Fuel Price Hike: Probe The Petroleum Sector Now.

In discussing this very volatile issue, let me make one point very clear. I speak from a very informed  perspective. This is not just one of those social commentaries. I worked in the downstream petroleum sector for about 36 months as legal counsel and this was at the peak of the subsidy crisis. I handled and prepared critical documents, advised on transactions and participated in the subsidy scheme as a staff of one of the biggest indigenous players in the sector. I have a perfect understanding of the system from the point where these products are negotiated and bought from refineries abroad to the contract for their shipping, from arrival at the Port in Nigeria to the inspections and the final destination at designated tank farms, so I speak with authority. When the subsidy probe started, I also made several submissions to the National Assembly Committees and also was at the EFCC during the investigations.
Weak and reactive leadership is a disaster to any organization that has it. The hallmark of great leadership is the ability to identify risks and institute effective risk management systems. No organization in this world can survive uncontrolled hemorrhage of scarce resources.

The subsidy scheme became an issue under President Obansanjo. It was under him that the concept of petroleum importation became full blown. For reasons best known to the wily Owu Chief, our four refineries were left to rot while our country relied on fuel importation. That policy remained the biggest disservice former President Obasanjo did to this country.

However, as bad as that policy was under OBJ, there was still some level of sanity and control. At no time under OBJ did subsidy payments exceed 190 billion Naira annually. There were stringent measures that controlled the participation of companies under the subsidy scheme.

Just before OBJ left office, he sold two of our refineries to Dangote and Otedola, a measure that would have worked if fully implemented. It is beyond doubt that the private sector remains the best economic and commercial managers. Government is a cesspool of waste and corruption.

When late President Yar’adua took over, he rode on a staccato of uninformed voices to reverse the sale of the refineries. He reversed the sale but did nothing to bring the refineries back to work. He continued to run the subsidy scheme and kept the restive sanity in the system. As at the time Yar’adua died, Nigeria’s subsidy burden was about 230 billion Naira per annum.

Now for the uninformed, the petroleum subsidy scheme is a system where the federal government, on a bid to reduce the cost of fuel paid by Nigerians chooses to pay the difference between the landing cost of petrol imports, the prevailing price of the commodity at the international market and what is actually sold in Nigeria.
For instance, if the landing cost of petrol in Nigeria is, say, N 115, and after adding lightering charges and other logistics costs, the price of petrol should be N147, the federal government asks the marketers to sell at N97 and decides to pay the marketers the difference per litre.

Now enter President Goodluck Ebele Azikiwe Jonathan!
Under him, subsidy costs jumped from 200 billion Naira to over 1.2 trillion in the first two years of his government.
Why? What happened?
Did the population of Nigerian triple within that period or did the number of cars quadruple? Was there an industrial revolution?
The answer is simple. Again, I speak from an informed position.

Due to weak regulatory regimes, the downstream sector became an all comers affair. Every Tom, Dick and Harry entered the business. Companies with no verifiable addresses, no tank farms, no vessels, no financial structures, no bank guarantees all became fuel importers. It was a bazaar. It is only in Nigeria that such bizzare things can happen. Emergency millionaires were made in days. Time and space won’t allow me to give you details of the unbelievable things that happened. Every top official of the federal government became an emergency fuel importer or middle man.

Importation licenses were hawked openly. All you needed was for the PPPRA to give you a license to import. You could sell it for millions just outside the door.
Now there is a complex web that links the Petroleum Ministry, the DPR, thE Navy, the NPA, NIMASA,PPPRA, DMO, CBN and Commercial Banks in this fraud. Documents like the sovereign debt statements and the sovereign debt notes flew about and our money kept disappearing. From about 30 companies in the scheme, the number shot up to 300. Monthly, billions of Naira were paid out to people who have never had any contact with a Jerry can of fuel in their lives. No verification, no authentication, nothing. Money was being paid with reckless abandon. Dr Okonjo Iweala and Mrs Alison Madueke were all there watching!

It got so bad that some people will arrange with ship owners……take a two day hire of an empty ship, move it to Lagos Port, berth it there. Officials of the PPPRA, Petroleum Ministry, DPR will come there to inspect an empty vessel and certify that the empty vessel carried 10,000 metric tons of petrol, collect their money and walk away. The vessel simply sails away and three weeks later, close to 6 billion Naira will be paid as subsidy when not even a single drop of petrol was brought in.

It was when the government saw that it could no longer sustain that level of waste that GEJ made that attempt at removing subsidy which was stoutly and rightly rejected by Nigerians.

If you recall, the call for the probe of the Subsidy fraud didn’t even come from the Presidency. GEJ never called for any probe. Neither did Alison Madueke nor Okonjo Iweala. The call for probe was triggered off by the submissions of Senator Bukola Saraki on the floor of the Senate when he took time to tell the sad story of the biggest fraud in modern Nigeria called FUEL SUBSIDY.

Nigerians should ask GEJ to tell us how our subsidy burden jumped from 200 billion to 1.4 trillion in two years.
Between 2008 and 2013, the PPPRA was about the most corrupt government office in Nigeria. People who worked there lived like Emperors. They spent dollars like there was no tomorrow. Only the privileged found their way there. Each time I went to their office in Abuja then, I left with a heavy heart. This country is in serious trouble.
The only time sanity came to that sector was when GEJ brought Reginald Stanley, former Group General Manager of PPMC who also headed the London Branch of the NNPC into the picture. Reginald Stanley cleaned up the PPPRA, redeployed close to 80% of the workers and rejigged the subsidy program. It was then discovered that more than 60% of the funds paid as subsidy in the last three years were paid wrongly and fraudulently.

That was when the subsidy probe started. Out of the over 300 companies that were collecting subsidy, it was found that not up,to 30 were really importing fuel. Close to 700 billion Naira were stolen in the subsidy scheme. Till date, not a single person has been convicted.

Again, throughout the five years that GEJ ran this country, not one single attempt was made to even find out what is the problem with our refinery.

By DR. OLA ODUWOLE.