Fuels of dissent

OF Politics, Corruption and Protest over Fuel Subsidy in Nigeria FUELS OF DISSENT Politics, Corruption and Protest over Fuel Subsidy in Nigeria Copyright © 2012 Social Development Integrated Centre (Social Action) ISBN: 978-978-49394-8-5 Published by: Social Development Integrated Centre 33, Oromineke Layout, D-Line Port Harcourt, Nigeria Tel/Fax +234 84 765 413 www.saction.org Design and layout: Mbuotidem Inc. Printed by: Silvertop Photo credit: Cover Picture courtesy Kingsley Itiose FUELS OF DISSENT 01 Social Action Briefing Table of Contents List of Abbreviations 03 Acknowledgments 04 Executive Summary 05 Recommendations for Government 07 Recommendations for CSOs 08 Fuel Subsidy: To be or not to be 09 Authority steal and the history of Fuel Subsidy Renewal 13 President Jonathan, Deregulation & Oil Subsidy 16 The Mass Protest 21 The Palliatives 24 The National Assembly’s Intervention 24 FUELS OF DISSENT 02 Social Action Briefing LIST OF ABBREVIATIONS EFCC ECONOMIC AND FINANCIAL CRIMES COMMISSION NNPC NIGERIA NATIONAL PETROLEUM CORPORATION OPEC ORGANISATION OF PETROLEUM EXPORTING COUNTRIES PDP PEOPLES DEMOCRATIC PARTY PPPRA PETROLEUM PRODUCT PRICING REGULATORY AGENCY PPMC PIPELINES AND PRODUCTS MARKETING COMPANY CSO CIVIL SOCIETY ORGANIZATION IMF INTERNATIONAL MONETARY FUND NNOC NIGERIAN NATIONAL OIL CORPORATION PMS PREMIUM MOTOR SPIRIT PTF PETROLEUM TRUST FUND NLC NIGERIA LABOUR CONGRESS TUC TRADE UNION CONGRESS CBN CENTRAL BANK OF NIGERIA NPAN NEWSPAPER PROPRIETORS ASSOCIATION OF NIGERIA NEPA NATIONAL ELECTRIC POWER AUTHORITY PHCN POWER HOLDING COMPANY OF NIGERIA NRSTF NATIONAL REFINERIES SPECIAL TASK FORCE SURE SUBSIDY REINVESTMENT EMPOWERMENT PROGRAMME DPR DIRECTORATE FOR PETROLEUM RESOURCES AGF ACCOUNTANT GENERAL OF THE FEDERATION NCF NIGERIA CUSTOMS SERVICE NEITI NIGERIAN EXTRATIVE INDUSTRIES TRANSPARENCY INITIATIVE GMD GROUP MANAGING DIRECTOR FUELS OF DISSENT 03 Social Action Briefing ACKNOWLEDGEMENTS This briefing paper has been written by Ken Henshaw & Godwin Onyeacholem. Asume Osuoka, Chiedu Ezeanah and Chido Onumah provided editorial support. Social Action collaborated with the United Action for Democracy (UAD) in developing the briefing paper. Special thanks to UAD convener, Jaye Gaskia. The production of the briefing paper has been made possible by the support of the Rosa Luxembourg Foundation (RLF). FUELS OF DISSENT 04 Social Action Briefing EXECUTIVE SUMMARY This briefing paper examines how the fuel subsidy regime reflects corruption in the petroleum industry, and the role of the Nigerian political leadership in sustaining the systems of fraud. Over 80% of the country's total annual revenue is derived from petroleum, but a widespread discontent has deepened over the wasteful way government has been running the sector. At the core of the grossly inept management is corruption, an intensely debilitating evil whose spirited resilience cuts through every sector and elicits deep worry in the society. Fuel subsidy is one arm of the intriguing tentacles of corruption in the Nigerian oil industry, and has become a driver of social dissent. This has been aggravated with the incumbent administration's deregulation policy that has entailed the removal of so-called fuel subsidy paid by government to marketers for the importation of consumer petroleum fuels. Nigerians cannot understand why as citizen of an oil producing country, they are denied the full benefits of a resource in which they ought to enjoy an economy of scale as well as a comparative cost advantage. Oil theft and unrestrained looting of public fund goes on a daily basis. Nigeria remains the only member of OPEC, the elite club of petroleum exporters, with more than 80% of the people on less than $2 a day. The people see the country as one massive landscape where nothing works! Unemployment is rising in geometric proportions, the health sector is in a comma, public infrastructure is in poor state; education is in step decline (schools, colleges and universities are in an appalling physical state as a result of lack of funds). With national electricity utility only able to generate and distribute less than 3 thousand megawatts of electricity daily to service about 150 million people through its national grid, homes and businesses are forced to provide own power. This is by owning petrol or diesel powered electric generating sets. Homes and businesses also have to drill their own water due to the collapse of public water systems in urban areas while most rural areas lack access to clean water. Mass transportation is based on the main by privately owned small buses and cars. This means that the price of petrol could have impact on other consumer prices and services making it a subject of relevance to most Nigerians. On New Year day of 2012, while Nigerians were on holidays, the Nigerian federal government ordered the increase in the price of petrol. Prices of consumer petroleum fuels had been subject of national debate, but the sudden decision of the government was in violation of its own public statements to the effect that a decision on price increase, or what it called removal of petrol subsidy, would only be taken on conclusion of consultations with different segments of the Nigerian population. From all indications, the consultations were not concluded as at end of 2011. It would seem that the Nigerian government was running out of cash to sustain itself a desperate situation that had been caused by its own corruption. Government payments to politically connected fuel importers, FUELS OF DISSENT 05 Social Action Briefing including to government's own Nigerian National Petroleum Corporation (NNPC) had consumed a major chunk of the national budget for 2011. In an election year, there may have been unprecedented looting of state funds as an opaque contracting system in the petroleum industry was enforced and exploited by senior state officials who have become part of an oil marketing cartel. The government itself acknowledged the existence of this 'cartel' or 'cabal' to which it pays the so-called subsidy. Why did the same government not take any concrete steps to tackle this cabal and bring it to book? Why was the Peoples Democratic Party (PDP) government be in a hurry to remove so called subsidies on price of consumer petroleum fuels, instead of working to tackle the corruption in the system? The answer may not be unconnected with an attempt to cover up massive fraud in the management of the petroleum industry in Nigeria, and the fuel subsidy regime in particular. The New Year fuel price hike roused popular outrage, resulting in mass protests and a general strike called by organised civil society and labour. A week of nationwide mass actions led to virtual shutdown of the economy in January 2012, as citizens protested over hundred percent hike in the pump price of consumer fuels. Labour unions and their civil society partners told the federal government to revert to N65. For the first time in the history of citizens' protests in Nigeria, the people were united across religious and ethnic divides, with protests in major cities across the country. Protests by Nigerians in Diaspora were held in major cities around the world. In the UK, Canada, USA, Ghana, South Africa and other countries, Nigerians took to the streets to register their anger at a policy that ultimately imposed more hardship on their compatriots at home. In response, government restored partial fuel subsidy. Throughout the period of the protests, organised civil society provided leadership, showed commitment and exhibited courage in their mobilization of the people towards the objective of social change. In the end, the scale of popular protests and the open questions about the lopsided expenditures on fuel subsidy in 2011 prompted two National Assembly committees to begin a probe. The probe is expected to determine the size of subsidy and make recommendations about cleaning up the entire oil sector to usher a true regime of transparency and accountability. Nigerians eagerly await the reports. With an uncompleted probe of the fuel subsidy regime in the National Assembly of Nigeria and the continuation of serious fuel shortages and artificially high prices in many parts of Nigeria, this paper is addressing an issue that remains relevant to national discourse. FUELS OF DISSENT 06 Social Action Briefing RECOMMENDATIONS FOR GOVERNMENT  Address the inefficiency and endemic corruption in the petroleum industry before embarking on deregulation of the downstream sector.  