Nigeria’s Subsidy Thief Stole The Headlines In 2012

By Funsho Balogun

The shocking New Year gift of an increase of pump price of the premium motor spirit (petrol) from N65 to N141 per litre by the federal government on 1 January 2012 was staunchly rejected by Nigerians at the time.

Although the price was eventually lowered to N97 per litre, the development triggered public outcry, culminating in a close scrutiny of what the federal government maintains is subsidy on petroleum products imported into the country.

On 8 January, the House of Representatives reached a decision to set up an ad hoc committee to probe the management of the fuel subsidy scheme, following nationwide protests that greeted the petrol subsidy removal. The aim was to examine the subsidy regime between 2009 and 2011. The Farouk Lawan-led eight-man committee uncovered alarming irregularities, including claims that the country paid subsidy on 59 million litres of petrol throughout 2011. The committee’s report was submitted to the House on 19 April after it took testimonies from 130 witnesses and studied evidence as voluminous as 3000 volumes of documents. The report indicted 71 companies for fuel subsidy offences. According to the report, they collected a total of N230.184 billion on PMS volume of 3,262,960,225 litres, but the fuel was never supplied. The indicted companies included Sea Petroleum and Gas, SPG, which has the Minister of Aviation, Stella Oduah as one of its directors.

The committee noted that some claims made by the 71 indicted companies could not be verified as the depots into which they purportedly discharged the products could not confirm receipt. It was also discovered that there were wide gaps between the dates that some of the importers claimed to have discharged their products and the date a receipt was confirmed from the depot. The report exposed the fact that some claims to volumes discharged by the marketers were not in tune with the volume received at depots. Marketers were also accused of not disclosing the date on which they discharged their products or the tank farms they discharged into. Some of them even refused to disclose the names of the vessels that discharged the petroleum products they claimed to have imported. Based on the defective transactions, the committee submitted that the companies did not deserve subsidy payments. The companies were also mandated to make refunds.

Other companies indicted in the committee’s report included Integrated Oil and Gas Ltd, largely owned by Emmanuel Iheanacho, the former Minister of Interior. The company was asked to make refunds to the tune of N13,252,055,429. Acorn Petroleum plc, in which Christopher Kolade and M.I Wushishi boast substantial shares were also listed among the companies found to have run foul of the proper rules of transactions. Chika Alexander Okafor’s A-Z Petroleum Products Limited was also indicted. Fifteen other companies that the committee fingered as allegedly obtaining subsidy without importing fuel included East Horizon Gas Co. Limtied, Pokat Nigeria Limited, Synopsis Enterprises and Emab Energy. Those that allegedly accessed foreign exchange without importing fuel included Index Petroleum Africa, Renad Oil and gas, Tridax Energy Ltd, Business Ventures Limited, Carnival Energy Oil Limited, Zenon Petroleum and Gas Ltd, Supreme and Mitchelles, Serene Greenfield Ltd, and Zamson Global Resources. Altogether, these companies allegedly collected $337,842,663.80 foreign exchange in 2010 alone without shipping a drop of fuel into the country. The committee put the total amount they should refund at N8,065,557,645.

Interestingly, Lawan himself was the first person to be thrown into public glare over bribery allegations. The bribery scandal rubbished the committee’s stand on transparency. While the public awaited the outcome of the result of findings by the Lawan-led ad-hoc committee, expecting the culprits to be brought to book, they were shocked to hear Femi Otedola, chairman of the Zenon group Forte Oil (formerly African Petroleum) accuse Lawan of collecting $550,000 bribe. Boniface Emenalo, the committee’s clerk also allegedly lined his pockets with $120,000 as part-payment of his own share. The purpose was for Otedola’s company to be erased from the list of the indicted in the committee’s report.

To prove that he was coerced into making the payments, Otedola claimed that Lawan insisted on collecting the money since other oil marketers had been paying huge sums into the committee’s coffers. According to the Zenon chief, Farouk disregarded his words that his company was not involved in the fuel subsidy manipulations in the first place.

