Friday, 23 November 2012

How to make Nigeria a bribery-free society

Bribery is an all pervasive phenomenon; and most people in the country engage in it one way or another on a regular basis. It is the linchpin of all financial crimes, yet it is a highly elusive concept, so much that countries around the world have struggled to pin it down with any degree of accuracy. The legal logic is pretty simple; you cannot outlaw something you cannot define. It goes without saying, therefore, that the more accurate the definition, the more precise will be the law to deal with it.  Most people generally understand bribery to involve an offer or demand from one person to another with the intention of inducing the other to alter their behaviour. Most bribery incidents involve money or some other items of value, and they range, for instance, from the ridiculous, such as giving a N20 note to a police officer on the road, to the gargantuan act of offering millions of dollars to a judge. The end, in both cases, is the same; that is to alter behaviour. Let me first explain why it must be outlawed even more forcefully than it currently is, and then counter that with the reasons why it cannot. I will then make an audacious suggestion at the end on how the incidence of bribery in Nigeria can become so rare that it will begin to resemble that of any advanced nation in the West. It can be done.
According to the World Bank, there is an estimated $1tn of bribe money circulating in the world economy of US$30tn. Difficult to say with precision what percentage of the one trillion  dollars emanates from our shores, but it is safe to assume that Nigeria is losing  billions of naira annually to bribes and kickbacks. James Ibori alone was alleged to have amassed up to half a billion dollars, Awhile the late Gen. Sani Abacha before him stashed away billions of dollars from bribes in Western banks. So, leaving aside the moral outrage bribery naturally provokes from well-meaning citizens, what does it matter to the real economy? It matters because, first, business deals are stymied as a consequence, and valuable investments lost in the process. The running costs of bribes are inevitably passed on to the customers in higher and higher prices for consumer goods. Apart from this, the main economic case against bribery is that it distorts the allocation of resources. Second, in terms of law and order, bribery induces disrespect for legitimate order if the rule of law can be circumvented at the behest of those willing to offer bribes. This, in itself, encourages a sense of anarchy and a resort to self help. Third, bribery within the administration of government creates cynicism, discontent and alienation of the citizenry from their political leaders. When the only people who enjoy the dividends of democratic governance are those who happen to be well-connected through bribery, then, others will withdraw their support for the system and over time, become totally indifferent to the development of society at large.   Now, with the submission made thus far, who would oppose legislation, even a draconian one, to get rid of bribery from the business of our daily national life?   Strange as it seems, not even the imposition of the death penalty can make bribery disappear from our midst.
Bribery in everyday life has largely been banished in the advanced industrial economies. Do not get me wrong, bribery still occurs regularly in Western countries, in industries and sometimes in government administration, but such incidents, where they occur, make peak-time news. On the contrary, in Nigeria, no self-respecting editor would devote a column inch to a report of bribery unless it involves more, because incidence of bribery is so pervasive in our midst. Moreover, as the world economy has gradually become intertwined through commerce, bribery in one foreign land, potentially, now has a bearing on business affairs in other countries around the globe, whether it is intended or not. It is precisely for this reason that the United States of America and the United Kingdom have spearheaded the effort to legislate extra-territorially on this issue. The US Foreign Corrupt Practices Act 1977 has been, in the main, the pace-setter in international business compliance.  It applies not only to US citizens, but to all businesses anywhere in the world that have a US connection. It applies to private and public officials. The UK updated its legislative effort in this area with the enactment of the Bribery Act 2010. Section 7 of the Act introduces a new strict liability offence of “failing to prevent bribery”.  This also applies extra-territorially. Consequently, a bribery occurrence in the remotest village of Nigeria, for instance, could land one in jail if it has the remotest of connection to the UK.  Maximum prison sentence is five years and 10 years under the FCPA and the Bribery Act respectively.  Despite all this, the real reason why bribery is less prevalent in Western societies than in ours is not about the law per se, but experience. The people in these countries have had a long experience of daily life free of bribery, especially of the kind that blights daily life on our roads, offices, hospitals and businesses.  By comparison, since independence, collectively, we have not experienced one day free of bribery in Nigeria, so the will to resist it when it occurs is, ipso-facto, weak.
My proposal, therefore, is this. Let us all shun bribery by setting aside one day; just one day in the month, where no one will either offer or take a bribe. In other words, no givers, and no takers.  Let us all feel and share in the rare experience of living in a country free of bribes if only for one day. This could be the first Monday of the month, for example, since Mondays often set the tone for how the rest of the week pans out. One is tempted to call such a day a “bribery-free day”, but that could be construed as a tacit endorsement of the act on the other days. To avoid this, I suggest it is called a “penitence day”, where everybody goes about their daily business secure in the knowledge that they will not be hampered by any act of bribery for the entire day. The referees for the day, of course, will be both the print and broadcast journalists who, I am sure, would love to interview drivers on the road going past police checkpoints without dropping one penny; people collecting their passports without money passing under the desks; customs men doing their diligent duties without lining their pockets; loans in the banks being approved with zero per cent going back to the manager as a “thank you”; people walking through immigration points without fear of having their belongings impounded unjustly; and doctors in hospitals attending to patients neither asking for; nor receiving ex-gratia payments of any kind etc.  The penitence day is cost-free, as it is not a public holiday.  Nonetheless, to be successful, it has to be coordinated nationally with a prolonged public education campaign prior to its adoption. What a day to remember that would be. A bribery-free Nigeria is not only a matter for legislation alone; it is an atmosphere that must be experienced.