Overhaul the mode of operations of the PPPRA with a view to eliminating its deceptive, anti-people, and anti-competition template, as well as strengthen it to enable it perform its regulatory functions effectively, for only in few cities is petrol actually sold for N97.  Ensure pipeline and depot integrity by curtailing vandalism of PPMC pipelines as stealing of products as a way of restoring what would normally be the most efficient way of distributing products across the country.  Restore the strategic reserve responsibility of the NNPC by bringing back MV TUMA, a vessel capable of holding 120,000 140,000 metric tons of products. This will eliminate the undue advantage given to importers who do not have this responsibility.  Carry out an audit of the products actually consumed from 2006-2011 on which subsidy was paid as a way of exposing the massive fraud that has been perpetrated against Nigeria.  Embark on programmes to boost the capacity utilization of existing refineries to international level.  Make public the Turn Around Maintenance agreement between government and foreign contractors who built the refineries and who would now handle their repairs in order to reveal the timelines and deliverables as this is crucial to the elimination of present problem of over-priced petroleum products currently facing Nigerians.  Reject NNPC's gradual approach and embark on speedy and wholesale maintenance of the refineries in view of the emergency situation in the oil sector.  Immediately begin work on the three Greenfield refineries proposed by government in order to expand existing capacities so as to completely eliminate “fuel subsidy”.  Ensure the passage into law of a functional Petroleum Industry Law that will solve the problem in the upstream and downstream sectors of the petroleum industry.  Reduce the bloated cost of government and explore other ways of generating revenue instead of imposing unnecessary tax on the people. FUELS OF DISSENT 07 Social Action Briefing RECOMMENDATION FOR CSOs  Step up campaign and raise awareness on the negative impact of corruption and waste in public and corporate governance.  Strengthen mechanisms for deepening the culture of responsible politics as a necessary step towards advancing the cause of democracy.  Devise creative ways of playing active role in policy dialogue and formulation.  Scale up education and enlightenment on rights violation as a way of instilling the culture of resistance to impurity and human rights abuses.  Rather than wait for organized labour to always initiate protests, CSOs should assume the important role of the people's conscience and mobilizing agent for articulating their demand.  Build on the success of the January 2012 protest through increased visibility as a theoretical and practical force for change in Nigeria. FUELS OF DISSENT 08 Social Action Briefing FUEL SUBSIDY: TO BE OR NOT TO BE The recent round of furor over the removal of fuel subsidy was sparked off in June 2011 at the instance of Nigeria Governors' Forum, which includes governors of the 36 federating states in Nigeria. The Forum visited President Jonathan in the wake of the national debate over the payment of the new N18,000 minimum wage ($120). The governors pleaded their inability to pay the new wage bill and suggested the removal of fuel subsidy to ensure that more money accrues to the Federation Account, which will in turn be shared among the three tiers being federal, state and local governments.1 However, the Chairman of the Forum, Governor Chubuike Amaechi of Rivers State later stated that contrary to the prevailing notion that the Governors' support for the removal of fuel subsidy is hinged on their inability to pay the new minimum wage, they wanted it removed because only a few people were benefitting from the subsidies. He added that 'with billions spent on fuel importation and we are not seeing the fuel, refineries are not in place … if we remove the subsidy, then people will establish refineries … the refineries will employ people and make fuel available.2 The debate over subsidies was further fuelled on the 4th of October 2011 when Nigeria's President Goodluck Jonathan forwarded to the National Assembly [Senate and House of Representatives] the 2012-2015 Medium Term Expenditure Framework, and the 2012 Fiscal Strategy Paper. Among other issues, the documents proposed to phase out what government called its subsidy on fuel beginning in 2012. According to the President, this will make available about N1.2 trillion - some of which will be available for use in creating safety nets for the poor who will be adversely affected by the removal of the subsidy, and also go into the establishment of 'critical infrastructure'.3 In a similar effort, the Minister of Finance, Dr. Ngozi Okonjo Iweala explained that removing the subsidy is 'a good direction to go';4 with Petroleum Minister Allison Madueke adding that continued fuel subsidy amounted to a significant drain to national resources.5 By January 2012, there were revelations that amount expended on fuel subsidies in 2011 was much higher than what the government was keen to admit. While it has been estimated that government expenditure for this purpose was about N561 billion in 2010, the figure at least tripled in 2011 even though there was no substantial increase in fuel consumption between 1 http://sweetcrudereports.com/2011/10/03/nigeria%E2%80%99s-unending-flirtation-with-deregulation/ 2 http://www.thenationonlineng.net/2011/index.php/news/19044-why-governors-want-fuel-subsidy-removed-%E2%80%93amaechi.html 3 http://allafrica.com/stories/201110050736.html Note that in 2006 when Nigeria exited Paris Club debt, the government also announced that savings from the process will be invested in critical sectors such as education, health, and public infrastructural development. 4 http://www.nigeriancompass.com/index.php?option=com_content&view=article&id=6464:as-governors-await-sharing-of-subsidy-windfall&catid=81:politicalnews&Itemid=618Http://allafrica.com/stories/201108021476.html FUELS OF DISSENT 09 Social Action Briefing the periods.6 It has also been reported that many oil marketers that benefited from the subsidy payments were also the main financiers of the electioneering campaigns of the ruling PDP.7 To put this in perspective, we are talking about almost half of the budget of the federal government being expended through fraudulent payments to so called ful importers.8 How did we arrive at this latest crisis point? Is it even true that the government subsidizes petroleum products in the country? If true, is there anything wrong in government providing subsidies to boost economic activities or to lessen the misery of the vast majority of Nigerians? This is the same period when the government is benefiting from high revenues due to increased crude oil production and record high global oil price. The well-publicized submissions of Prof. Tam David West, retired Virology Professor at the University of Ibadan and former Petroleum Minister, and that of Dr. Izilien Agbon, a Nigerian energy expert based in the US, have been that the subsidy itself does not exist.9 They advise that the nation's four non-functioning refineries should be repaired immediately to meet the local consumption of kerosene, petrol and diesel.10 The other pertinent question is: what is the practice in the so called advanced Western economies, which have been the greatest champions of deregulation and zero subsidy in the economy through multilateral agencies like the IMF and World Bank? It's a moot point to begin to reiterate the obvious: the bastion of capitalism, the US, has been subsidizing its oil and agricultural sectors for a long time, and this has never roused the intervention of the IMF and the World Bank. Subsidy to farmers remains at the core of agriculture in the United States and countries of Western Europe. Background to Nigeria's 'Oil Curse’ To assert that Nigeria's economic history like its political evolution has been over-determined by the revenue from oil and gas is to state the obvious. Nigeria is one of the oil major petroleum exporting countries, producing about 2.6 million barrels of crude oil per day, and a lot of natural gas. Nigeria is believed to have the world's eighth largest reserve of natural gas estimated at not less than 5.9billion m3.11 Virtually all of the exploited Protesters in Benin 6 http://allafrica.com/stories/201109150472.html 7 http://www.thenationonlineng.net/2011/index.php/news/32864-subsidy-beneficiaries-financed-jonathan%E2%80%99s-election,-says-el-rufai.html 8 This does not include the budgets of states and local government where about 60% of oil revenues are expended. 