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THE SUBSIDY PROBE: Blackmail, Politics, Take Over

Published by Guardian on Tue, 21 Feb 2012

Pressure Mounts On Committee' Firms With No Prior Experience Take' Nation's Oil Sector HostageVARIOUS scenarios of power play, blackmail and dirty politics have crept into the House of Representatives' investigation into the management of subsidy funds in the petroleum sector.But the House insists that it would not be swayed from the path of honour, in the attempt to sieve the chaff from the grains and ensure that businesses in the Oil industry are transparent and corruption free.And as the ad-hoc committee concluded the open aspect of its investigations, it hinted that some individuals, private and public firms as well as government officials found wanting in the conduct of affairs in the importation of petroleum products would be dragged to courts for appropriate legal action.The threat came even as allegations were rife that the Farouk Lawan-led ad hoc committee had violated the House Rule on ethics by engaging in some underhand dealings with some stakeholders in the Gas and Oil industry.Spokesman of the House and chairman of the House Committee on Media and Public Affairs, Zakari Mohammed, tried to defend allegations that the committee was compromising ethics in the investigation.However, Mohammed was very categorical in admitting that members of the committee had come under intense pressure.He said, 'The committee investigating the fuel subsidy regime and the sharp practices that took place had developed a life of its own. Every Nigerian is interested in what comes out of the investigation.So, I want to reassure Nigerians that the seventh House of Representatives is focused; the committee has been empowered to unravel all those that profiteered on the fuel subsidy regime. The assurance I would want to give is that much as we did the investigation in the open, the findings of the committee will be made public.'All legislative machineries at our disposal will be put to use and to bear, to ensure that those who had been indicted are brought to book. After the investigations and after the findings are made public, we will put up due legislative machineries that will make it compelling for any arm of government or agency of government that is supposed to go after those who profiteered from it.'The committee has finished its public hearing; they are writing their report and in writing their report, they are even inviting some other people for clarifications. And definitely, oil in Nigeria has become the major attraction; it is our foreign exchange earner. And issues that border on oil can never be swept under the carpet; it is not possible.'I want to also say that that investigation has developed a life of its own. You cannot kill it. It is living and it will continue until we get to that logical conclusion, where people have been indicted and they are so brought to book. So, I want to assure Nigerians that this committee is working on its report and that if the report comes out, it should be so executed. We are not after anybody; we are not witch-hunting anybody; we cannot be judgmental, but at the same time when it comes out, nothing will be hidden.'The Threat To Prosecute Indicted PersonsLAWAN had consistently stated that the House would use the probe to send out the message that it meant business and is indeed willing to meet all international standard in exposing corruption and blocking waste and leakages in the system.He said, 'Within the next couple of weeks, we will present our report before the House of Representatives and it is our expectation that the House will adopt the recommendations that would come out of the report and we hope and pray that the relevant agencies of government who would be called upon to implement some of these recommendations will equally be willing to do so. Some of the recommendations would likely call for the legislators to take legislative actions, there would be some that would likely be implemented by the Executive, and there would be some that would go to the judiciary. Whatever comes out of this report, we want to assure Nigeriansthat it will be borne out of the desire for things to be improved in this polity.'Lawan continued:'It is our desire to be fair and objective and just in the course of producing our report. We are not going to write a report that is going to address the interest of any group, but the overall interest of the Nigerian people and the desire to ensure that best business practices become the guiding principles in the way we manage the subsidy regime.'We will work towards ensuring that there is greater transparency, accountability and prudence in the management ofpublic resources, especially with regards to the way this sector is managed and would be managed in the future.'Scandalous RevelationsMANY shocking revelations came to the fore during the probe of the oil sector.For instance, contrary to what many had been made to believe, it emerged that as at the end of last year, government paid out a whopping N1.7tn as subsidy on Premium Motor Spirit (petrol) and Dual Purpose Kerosene (DPK).This, according to the committee, represents an astronomic rise above the N620bn subsidy payment for 2010.The figure is still rising because the panel had discovered there were outstanding subsidy claims, which when added to the N1.7 trillion could bring the final figure to about N2trillionn!And from around the number of 49 in 2010, the number of fuel contractors rose to 140 in 2011, with a daily average PMS consumption standing at three million litres and kerosene, 10milion litres.Other findings of sharp practices in the industry showed clear evidence of smuggling/diversion of products; round tripping; contractors collecting subsidy money, but not delivering products; unregistered firms importing fuel; and government giving instructions to subvert due process.For example, out of the 59million litres of fuel imported daily, only 33 million litres are consumed locally. The committee established that 24 million litres were either diverted or smuggled after importers had claimed their subsidy.One of the oil firms, admitted before the panel to have collected over N19bn as subsidy claims, but the officer did not know the annual turnover of his company.There are documents before the committee, where some importers claim that a 30-ton vessel departed Rotterdam and arrived in Nigeria within two days.Another firm admitted that it initially came to Nigeria in 2010 to bid for an environment-related contract before 'we were advised to take a shot at the PMS importation deals.'More than two years on, the firm has yet to tidy up the environment contract, but it has struck several fuel importation deals running into billions of naira, so much so that its original mission has become a distraction.Thus, like this firm, many of the 140 contracting firms had no prior experience in the industry, but were simply drafted and used as fronts by powerful persons who had taken the nation's oil and gas sector hostage.Some of the oil firms testified that they had no retail outlets with which to directly distribute the products to the consumers. And many of those that had retail outlets had no storage facilities.Committee chairman, Farouk Lawan observed that Nigerian consumers were not fairly treated by the series of firms playing roles as middlemen. 