Tuesday, 20 November 2012

JTF Denies Bribery Allegation In Port Harcourt

The Joint Task Force (JTF) operating in the Niger Delta on Monday described as false and baseless allegations that its personnel were bribed by oil thieves in the area.
Some members of the public had alleged that some personnel of the JTF had been compromised by oil thieves to regain freedom and carry on with their escapades.
Brig.-Gen Tukur Buratai, the Commander, 2 Brigade of the Army and Sector 2 of the JTF, denied the allegation in an interview with the News Agency of Nigeria (NAN) in Port Harcourt.
Buratai denied the allegation on the sidelines of a 12-kilometre road race organised in the state by the Nigerian Army.
He said soldiers of the JTF had always maintained discipline without any form of prejudice and corrupt practices in carrying out their duty of eliminating illegal bunkering in the region.
``I’m hearing this allegation for the first time; I don’t believe men of the JTF will do that (collect bribes).
``Notwithstanding, since you brought it to my notice, I will investigate; but I don’t believe our Soldiers will do that.
``Anyone (illegal bunkers) that is arrested and brought to my notice, nobody goes free. We take them straight to the court through the Nigerian Security and Civil Defence.”
Buratai called on the public to report anyone involved in oil theft and illegal refining of crude oil to security agencies in the state.

Source: http://leadership.ng/nga/articles/40499/2012/11/19/jtf_denies_bribery_allegation_port_harcourt.html

Thursday, 3 May 2012

Fuel Subsidy Scam: Official Report

Following the removal of subsidy on PMS on the 1st day of January, 2012 by the Federal Government of Nigeria and the attendant spontaneous social and political upheavals that greeted the policy, the House of Representatives in an Emergency Session on the 8th of January, 2012 set up an Ad-hoc Committee to verify and determine the actual subsidy requirements and monitor the implementation of the  subsidy regime in Nigeria.

The Federal Government had informed the nation of its inability to continue to pump endless amount of money into the seemingly bottomless pit that was referred to as petroleum products subsidy. It explained that the annual subsidy payment was huge, endless and unsustainable. Nigerians were led to believe that the colossal payments 

Download the report here (1.7MB).

You can also download the Executive Summary (170KB).