9 Saturday Sun, January 7, 2012, Vol 8. No 471, Pg 14-18 10 The Nation, January 18, 2012, Vol. 7 No 2008, Pg 17-18 11 en.wikipedia.org/wiki/Oil_reserves FUELS OF DISSENT 10 Courtesy: Ken Henshaw Social Action Briefing petroleum is exported. The country is Africa's largest petroleum exporter and consistently in the top ten of global oil exporters. Petroleum exports provide significant profits for oil companies and revenues for the government of Nigeria. However, the bulk of the revenues end up stolen by corrupt politicians and their cronies, who have bled Nigeria to a point of near shock. They have grown stupendously rich, increasingly so since the end of military rule in 1999. During the same period the majority of Nigerians have sunken deeper and deeper into poverty. Nigerians could never have imagined the extent of the controversy and conflict the discovery of oil would generate and the pains it would cause them in the long run. Even after the revenue generated from oil export became a welcome addition to what accrued from agriculture which was the mainstay of the economy up to the late 60s, no keen chronicler of Nigeria's history would have foreseen the stupendous rot now buffeting the country's economic development. Signs of imminent decay began to set in by the early 70s. That was the beginning of the era of oil boom, when revenues from crude oil exports effectively supplanted agriculture as the mainstay of the Nigerian government. Awash with petro-dollars, the country bubbled in a newfound affluence and the Nigerian government lost its bearings. General Yakubu Gowon, who was then the Head of State, was to affirm this loss when he naively declared that Nigeria's problem was not money, but how to spend it. That official indiscretion, enunciated by the highest official of government at the time, foregrounds the crass absence of leadership vision that ensures the country remains underdeveloped. With increased dependence on earnings from oil export, other sectors of the economy slid into neglect. Agriculture was worst hit. All eyes shifted away from cocoa in the South-West, groundnut in the North, rubber in the Mid-West and palm oil in the South-East. The emerging Nigerian manufacturing sector dwindled. All the attention of the government, and the elite that it nourishes, turned towards the swamps of the oil bearing Niger Delta. In no time, the Nigerian National Oil Corporation (NNOC), the state-owned oil company which shortly morphed into a behemoth named Nigeria National Petroleum Corporation (NNPC), was established. Rather than design a viable platform for the effective take-off of a truly Nigerian oil industry, NNPC floundered ceaselessly, only to eventually betray its lack of focus by sealing Joint Venture deals with foreign multi-national oil companies that made certain Nigeria does not have an indigenous oil industry to boast of. NNPC that ought to be a healthy competitor of thriving oil corporations, such as Petrobras of Brazil, Malaysia's Petronas, and Aramco of Saudi Arabia, is currently immersed in widespread mismanagement and high-level fraud. FUELS OF DISSENT 11 Social Action Briefing Nigeria has since become the continent's poster child for embarrassing irony. At independence, just over fifty years ago, Nigeria rubbed shoulders with the likes of South Korea, Brazil and India in terms of potentials for industrial growth. While these countries, none of which is grouped among the world's crude oil producers, have long established a firm base for industrial development, Nigeria still appears to be where it was in 1960, if not worse off. Infrastructure in Nigeria has deteriorated to a point of crisis. The country generates less than 3 thousand megawatts of electricity daily to service about 150 million people through its national grid. Electricity generated by the public utility is not even enough to meet the energy needs of individual cities in Nigeria. With very irregular electricity from the national grid, homes (that can afford it), large and small businesses and other electricity users have to generate their own electricity. This is by owning petrol or diesel powered electric generating sets. If you live in Nigeria or do business in Nigeria, you will depend more on your own private generator than on publicly supplied electricity. Homes and businesses also have to drill their own water due to the collapse of public water systems in urban areas while most rural areas lack access to clean water. The implication is that many small businesses can't cope. Even larger companies have shut down, in part because of the insufficient electricity regime. Families are expending large amounts of incomes on energy. This includes expenses for kerosene, which is the most commonly used cooking fuel among the people with lower incomes in Nigeria. every instance the cost of fuel has been hiked, there has been an attendant increase in the cost of livelihood The official minimum wage in Nigeria is N18, 000 (about $120) a month. But many employers, including some state governments, have been unwilling to implement it with their employees. Many people in the country that operate outside of the formal public or private sectors earn less than the official minimum wage. Youth unemployment is high. We also have to factor in transportation. Nigeria doesn't have any functioning railway system, for a country of 150 million people. Mass transit is mostly by way of small buses and small cars. Price of fuel could determine the prices of everything and affect productivity and incomes in the country. The link between the cost of fuel and increases in the cost of living and making a living, in particular the cost of food and other consumables, is one that has since been established. Even reports by the IMF indicate that high fuel costs are instrumental in rising food prices. In the case of Nigeria, the effect on livelihood is worse; from the cost of food prices to 12 http://www.businessdayonline.com/NG/index.php/economic-watch/23393-high-volatile-food-prices-threaten-worlds-poor--report- FUELS OF DISSENT 12 Social Action Briefing AUTHORITY STEALING AND THE HISTORY OF FUEL SUBSIDY REMOVAL The mismanagement of the petroleum sector by successive governments (from the General Yakubu Gowon era in the early 1970s, through the Murtala/Obasanjo regimes of the mid 70s to ex-President Shehu Shagari's need to implement “Austerity Measures” in the early 1980s) reached its troubling height during the military dictatorship of General Ibrahim Babangida in the late eighties. HISTORY OF PETROL PRICE INCREASES (PER LITRE) The word 1 October 1978 8.45 kobo to 15.3 kobo. “subsidy” 20 April 1982 20 kobo first burst 31 March 1986 39.5 kobo into the 10 April 1988 42 kobo consciousnes 1 January 1989 60kobo (private cars) and 42kobo s of Nigerians (commercial) in 1987 when 19 December 1989 60kobo (uniform pricing restored) t h e 6 March 1991 70kobo. Babangida 8 November 1993 N5, r e g i m e 22 November 1993 (reduced to N3.25k following popular became the protests) very first to 2 October 1994 N15 (reduced two days later to N11). popularize it 20 December, 1998 N25 (reduced to N20 a month later on 6 with the January 1999). announceme 1 June 2000 N30 (reduced to N25 one week later. nt of the Five days later, on June 13, 2000, removal of price per litre was further reduced 80% of soto N22 a litre). c a l l e d 1 January 2002 N26 subsidy on 23 June 2003 N70 premium motor spirit (PMS-petrol). That decision led to the increase in the price of fuel, which inevitably escalated inflation in all sectors of the economy. Not unexpectedly, protests and demonstrations erupted in cities across the country, calling on the regime to reverse itself. In retrospect, when President Ibrahim Babangida initiated the oil subsidy withdrawal, he announced that savings from the cut would be used to develop other sectors of the economy that would ultimately improve the lives of the people. Nigerians did not see that happen. The regime rather went down in history as the greatest propagator of institutionalized corruption and grand deception in Nigerian public governance. Thereafter, “subsidy removal”, became the passphrase ready to be deployed by government in a hunt for quick cash once the country goes “broke”. It was also to haunt Nigerians during the dictatorship of Genaral Sani Abacha