'Worse still, there are some people who had neither storage facility nor retail outlets. They simply collect products and re-sell to other marketers,' he said . Depot And Petroleum Products Marketers Association (DAPPMA), which had been fingered by many stakeholders as causing much of the problems in the distribution of products, told the committee that it had no hand in the shady deals in the industry.DAPPMA chairman, Silvanus Okoli, said: 'It is sad that all marketers including DAPPMA members have been labeled as criminals and accused by the committee of encouraging the hike in the price of kerosene, but there other layers of middlemen who buy from DAPPMA to sell to consumers. 'The committee expressed shock that after buying kerosene at N40.9 per liter, DAPPMA would sell at N75 per litre as admitted to by Independent Petroleum Marketers Association of Nigeria (IPMAN). IPMAN told the panel a story of how agencies connected with the fuel subsidy regime had been awarding fuel importation contracts to 'briefcase importers,' a practice which IPMAN said contributed to the abuse of the subsidy regime.IPMAN called on the Federal Government to take the bold step of removing the briefcase contractors from the system and ensure that regulatory agencies did not provide a platform that encouraged cutting of corners.IPMAN equally maintained that the money being spent on subsidy yearly could have been used to build new refineries, so that the country could go beyond refining for local consumption, to exporting refined products.Another shocking revelation about how Nigeria is losing money due to inadequate patronage for indigenous ship owners was brought to the knowledge of the committee.Indigenous Ship Owners Association of Nigeria (ISOAN) alleged that the country lost about N45 trillion annually due to the preferences given to foreign ship owners over indigenous owners. ISOAN chairman, Isaac Jolapamo also accused the NNPC of deliberately sidelining Nigerian ship owners from lifting fuel during the fuel subsidy regime.He maintained that the NNPC set unnecessary conditions that make it impossible for Nigerian vessels to take part in the lifting of oil that were either imported or locally sourced, 'because once you fly the Nigerian flag, then you are not good enough. No Nigerian ship was used throughout the subsidy regime, except a handful of vessels used by the foreign ships that brought in fuel and this has further short-changed Nigeria as we lose as much as N3.7trillion monthly in freight or shipping costs that Nigeria should be earned.'But an issue capable of casting doubt on the real intentions of the lower House in the probe of the petroleum sector was the speculation that the committee was going to recommend the removal of Minister of Petroleum Resources, Mrs. Diezani Allison-Madueke, the Group Managing Director of the Nigeria National Petroleum Corporation (NNPC), Mr. Austin Oniwon and other top government officials managing the nation's oil and gas sector over allege fraud.'We are moving a motion on the floor of the House under matters of urgent public importance on Tuesday next week, in which we will call for the outright suspension of the affected officials who are now under investigation by our ad hoc committee. It is only natural that they step aside pending the outcome of the investigation. 120 members have endorsed the motion,' the source said.The lawmakers want a commission of inquiry to be set up to look into the activities of big guns in the oil and gas sector and the membership should come from civil society organisations (CSOs), the media, the Nigerian Bar Association (NBA), Institute of Chattered Accountants of Nigeria (ICAN), the Economic and Financial Crimes Commission (EFCC), the Independent Corrupt Practices and other offenses Commission (ICPC) and the Nigeria Police Force.Another issue that came up at the hearing was that of many Mother vessels bringing refined products and refusing to enter Nigerian territorial waters, but staying and selling out products, some 52 nautical miles far into the high Sea. The committee frowned at the practice, saying that the revenues due to Nigeria from these transactions were not paid to her because the transactions were taking place offshore Cotonou or offshore Lome.A firm, Vitol, which specialized in supplying products to the high Sea for Nigerian importers to buy, admitted that, the high Sea business attracted no duty or charges from any country since it happened in international waters. Its managing director, Rodney Garshon, was directed by the committee to produce the list of all firms it had transacted the offshore business with, particularly those importing into Nigeria.The investigation has equally brought to the fore the hostility and utter absence of coordination between key government agencies connected with the oil sector.Central Bank of Nigeria (CBN) and the Nigeria Customs Services (NCS) publicly traded hot words over alleged circular not to inspect imported petroleum products.Making a presentation, the CBN Governor, Sanusi Lamido Sanusi, represented by Deputy Governor, Operations of the CBN, Mr. Tunde Lemo, dismissed as untrue reports that it had been preventing the NCS from inspecting imported fuel.'We at the CBN do not have the authority to stop the Customs from the inspection of products.' He said.And without wasting time, Deputy Comptroller General of Customs, Mr. Julius Nwogwu, upon invitation to respond, said the NCS had always protested against the circular which he admitted was issued by an inter agency secretariat coordinated by the apex bank.The CBN representative informed the committee that what happened was that there was an inter agency committee, which secretariat was located at the CBN to monitor fuel importation regime pointing out that the NCS was part of that committee.Interjecting, but with the permission of the committee, the NCS representative said:'Even at that committee then, we contested all that bordered on the circular issued; we made the point against the aspect of the circular that petrol should be exempted from duties; let them (CBN) check their documents; it was documented and what transpired then was different from what the president approved.'Alison-Madueke And AllegedExistence Of CabalTHE Petroleum minister, Mrs. Diezani Alison-Madueke had in response to questions relating to the alleged existence of a cabal in the sector declared that it was wrong and dangerous to criminalise the policy of subsidy.She said: 'I think I have to say at this time that I'm under oath and it will be most improper to speculate on the existence or not of the purported cabal. Let me say for the purpose of records that I think that we cannot afford as a country to criminalise either a certain group with one fell swoop or just as we cannot afford to criminalise the policy of subsidy itself. The policy on subsidy, I believe was enacted at a time when the government felt it was good for the people of Nigeria, I believe it was the best of intentions at the beginning.'Yes, there have been manipulations in the sector; there is no question about it. Yes, we are looking into it very aggressively and we have made certain changes.
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