Fuel Subsidy Probe: All 61 Recommendations


Based on the facts, issues and investigative interactions, the Committee hereby makes the following recommendations for the consideration and approval of the House.
1.         From the findings of this Committee the consumption level for 2011 is estimated at 31.5 million litres per day. However, in 2012 marginal increment of 1.5 million litres a day is recommended in order to take care of unforeseen circumstances, bringing it to 33 million litres per day. And to maintain a strategic reserve, an additional average of seven (7) million litres per day (or 630million litres per Quarter) for the first quarter of 2012 only is recommended. Thus, PPPRA is to use 40 million litres of PMS in the first quarter as its maximum ordering quantity per day. In subsequent quarters PMS daily ordering quantity should be 33 million litres per day. For Kerosene, the Committee recommends a daily ordering quantity of 9 million litres.
2.         With regards to the 445,000bpd allocation to NNPC to refine for local consumption, the Committee established that the allocation is sufficient to provide the nation with forty million litres per day for PMS and Ten million litres of HHK.
The above can be achieved conveniently through;
  • SWAP arrangement,
  • Offshore processing,
  • Outright sale of the 445,000bpd and or partial sale of the excess from the local refining capacity of 53%.
Therefore there is no reason for government to grant subsidy importation to any other marketer.
Even though we have quoted 40 million litres as a liberal figure, in the course of monitoring the implementation of the subsidy regime the actual daily consumption will then be determined.
3.         The NNPC should refund to the Federation Account, the sum of N310,414,963,613 (Three hundred and ten billion, four hundred and fourteen million, nine hundred and sixty three thousand, six hundred and thirteen naira only) paid to it illegally as subsidy for kerosene contrary to the Presidential Directive of July 29th, 2009 withdrawing subsidy on the product.
4.         The Committee recommends that the NNPC should be unbundled to make its operations more efficient and transparent, and this we believe can also be achieved through the passage of a well drafted and comprehensive Petroleum Industry Bill. The Committee therefore urges the speedy drafting and submission of the bill to the National Assembly.
5.         The Committee wishes to recommend that the House do direct for the auditing of the NNPC to determine its solvency. This was as a result of plethora of claims of indebtedness and demands for payments by NNPC’s debtors which, if not well handled, will not only affect the entire economy of Nigeria, but also the supply and distribution of petroleum products.
Nigeria Customs Service        =       N46 billion
Nigeria Ports Authority         =      N6 billion
Trafigura et al                         =      $3.5 billion
6.         The House should direct the NNPC to stop any form of deduction not captured in the Appropriation Act before remittance to the Federation Accounts, and the Corporation should submit its transactions to the operational Guidelines of the Subsidy Scheme.
7.         NNPC Retail, Independent Petroleum Marketers Association of Nigeria (IPMAN) and Major Oil Marketers Association of Nigeria (MOMAN) should be the outlets for the distribution of Kerosene to ensure availability and affordability of the product to Nigerians.
8.         The NNPC should also refund to the Federation Account the sum of NGN285.098Billion being over-deductions as against PPPRA approvals for 2011. The Relevant Anti- Corruption Agencies should further investigate the Corporation for deductions for the years 2009 and 2010.
9.         As postulated earlier in this report, data provided by NNPC and CBN tends to suggest that for 2009, 2010, and 2011, NNPC deducted subsidy payments from two different accounts. It is the recommendation of this Committee that Relevant Anti- Corruption Agencies conduct thorough investigations into this matter and where it is established that double withdrawals were made, the extra amounts should be paid back to the Treasury and those involved prosecuted.
10.       The Management and Board of the NNPC should be completely overhauled and all those involved in the following infractions be further investigated and prosecuted by the Relevant Anti -Corruption Agencies:
  • Payment of N285.098 Billion in excess of the PPPRA recommended figure for 2011
  • Subsidy deductions of N310,414,963,613 for kerosene against a Presidential Directive
  • Direct deductions from funds meant for the Federation Account in contravention of Section 162 of the Nigerian Constitution
  • Illegal granting of price differential (discounts) of crude oil price per barrel to NNPC to the tune of N108.648Billion from 2009-2011.
11.       The relevant Anti- Corruption Agencies should carry out a due-diligence investigation to determine the total demurrage payments and outstanding incurred by NNPC for the period 2009 – 2011.
12.       Under the PSF Scheme, importers especially NNPC should be mandated to patronize Nigerian Flagged vessels provided they produce the standard safety and sea-worthiness certificates in tune with international best practices.