in 1995. Like his FUELS OF DISSENT 13 Social Action Briefing predecessors, Abacha's also promised some relief measures with the establishment of the Petroleum Trust Fund (PTF) to manage the extra money arising from the subsidy cut. He sought credibility for the PTF by placing another former Head of State, General Muhammadu Buhari, reputed for his personal discipline and aversion to corruption, to manage the funds. The PTF seemed to have made some impact in the areas of building and rehabilitation of schools, clinics, hospitals, and roads in different parts of the country. This period coincided with the malfunctioning of the country's four refineries, due to poor maintenance, that resulted in their inability to refine enough crude oil for domestic consumption. With refineries not functioning properly, despite millions of dollars voted for their periodic maintenance, Nigeria, Africa's major oil producer and exporter now imports refined petroleum products like petrol, kerosene and diesel. The Nigerian government says it pays the importers a 'subsidy', being whatever differentials between the cost of importation, and the locally regulated price. At this time, the nation's economy was on a free fall from long years of large scale corruption and the neglect of the fundamentals - a sustained and proactive developmental vision that builds and maintains human capital and socio-economic infrastructure to keep pace with the growing populace and needs of the nation. By the time President Olusegun Obasanjo assumed office under a supposedly democratic dispensation in1999, the state of the refineries had considerably worsened and importation of petrol, diesel, and other petroleum products increased in tempo. And so did corruption. All manner of shady deals, all of which were never beyond the presidency and the NNPC, prevailed. Oil and Gas business became an all-comers job. All kinds of quacks with links to the presidency and the hierarchy of the NNPC, most of them sympathizers of the ruling party, some with offices no more than just brief cases, joined the widening rank of the so called fuel importers. This was truly the beginning of the era of the so called “cabal” which tightened its grip on the jugular of the petroleum sector in subsequent years. Amid all this, Obasanjo still did his bit to turn the screw on the national misery by surpassing his predecessors in the removal of oil subsidy. One of the first things he did as President was to scrap the PTF on the grounds that it was illegal. He spent eight years as civilian President and withdrew subsidy on fuel on six different occasions, each time unilaterally, in complete disregard to the principle of constitutional governance. On each of these occasions, his action was greeted with outrage, followed by nationwide workers' strike and protests, and demonstrations by civil society groups, which invariably turned violent and recorded fatalities. It is understandable if neither Babangida nor Abacha consulted with the public or stakeholders before imposing higher prices of petroleum products on Nigerians, since they were military dictators. We can't say the same for Obasanjo's government that came to being through seeking FUELS OF DISSENT 14 Social Action Briefing the people's mandate via the ballot. Oftentimes, his security agents and the police clashed with officials of the Nigeria Labor Congress (NLC) led by Adams Oshiomole in their bid to stop their peaceful protests against the umbrella body of workers. Nigeria's first refinery was established in Port Harcourt with a capacity to refine 35,000 barrels of petrol daily. An expansion was carried out in 1971 to raise the daily production capacity to 60,000 barrels daily. In 1978, another refinery was established in Warri with a daily production capacity of 125,000 barrels. In 1980, yet another refinery was commissioned in Kaduna to produce 110,000 barrels of petrol on a daily basis, and another in Port Harcourt with an installed daily capacity of 150,000 barrels in 1989. Cumulative installed refining capacity was 445,000 barrels daily.13 Unfortunately, all the refineries are functioning at far less than their installed capacities, causing Nigeria to import over 80% of petroleum fuels for domestic consumption. This trend has continued unabated despite the huge resources allocated for the periodic Turn Around Maintenance (TAM)of the four refineries. Between 1999 and 2004, more than N90 billion was spent on getting the refineries producing at their full capacities. No positive result was achieved from the huge expenditures.14 In 2010 industry statistics showed that $75 million had been spent on the Kaduna refinery alone, while the Port Harcourt and Warri refineries had received $137 million and $152 million respectively.15 The amount of resources wasted on fruitless TAMs would have been able to build completely new refineries with the same total installed capacity in a period of 3 years! The none performance of the refineries had come to the fore in 2010 when the Federal House of Representative summoned the leadership of the NNPC to explain what it termed the 'fraudulent award of a $75 million contract at the Kaduna Refinery'. A member of the legislative house queried “Nigeria is too big for a group of persons to be deceiving us. The contract agreement signed was $23 million, but the turn around maintenance (TAM) takes about $75 16 million. This shows that there is a cabal in NNPC. To general public acclaim, the feisty President of NLC and his comrades were consistent in their rejection of subsidy withdrawal, and their recourse to strike as a weapon to force the government to back down or meet them half-way was always applauded. But with the country usually grounded for days and recording massive human and material losses as a result, both parties often came to a compromise to avoid further “trouble”. However, prices of goods and services that had already gone up never climbed down. That champion of 13 14 15 16 http://www.unctadxi.org/sections/DITC/Finance_Energy/docs/ditc_commb_energy_0200.pdf http://www.newswatchngr.com/editorial/prime/Cover/10621122115.htm http://allafrica.com/stories/201011221355.html http://thenationonlineng.net/web2/articles/38273/1/Reps-accuse-NNPC-of-fraud-in-award-of-75m-Kaduna-refinery-contract/Page1.html FUELS OF DISSENT 15 Social Action Briefing workers' rights is today the Governor of Edo State and, like Mr. Labaran Maku, the Information Minister (who as a student activist, led protests against fuel subsidy removal), has become a strong supporter of the petroleum subsidy removal policy of the present government. Like Babangida's military regime, Obasanjo's civilian government never put in place any known mechanism that worked to reduce the effects of inflation caused by fuel price hike. PRESIDENT JONATHAN, DEREGULATION & OIL SUBSIDY The very last time General Obasanjo's administration removed fuel subsidy was towards the tail end of his second term in 2007. One litre of petrol which sold for 65 naira (about 43 cent) was hiked to 70 naira (about 46 cent ). That action was trailed by the usual outrage, but there were no prowlers or strikes. President Umaru Musa Yar'Adua who succeeded Obasanjo quickly returned the cost of a litre of petrol to the old price of 65 naira (about 43 cent) sensing that the mood of the people was one of total rejection of subsidy removal. Not only that, he also cancelled Obasanjo's last-minute sale of three state refineries to two businessmen who were Obasanjo's close friends. But no sooner had Jonathan become president after the April 2011 election than words began to spread that plans were on to withdraw the subsidy on oil. At first, Nigerians could hardly believe it. The question on many lips was how a man who served as vice president in an administration that got all the praise for renouncing fuel price increase, now turn around as president to make that very obnoxious policy the cornerstone of his administration's development programme? The more poignant question was: why would a president who campaigned using his poor background as point of reference, who repeatedly made an issue of the years he walked to school without shoes, now decide to inflict hardship on the people whose pain he claimed to share? The Jonathan administration said it was forced to embark on a full deregulation of the petroleum sector because it could not afford to continue paying huge amount in subsidizing petroleum products. It contended that the subsidy which rose from N260 billion in 2010 to N1.3 trillion in 201117 is enjoyed only by a group of oil importers it called the “cabal”, and not the people for whom it is meant. The administration linked the complete withdrawal of the subsidy to the survival of the economy. It estimated an annual income of $8 billion once the subsidy removal kicked off and declared that the economy would “collapse” if this step was not taken. 