not be unconnected with the fact that all are involved in the corruption along the value chain of the verification of claims.
Subsidy claims, which are tied to the quantity of product brought in, are subjected to a series of verification beginning with the Department of Petroleum Resources, DPR.
The department works in conjunction with other agencies, including the Petroleum Products Pricing Regulation Agency, PPPRA; Ministry of Finance, the Budget Office, Office of the Accountant-General, and the Central Bank of Nigeria, CBN, which issues the final cheques after all the necessary clearance have been made
In analysts opinions, officials along this chain are culpable in the subsidy scam, including the banks, as they are the ones that issue the fake bank documents (Letters of Credit, Form M, etc), which were allegedly submitted to the PPPRA, by the importers in collaboration with bank officials.
In view of the string of the web of corruption, analysts are not surprised that infractions in the subsidy regime have continued unabated.
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