Otedola’s allegation opened the floodgates to similar accusations against the committee by other indicted oil marketers. However, these marketers allegedly chose not to go public with their complaints regarding the committee’s alleged misconduct. A Police Special Task Force investigating the bribery allegation gathered information that not less than N11 billion was allegedly paid to the committee members by oil marketers. The indicted companies also lamented that they were only on the committee’s list because they refused to cooperate with the committee members.

The Attorney-General of the Federation and Minister of Justice, Mohammed Adoke, declared on 3 May 2012 that government was not yet considering the prosecution of individuals and firms discovered to have benefitted from the subsidy scam. His description of the exercise as mainly “fact-finding, which would require further thorough investigation before any move towards prosecution,” knocked, at that period, some weight off the seriousness and integrity of the whole exercise. The House of Representative’s ad-hoc committee’s findings were also faulted as lacking credibility because key actors who were in charge of the affairs of the Nigerian National Petroleum Corporation for the period of the subsidy regime under probe were not called upon to be questioned. And while some members of the Economic Management Team insisted that the report of the committee be followed, the issue of its credibility continued to rear its head. Many of the indicted firms also headed for the court to seek exoneration, alleging that they were not given fair hearing by the committee.

Consequently, the Federal Ministry of Finance set up another committee in May 2012 to scrutinise the fuel subsidy payments to marketers during the 2011 financial year. The Ministry had been shocked at the discovery that despite paying N1.7 trillion in subsidy by December 2011 and another N450 billion in the first quarter of 2012 to clear the 2011 backlog, there were still outstanding claims carried over from 2011.

The Finance Ministry’s committee, headed by Aigboje Aig-Imoukhuede, a banker and member of the EMT swung into action to further examine the process of subsidy payments. But on submission of its findings, it was criticised for not giving oil marketers and importers the chance to defend themselves. The barrage of fresh criticisms prompted President Goodluck Jonathan to set up a presidential committee, which was again headed by Aig-Imoukhuede, towards verifying and reconciling the findings of the earlier technical committee.

The final report of the Aig-Imoukhuede committee on claims verification uncovered a total of N382bn subsidy money as stolen in 2011. The committee stated in its report that it appears that processing and payments of subsidy claims were based on fictitious receipts of products. It was also discovered that “there was no proof of the existence of the mother vessel or bill of lading or the daughter vessel for some transactions for which subsidy was paid. The total value of subsidy paid in respect of such transactions was N11,762,998,358.89.

The Aig-Imoukhuede-led committee’s report came up with several names missing in Farouk Lawan’s list of the indicted. These included Oando plc, Folawiyo Energy Ltd, Lloyds Energy Ltd, African Petroleum plc, Majope Investment Ltd., Rainoil Ltd, A.A Rano Nig. Ltd., Sahara Energy, Forte Oil, Eterna plc and Practoil Ltd, amongst those listed in a fresh list of 50 more indicted companies. Chairman of MRS, Alhaji Sayyu Dantata, whose company’s name crept into the Aig-Imoukhuede committee’s list, was mentioned as one of those that had no evidence of sales proceeds in banks, as well as those that got subsidy payments without the signature of auditors. For Tope Shonubi of Sahara Energy Resources, his company was also listed for the same offence. Ifeanyi Uba’s Capital Oil was also accused of being paid without auditor’s report.

Mahmud Tukur, son of PDP chairman, Bamanga Tukur and Abdullahi Alao, whose father is Ibadan businessman, Arisekola Alao were dragged to court by the Economic and Financial Crimes Commission over fuel subsidy scam, along with Ochonogor Alex and Eterna Oil and Gas plc. They were charged before Justice Adeniyi Onigbanjo of the Ikeja High Court with fraudulently obtaining N1,899,238,946.02 from the Petroleum Support Fund, PSF, to import 80.3 million litres of PMS. Abdullahi Alao and Axenergy Limited also faced another charge of allegedly obtaining N2.6 billion as payments received from the PSF for the purported importation of 33.3 million litres of PMS. By October 2012, the EFCC’s information sheet showed that it had filed charges against nine oil companies and 11 individuals.