17 In the 2011 federal government budget, a total of N240billion was allocated to the Nigerian National Petroleum Corporation to finance subsidy at an average of N20billion monthly. Government went ahead to exceed the allocation without seeking supplementary approval from the National Assembly. FUELS OF DISSENT 16 Social Action Briefing To underscore its determination to toe this path, it conscripted all relevant agencies of government, mobilized well-known private sector “experts”, and some pressure groups and religious leaders, to drum the propriety of the so-called deregulation into the ears of the people. President Jonathan's 2011 electoral campaign platform, Neighbor to Neighbor was hurriedly converted to the cause of propagating the benefits of fuel price increase. The source of the huge financial resources for that elaborates media campaign remains hazy. The foot soldiers quickly seized the airwaves and other media platforms to pass the incongruent message. To further confuse Nigerians, the government said it was not in a hurry to go ahead with the plan as yet, promising to “consult widely with all stakeholders” before reaching a decision. It turned out to be a lie. The government's mind was already made up. At the same time, governors across the country, driven more by greed and self interest, w e r e a c t u a l l y masterminding the current removal of subsidy. There were reports that they arranged a secret deal with President Jonathan that the only way they would be able to pay the N18, 000 ($120) minimum wage was if the price of petrol was Anti-fuel price hike protest in Port Harcourt increased. The president promptly acquiesced, Courtesy: Ken Henshaw knowing that would mean more money at the disposal of the federal government and the states. Evidence that a deal was indeed struck was when the Nigeria Governors Forum publicly threw their weight behind the federal government on the removal of fuel subsidy and urged it to continue talks with the stakeholders. On the other hand, Nigerians who opposed subsidy removal were in the majority. Their voice was echoed by two broad workers union, the Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC), as well as healthy mix of people-centered civil society organizations. The strongest government voices in favour of subsidy removal were those of Dr. Ngozi Okonjo-Iweala, minister of finance and coordinating minister of the economy, Sanusi Lamido Sanusi, governor of the Central Bank of Nigeria (CBN), Diezani Allison-Madueke, minister of petroleum resources, Labaran Maku, minister of information, and Emeka Nwogu, minister of labour. From the Governors Forum, Governor Adams Oshiomhole of Edo State was pushed forward to square up with colleagues in his former constituency, organized labour. The NLC, TUC and leaders of civil society organizations (CSOs) insisted that there was no subsidy and called for a debate with government officials. FUELS OF DISSENT 17 Social Action Briefing How the Government has arrived at its Calculations The Petroleum Product Pricing Regulatory Agency (PPPRA) argued that the actual cost of landing a litre of petrol in the country is N144.70. Calculated against then prevailing pump price of N65, the government claimed to subsidize each litre with N79.70. For the sake of emphasis, it is reasonable to recreate a hypothetical process of getting petrol to the filling stations. When crude oil is extracted from numerous oil field in Nigeria, the Joint Venture Partners take their entitlement (45% for Shell and 40% for other Oil Majors) while the rest is handed over to the relevant Nigerian Agency. This agency sells the Nigerian share of crude at prevailing international market prices. With this sale concluded, the buyer takes the cargo through the Ocean abroad to be refined. The buyer would have had to pay at least custom charges in Nigeria, and would also pay the cost of freighting the crude. Once in the country of destination, the same businessman will have to pay additional custom charges, and once again cost of freight to the refinery where the crude is processed into petrol and other bye products. At this point in the chain, tax is paid in the country of refining, workers are paid and a profit margin added. The same product now refined into petrol is purchased and again freighted from the refining country, through the ocean and into Nigeria at huge cost. The cost of this cumbersome and unnecessary process the government claims amounts to N144.70 per litre, and it is from this amount that its subsidy is calculated. Nigeria is the only member country of OPEC that exports crude oil and imports a substantial part of the refined petroleum products used domestically. To prove their case, the opponents of subsidy removal argued that the amount government was claiming as subsidy in 2011 was arrived at fraudulently. The “oil cabal”, they argued, was known to government and could be reined in if government was interested in sanitizing the petroleum sector. After all, it is the same government that grants the licenses. The CSOs in particular were vehement in their opposition to subsidy removal. They argued that indeed what the government had been subsidizing was corruption and not oil as people were made to believe. They hammered on the cruel paradox of a leading oil producing country that relished importation of refined products, urging the authorities to fix the four refineries and build more in order to halt the nightmare of importing refined petroleum products through their crooked friends whom they camouflaged as “cabal”. Pretending to be a listening administration, the government, on Dec 19 2011 invited the organized labour and civil society representatives for talks. The government showed its true colours by rocking back and forth, avoiding the real issues as enunciated by labour and the CSOs. The anti-fuel subsidy team had tabled an argument showing that the true cost of a litre of fuel was N34 (22 cent) and not the official FUELS OF DISSENT 18 Social Action Briefing price of N65 (43 cent).18 Jolted by this revelation, government asked the team to return in two weeks19 and make a more formal response to its proposed (read decided) plan to remove subsidy on petroleum products. Inside that period, the Newspapers Proprietors Association of Nigeria (NPAN) on December 22, 2011, organized a town hall meeting in Lagos inviting the pro and anti-subsidy removal groups to a debate. Government was represented at that debate by the tag team of Dr. Ngozi Okonjo-Iweala, Lamido Sanusi and Allison Madueke while civil society had a formidable representation comprising labour leaders, pro-democracy and human activists. At that event, snippets of truth emerged that there was no subsidy after all. Representatives of civil society urged government to explore other sectors of the economy to raise revenue instead of seeking to punish the innocent poor for government's failure to arrest and prosecute the “cabal” whom it said was the sole beneficiary of the subsidy. The government team could not tell Nigerians the volume of daily consumption of petrol in the country, or the quantity refined at by local refineries. Nothing was specific. Even the landing cost of imported PMS varied from N138 to N 139 to N140 and N141, depending on the government official speaking, meaning that a litre of petrol is subsidized for over N70. The only specific thing was that subsidy had to go. In a familiar arrogant language borrowed from the Obasanjo era, government officials repeated countless times: “There is no going back on subsidy removal”. And in what seemed like a plea, former president of the NLC and now governor, comrade Adams Oshiomhole, to the dismay of many people, asked Nigerians to cooperate with President Jonathan on the fuel subsidy issue, “otherwise, the economy would collapse”. The representatives of the government flashed statistics showing that a litre of petrol sells cheaper in Nigeria than in neighboring countries, but they avoid the embarrassing reality that (1) these are not oil producing countries, and (2) the minimum wages in those countries were far higher than the meager amount of (N18,000) that the Nigerian government offers its workers. They nonetheless restated the position that no date had been fixed yet for the removal of subsidy; that they would “carry everybody along” by consulting extensively to persuade the people to see reason in the government policy. That was a most spectacular lead-on from a government that never tires of telling everybody that it exists in the interest of the people. On January 1, 18 The Guardian, January 9, 2012, Vol. 29, No 1265, Pg 26. 19 The Nation, January 18, 2012, Vol. 7, No 2008, Pg 24. FUELS OF DISSENT 19 Social Action Briefing 2012, ten days after the town hall meeting and the bogus promise to take the fuel subsidy debate round the country, government through the Petroleum Products Pricing Regulatory Agency (PPPRA), the discredited agency that played similar roles during Obasanjo's government, announced the increase in the pump price of petrol from N65 to N141, a whopping 117% increase. That increase, in government's book, signaled the first step in the deregulation of the petroleum industry. Deregulation as an Attraction for Foreign Direct Investment Key members of the government made the argument that full deregulation of the oil sector will attract investment especially in the establishment of new refineries. It is also speculated that the share number of refineries which these investors will establish will engender competition which will in turn drive down the pump price of fuel. While in some cases this assertion may be reasonable, it is hardly so in the case of Nigeria. Some of the key considerations investors make in the choice of investment environment include the security of their investment, the availability of power and the state of infrastructure. Unfortunately on all these counts, Nigeria falls short of an investment destination. With the current state of the aforementioned, any talk of attracting Foreign Direct Investment is either deceptive or outright puerile. A case that buttresses the futility of this expectation is that of Michellin Tyres a once thriving manufacturing firm in Nigeria that recently closed its factory. We came to Nigeria in 1960 but had to close our factory in the country four years ago, located in Port Harcourt, because of the prevailing situation in the economy, laying off thousands of workers. You have a country where infrastructure is almost nonexistent. We produce tyres using diesel. Even when NEPA (PHCN) gives us power, the quality of the power is not good because of the fluctuating nature which could jeopardise an entire production process. So even when there is power, we had to use our generator to give us quality and stable electricity to be able to produce a very high quality tyres…While we were dealing with the energy situation, we had other crises to deal with. Some of the raw materials we needed to produce tyres were stocked at the port due to massive congestion. We had a situation where hundreds of our containers were trapped. At a point we had to start diverting the FUELS OF DISSENT 20 Social Action Briefing containers to other ports within the region that is quite a few miles from the central of south, and the roads were very bad.20 Unprecedented turnout at the Lagos protests THE MASS PROTEST The sudden removal of fuel subsidy by the federal government on New Year's Day came at a time the Nigerian public doubted if a subsidy existed. The more conservative opinion felt the timing was wrong. It came at a time government said it was still consulting for a more lasting consensus on the issue. The rush to implement the subsidy removal was seen as an affront by Nigerians. Governance, after all, is about the people. A serious government ought to have taken into consideration the opinion of majority of its citizens. From all social indicators, Nigerians were already impoverished by the misrule of the political elite. Therefore, the spontaneous nationwide protests that followed what is widely seen as imposition of petroleum tax on the people were not unexpected. Across the country, from Lagos to Abuja, Benin, Ibadan, Port Harcourt, Calabar, Owerri, Warri, Asaba, Enugu, Abeokuta, Ilorin, Kaduna, Kano, Bernin-kebbi, Gombe and Lokoja, it was a boiling pot of anger. Those who travelled for the Christmas and New Year holidays were yet to return to their bases when the price of petrol jumped from N65 to N141. Many cried and poured invectives on the government. Rising from an emergency labour and civil society meeting, Labour unions and their civil society partners told the federal government to revert to N65 or face the wrath of the people. The federal government was given up to the 9th of January to revert or face nationwide strike and mass actions across the country. By the time the strike and street protests coordinated by labour and civil society groups began on January 9, the entire country was grounded. For the first time in the history of protests in Nigeria, the people were united across religious and ethnic divides. This was one protest whose unanimity of purpose was applauded by all and sundry. Christians and Muslims, northerners and southerners marched together peacefully. In Kano state and elsewhere, tension between Christian and Muslim communities was no longer a factor as both communities collaborated and protected each other from harm during the protests. Christians formed a human shield around Muslims 20 1http://234next.com/csp/cms/sites/Next/Home/5728740-146/were_making_more_money_importing_tyres.csp FUELS OF DISSENT 21 Social Action Briefing while they prayed. Muslims in turn, visited churches and assured Christians of solidarity and protection. Protest by Nigerians in diaspora were held in major cities around the world. In the UK, Canada, USA, Ghana, South Africa and other countries, Nigerians took to the streets to register their anger at a policy that ultimately imposed more hardship on their compatriots at home. As the demonstrations began in Nigeria, government thought people would burn out in two days of the strike and get back to work. When they did not, President Jonathan and his officials resorted to blackmail, calling opposition politicians names and accusing them of plotting a regime change. When it became apparent that blackmail was of no effect, government became jittery and quickly invited Christians form protective chain around labour for a fresh dialogue. In all, three Muslim protesters in prayer meetings were held, with civil society Courtesy: Lawal Gambo coordinators of the protests represented. As the meetings failed to achieve compromise, the federal government unilaterally announced N97 as the new price of petrol, without the input of labour and civil society. A day after the announcement, without consultation with civil society partners, labour called off the strike. Civil society was determined to continue the strike, and indeed resumed the protest in Lagos only for armed soldiers to be drafted to the city to stop them. In spite of the casualties recorded across the country, the strike and mass actions proved to Nigerians and the whole world that civil society groups can indeed play a leading role in the process of rebuilding the country. Throughout the period of the protest they provided leadership, showed commitment and exhibited courage in their mobilization of the people towards the objective of the protest. It has been argued that the protests did not achieve the demand for a full reversal to N65 per litre, and that that indicates a failure of the actions. However, the major import of the protest actions may be that in a few days in January 2012, Nigeria had attained a level of mass mobilization and solidarity unprecedented in the history of the country. The political leaders now know that citizens can no longer be taken for granted. Without FUELS OF DISSENT Protests in London Courtesy: Leadership Newspaper 22 Social Action Briefing doubt, the strike and mass actions conferred on the citizens an aura of leadership they were scarcely associated with in the past. The success ascribed to the uprising would not have been recorded without the vigorous mobilization of citizens and civil society groups. When the strike was called off in a manner that many people described as hasty, the public protested loudly and criticised organized labour for what was considered capitulation. On the other hand, with their robust participation in the protests, the CSOs more than underscored the essence of democracy. They have helped in deepening democratic governance through mobilizing the people to demand accountability and transparency from their leaders. Fall-out of the protest The size and intensity of the protest was unprecedented. The demands of the protesters though hinged on good governance, the strident call on the authorities to stop the rot in the petroleum sector was unmistakable. The message was clear: corruption, the monster which had bedeviled the oil sector for decades, must be confronted and crushed now. The government, badly shaken, could not afford to ignore their call. Minister of Petroleum Resources, Diezani Allison-Madueke promptly cobbled together some interim measure which, she hoped, would bring about serious reform in the sector. The minister invited the Economic and Financial Crimes Commission (EFCC) to take over the offices of the Petroleum Products Pricing Regulatory Agency (PPPRA). She set up an 11-man task force on governance and controls in NNPC and other parastatals in the ministry of petroleum resources. The committee was given 30 days to submit its report. There was also an eight-man team, headed by Senator Udo Udoma, to quicken the passage of the Petroleum Industry Bill, which had been before the national assembly, and expected to synchronize and sanitize operations in the oil sector. The federal government engaged the services of two firms to carry out an independent audit of payments in the country's oil and gas industry as well as ascertain the amount of oil sold from 2009 to 2011. There was also a 17-member Petroleum Revenue Special Task Force headed by former chair of the Economic and Financial Crimes Commission (EFCC) Nuhu Ribadu with terms of reference including working with consultants and experts to determine and verify all upstream and downstream petroleum revenue taxes and royalties due and payable to the federal government. President Jonathan approved the composition of a National Refineries Special Task Force (NRSTF) headed by a renowned economist and a former minister of finance, Dr. Kalu Idika Kalu. The NRSTF is to ensure self-sufficiency of petroleum products in Nigeria “within a strong framework in the shortest possible time.” It will also conduct a high-level assessment of the nation's four refineries and produce a report within 60 days. FUELS OF DISSENT 23 Social Action Briefing THE PALLIATIVES As was often the case under past administration whenever oil subsidy was removed, the Jonathan administration saw the need to put in place a package aimed at reducing the effects of the inevitable rise in prices of goods and service as a result of the new increase in petrol price, which has always been the most conspicuous and controversial outcome of the policy. First, government commissioned 1,000 for mass transportation. The buses had been the subject of mild controversy between government and the Trade Union Congress (TUC). When government officials made it look like the buses were ordered by the Jonathan administration, the TUC through Peter Esele, its president, countered that the labour union actually facilitated the importation of the buses through a World Bank facility during the Yar'Adua administration. Five days after the government announced that it would purchase the buses as part of it palliatives, the buses were in Nigeria and ready for commissioning. Since the buses were not manufactured or bought in Nigeria, the question was how the buses could have arrived Nigeria in so short a time. Whatever the source, the questions Nigerians are asking is what impact will 1,000 buses make for mass transportation in a country of 150 million people scattered around 774 local government councils? But the real plank of the government's palliative is the Subsidy Reinvestment Empowerment (SURE) programme which government hopes will tackle the gaps in social infrastructure in the country. Government plans to fund the SURE programme with the revenue from the increase in the price of petrol. To give it some level of credibility, Dr. Christopher Kolade, a former chairman of Cadbury Nigeria Plc and a man with good public service record was appointed to head the SURE programme. Regrettably, there is nothing new in the programme as everything it promises to deliver can be found in the 2012 budget. Few days after officially unveiling Kolade's panel, President Jonathan announced that the SURE programme will not be implemented as planned because the subsidy was only partially removed. Still, there are some who believe that the Kolade panel is illegal and want the SURE programme discontinued, just as Obasanjo scrapped the PTF on the basis that if had no legal backing. THE NATIONAL ASSEMBLY'S INTERVENTION The very first involvement of the National Assembly in the oil subsidy issue came in the middle of what was a determined effort on the part of the government to cut petrol subsidy by any means necessary. Senator Bukola Saraki from Kwara State moved a motion on the floor of the Senate requesting his colleagues to look into a whopping N 1.3 trillion ($8.6 billion) government had budgeted as petroleum subsidy for 2011. Because of his antecedent and perception of him as a most unlikely advocate of the retention of subsidy, not a few Nigerians saw Saraki's motion as sponsored move to justify government's FUELS OF DISSENT 24 Social Action Briefing plan to end the alleged subsidy (Saraki attempted the Nigeria presidency under the platform of the ruling PDP). After a heated debate for and against subsidy withdrawal the Senate set up an ad-hoc committee headed by Senator Magnus Abe, not only to verify government claims, but also to find out whether or not there was subsidy on petrol. And if there is, whether it is up to the amount the government was claiming. The committee had not gone far in its investigation when subsidy was suddenly removed. Though Senator Abe and his colleagues continued their work, the lower chamber, the House of Representatives weighted in to save the country. As the threat of a nation-wide strike loomed, the House suspended its recess and hurriedly convened a special emergency session on Sunday January 8, 2012, to discuss government's action and its implication. Never in the history of Nigeria's legislature had a session been held on a Sunday. But this had to be so, for the nationwide strike and massive protest promised by the NLC/TUC and a coalition of CSOs was to begin the following day Monday January 9. At the end of that tempestuous session, which the henchmen of the ruling party tried in vain to stop from holding, the House stood on the side of the people by passing a resolution asking President Jonathan to suspend the withdrawal of subsidy and resume consultations with labour and other stakeholders. Like its Senate counterpart, the House also set up an ad-hoc committee to probe the management of oil subsidy. The petroleum industry investigations in both chambers of the National Assembly went on simultaneously. But it was the public hearing of the ad-hoc committee of the House of Representatives that gained prominence and etched on the people's consciousness for its shocking revelations. The 10-member committee could not hide its anger at the ineptitude of the heads of government agencies. The Nigeria National Petroleum Corporation (NNPC), Department of Petroleum Resources (DPR), Pipeline and Products Marketing Company (PPMC), Petroleum Products Pricing and Regulatory Agency (PPPRA), Accountant General of the Federation (AGF), Central Bank of Nigerian (CBN) and the Ministry of Petroleum Resources at different times presented conflicting figures on subsidy, claims, actual daily consumption of products and could not say whether or not certain accounts existed. In one case over N 220 billion ($1.4 billion) was discovered as overpayment to some oil marketers. In another instance, the CBN presented a subsidy amount of N1.75 trillion, ($11.6 billion) as against the N 1.9 trillion ($12.6 billion) quoted by the AGF. Both did not tally with the N 1.3 trillion or N 1.2trillion ($8.6 billion) the government presented as subsidy.21 When the minister of 21 The Guardian, February 12, 2009, Vol. 29, No 12099, Pg 44. FUELS OF DISSENT 25 Social Action Briefing petroleum resources, Diezani Allison-Madueke appeared before the committee she indicated that Nigeria's daily consumption of fuel was 35 million litres. But Reginald Stanley, Executive Secretary of PPPRA revealed that the volume of fuel actually imported was 59 million litres per day. What this means is that there is a gap of 24 million litres per day being funded by tax payers as subsidy that Nigerians do not benefit from. This amounted to approximately N 670 billion ($4.4 billion) in “extra” subsidy on petrol in the last one year. If this is backdated to the last three years, it means the country has lost trillions of naira to a clique that has held the country by the jugular over the years. This clique runs a close-knit scam linking different government agencies. The Nigeria Customs Service (NCS) told the committee that the bulk of imported fuel did not follow due process. Deputy comptroller general of the NCS, Julius Nwagwu said no invoices were attached during clearance of fuel and “most of the importation of petrol has no documentation”. The committee learnt that the NNPC did not make any documentation available to the NCS, and several meetings were held between the Ministry of Finance and the NCS where the latter was directed not to ask for documentations. The ministry specifically wrote to the NCS, warning them not to ask for documents “because this will cause crisis”. Besides the committee heard how the NNPC never bartered the mother vessels carrying imported fuel at Nigerian ports, contrary to the provisions of extant laws. The manifests covering these imports often bear offshore Cotonou in Benin republic, or offshore Lome in Togo. They never get to the Nigerian ports. Rather, smaller vessels pick these products from the mother vessels and come to the Nigerian ports to report to the customs in line with the provision of the enabling act of customs. The customs representative told the committee that the NNPC failed to pay duty on imported PMS worth N 45 billion ($300 million) from 1999 to 2002 when the duty was formally suspended by the Federal Government. The chairman of Nigeria Extractive Industries Transparency Initiative (NEITI), Professor Assisi Asobie, corroborated the customs allegations when he said the management of the country's crude oil and importation of petroleum products by the NNPC is deficient in transparency and due process. He told the committee that subsidy payments ought to be made from the Central Bank through the petroleum fund but that has not been the case with the NNPC. Instead, NNPC estimates the subsidy entitlements and deducts the estimated amounts directly from the domestic crude proceeds before remitting the rest to the Federation Account. During the audit of the oil and gas sector in 2006 and 2008, NEITI discovered inadequacies that complicated the problem of accurate determination of volume of imported petroleum products. Even now the measurement methods used by the PPMC and DPR are not in accordance with best practices. And FUELS OF DISSENT 26 Social Action Briefing when they do, they are not consistently applied and cannot be relied upon. NEITI also observed that the systems for recording the movements of refined products through the PPMC pipeline are outdated, paper-based and subject to error. In response to claims that NNPC deducts subsidy entitlements from the domestic crude proceeds before paying to the Federation Accounts, NNPC, through its group Managing Director, Austin Oniwon, said the company only deducts what is authorized by PPPRA. According to Allison-Madueke, the deductions for subsidy by NNPC are legal, citing section 5(80) (3) of the 1999 constitution, as amended, which she says empowers NNPC to deduct from source. Regardless of their spirited defense, the committee was told that NNPC does business with companies already indicted for operating unethically. For instance, the Kerosene Direct, a scheme that would take the product to the doorsteps of Nigerians was handled by a popular company found to have sold NNPC products in its tanks without authorization. Members of the committee were shocked when the group Managing Director of NNPC told them that NNPC had “a commercial issue” with the company “and we have resolved them”. All the companies doing business with NNPC were invited to appear before the committee. At the sitting, it was discovered that any incompetent person can do business with NNPC so long as the “connection is right”. The story is told of how some importers resident in the United States got electronic message from NNPC top shots telling them to register a company in Nigeria if they were interested in importing fuel. They did and became a fuel importing company. There was also the case of a company that was originally commissioned for waste management but which had no problems transforming into an oil importing company even without experience, expertise and capacity. Nigeria bound PMS is actually hawked on the high seas like oranges on the streets. The CBN was exposed in a grand conspiracy of sabotaging the Nigerian economy by encouraging massive capital flight from the country. The committee heard that to benefit from subsidy, CBN regulations do not give room for vessels importing petrol to Nigeria to berth on Nigerian waters, be it offshore or onshore. By implication, if a mother vessel berths on Nigerian waters, smaller vessels that go to lift products from her do so at their own risk because, in CBN's view, that does not constitute import. It only becomes import when the mother vessel berths in Cotonou or Lome and the smaller vessels go there to lift the products back to the Nigerian ports. That is when the importer qualifies for payment denominated in dollars, the only currency acceptable to mother vessels. The irony is that while imported PMS does not originate from Cotonou or Lome, the documents that qualify to be clarified as import and guarantee payment of foreign exchange, according to CBN regulations, must bear FUELS OF DISSENT 27 Social Action Briefing offshore Cotonou or offshore Lome. In view of this, the questions begging for answer are, why is it impossible for the mother vessels to berth offshore Lagos that is secured by the Nigerian government and has deeper ocean depth than republic of Benin and Togo? Why is it that a mother vessel that berths offshore Lagos would not be regarded as import and qualify for foreign exchange? And, if these mother vessels have no problem coming to Nigeria to lift crude oil as confirmed by Vitol, a company that imports kerosene for NNPC, why would they not be compelled to berth offshore Lagos to discharge their imports? Apart from the CBN conspiracy, the other reason mother vessels would not berth on Nigerian waters is the selfishness of Nigerian importers who avoid additional costs such as demurrage, port duties, and war risk insurance since Nigeria has been declared a war zone by some international bodies. The committee and the public did not find it amusing that government officials who appeared so efficient and honest could suddenly become so evasive and untruthful when it suited them. For example, heads of some of the agencies made great efforts to remember whether or not there was subsidy on locally refined products. To the petroleum minister, it depended on several things; to the NNPC GMD, it was so complicated the layman would not understand how it works. As for the Executive Secretary of PPPRA, there is subsidy for locally refined products. But his counterpart in the DPR noted there was none. Even the status of the subsidy account remains as controversial as ever. The petroleum minister owned up that it is a virtual account; though she could not explain it. The CBN denied any such account with it. The NNPC on its part was also not aware of the existence of the account, while the PPRA said it was a technical account. The AGF confirmed one account without funds, and the finance minister affirmed that it truly existed but not with a bank. The House committee investigation genuinely lived up to its billing. It was a mindboggling expose and a well rehearsed show of shame in which public officials engaged in extensive cover-up of massive thefts in the petroleum industry with its crippling effect on the economy. Conveniently, even the NNPC boss and head of agencies under that institution, forgot actual facts and figures, like the price of kerosene in the open market. Neither were they certain about the number of NNPC mega stations in Lagos. Yet, it was not as if they were not aware, as both the Senate and House of Representatives committees had shown in their investigations, that some Nigerian importers pass locally refined products for imported fuel so as to claim billions of naira in subsidy. The mess in Nigeria's oil sector is not just multi-faceted. It is deep. FUELS OF DISSENT 28 Social Action Briefing ISBN: 978-978-49394-8-5