13.       All the payments which the PPPRA made to itself from the PSF account in excess of the approved administrative charges which were due to it under the Template should be recovered and paid back into the Fund. The officials involved in this infraction should be further investigated/prosecuted by the relevant Anti- Corruption Agencies. These confirmed illegal payments were the sum of NGN156.455Billion in 2009, and the sum of NGN155.824Billion in 2010, a total sum of NGN312,279Billion.
14.       All staff of PPPRA and DPR involved in the
  • Processing of Applications by importers, and
  • Verification, confirmation and payment for imported products by Importers and NNPC should be investigated/prosecuted by Anti- Corruption Agencies for negligence, collusion and fraud.
15.       The Executive Secretaries of the PPPRA who were the accounting officers, and under whose watch these abuses were perpetrated that led to the Government losing billions of naira, should be held liable. Therefore, we strongly recommend that those who served as Executive Secretaries of PPPRA from January 2009 to October 2011 should be further investigated/prosecuted by relevant Anti- Corruption Agencies. This should also include GM Field Services, ACDO/Supervisor-Ullage Team 1, and ACDO/Supervisor-Ullage Team 2 within the same period, for their roles in the management of the ullaging under the subsidy scheme.
16.       The Chairman of the Board of PPPRA from 2009 – 2011, and the entire Members of the board during the period are hereby reprimanded and their decision which opened the floodgate for the Bazaar is condemned in the strongest terms.
17.       It is hereby recommended that Mr President should reorganize the Ministry of Petroleum Resources to make it more effective in carrying out the much needed reforms in the oil and gas sector.
18.       Given the large and complex nature of the Ministry of Petroleum Resources, the Committee recommends that two ministers should be appointed to take charge of the upstream and downstream.
19.       The current template being used by PPPRA in computing and paying PSF is full of in-built prices for wastages and inefficiencies (e.g. Lightering exercise, demurrage) that could be plugged to save the Nation’s scarce resources. We therefore recommend the revision of the template.
20.       Henceforth the PPPRA margin of error on the payment Template for ascertaining allowable volumes on imported products should not be more than +/-5% as against the current +/- 10%
21.       The PPPRA should provide the Nigerian Navy and NIMASA advance copies of allocation and vessel arrival notification documents to enable the Navy monitor, track and interdict vessels seeking to avoid Naval certification.
22.       The Executive Secretary of PPPRA 2009 – February, 2011 should be investigated and punished for the official recklessness he exhibited in the implementation of the Board decision to reverse the qualification for participation in the scheme. The allocation/approvals to import products given to thirty-five (35) Companies before their formal registration with PPPRA testify to this. Companies that lack the required competence and expertise to import petroleum products and even those who did not meet up with the agreed standards were also awarded large chunks of the allocation, an act that culminated in huge loss of resources to the nation. Many Companies under his watch who had neither depots nor through-put agreement were allowed to participate in the Scheme contrary to the revised eligibility guidelines.
23.       The practice whereby PPPRA as a regulator in the petroleum downstream sector being supervised by the Ministry of Petroleum Resources whose Minister is the Chairman of the Board of NNPC (a major importer/participant in the PSF scheme) negates the principles of checks and balances and international best practices.
The Committee therefore recommends that the regulatory capacity of PPPRA be strengthened and the National Assembly should commence the process of amending the Act to make the Agency autonomous.
24.       The PPPRA should, within two weeks of the adoption of this Report, conduct a performance assessment of ALL Companies involved in the PSF scheme and publish such reports.
25.       The Committee is firm in its view that if any petroleum product is deserving of subsidy, HHK should enjoy a pride of place. It therefore recommends the immediate reinstatement of subsidy for Kerosene not later than second quarter, 2012 at pump price of N50 per Litre.
26.       The Committee recommends that the sum of NGN557.70Billion should be provided for as Subsidy in the 2012 Appropriation Act, while the sum of N249.006B should be provided as subsidy for HHK (Kerosene).
Evidently, 445,000 bpd allocation to NNPC is sufficient to provide the nation with 40 MLPD PMS, 10 MLPD HHK, 8.97 MLPD AGO, 0.62 MLPD LPG and 2.31 MLPD of FO at the current NNPC refining capacity of 53%. It is only AGO that daily consumption in full could not be achieved. Since AGO has been deregulated, other marketers can make up for the 3.03 MLPD shortfalls.
27.       The Committee recommends that FIRS should follow up on the companies listed earlier to pay their taxes with due penalties in line with the provisions of the Companies Income Tax Act.
28.       The PSF Guidelines should be revised to make Tax compliance a mandatory pre-qualification requirement for all participants under the Scheme.
29.       Marketers who obtained FOREX but did not import petroleum products should be referred to the relevant Anti- Corruption Agencies with a view to verifying what they used the FOREX for:

2010 ($)
2011 ($)







30.       The following Companies that participated in the Scheme and refused to appear before the Committee and never submitted the required documents as was repeatedly announced during the hearing are to refund the various sums against their names. It is believed that these companies deliberately refused to appear because they had something to hide. The relevant Anti- Corruption Agencies should ensure full recovery:

Mut-Hass Petroleum Ltd
Nepal Oil and Gas Service
Oilbath Nigeria
Techno Oil Ltd
Somerset Energy Services
Stonebridge Oil Limited
Mobil Oil Nigeria
AX Energy Limited
CAH Resources Association Limited
Crust Energy Limited
Fresh Synergy Limited
Ibafon Oil Limited
Lottoj Oil and Gas Limited
Oakfield Synergy Network Limited
Petro Trade Energy Limited
Prudent Energy & Service Limited
Rocky Energy Limited

31.       Payments for PMS with effect from the second quarter of 2012 should be based on certified truck outs at depots confirmed at the retail outlets and no longer on discharges from vessels into tank farms. Consumption should be defined in a way to exclude what is imported but only what is put in the tank.
32.       The markets of opportunity situated within Nigerian territorial waters which are designated “offshore Cotonou” or “offshore Lome” to qualify for FOREX payment and to evade payment of appropriate levies, dues and taxes to the Nigerian government should be discontinued forthwith.
33.       A Marine Transportation System should be put in place that is safe, secure, reliable, cost effective and efficient to reduce the present high cost of doing business in Nigeria.
34.       Any importation without permit or where the difference is above approved quota should not be entitled to any amount on the Template.
35.       It is strongly recommended that Marketers without storage facilities and retail outlets should be excluded from participating in the PFS Scheme as this will end the bazaar that constituted a serious drain on the nation’s economy and created room for abuses.
36.       The services of the accounting firm of Akintola Williams, Deloitte and Olusola Adekanola& Partners should be discontinued with immediate effect for professional incompetence on this particular assignment.
37.       In view of the above the 2 firms should be blacklisted from being engaged by any Federal Ministry, Department or Agency (MDA’s) for a period of three years.
38.       This Ad-Hoc Committee shall in its monitoring stage conduct extensive and thorough investigation into the operations of the PEF (MB) in order to ascertain the management of the bridging funds under the subsidy regime.
39.       Penalties should also be indicated for non-compliance and promptly imposed to ensure the smooth operation of the Scheme.
40.       The Nigerian Ports Authority (NPA) should be encouraged within a time frame to improve on the draught level of the Nigerian waters to encourage the berthing of ALL types of vessels so as to eliminate the present ship-to-ship (STS) transfers by importers of petroleum products.
41.       All those in the Federal Ministry of Finance, Office of the Director-General Budget, and the Office of the Accountant General of the Federation involved in the extra budgetary expenditure under the PSF Scheme (2009-2011) should be sanctioned in accordance with the Civil Service Rules and the Code of Conduct Bureau.
42.       The payment of N999,000,000 in 128times within 24hrs (12th& 13th January, 2009) by the Office of the Accountant -General of the Federation should be further investigated by relevant Anti-Corruption Agencies.
43.       The National Assembly should enact an Act to criminalise extra budgetary expenditure.
44.       CBN and the Federal Ministry of Finance should critically examine and review the policy guiding payment for importation of petroleum products to avoid the current fraudulent system that allows importers to bring in products from off-shore “Lome” or “Cotonou” to qualify for forex payments.
45.       The Committee notes that several alarms were raised by the CBN on the escalation of subsidy figures but these early warning signals were ignored by relevant agencies. The Committee wishes to encourage whistle –blowing by regulatory agencies on threats to the economy with the hope that proactive measures could be taken.
46.       The Committee recommends that the PPMC Management be overhauled. In furtherance to above recommendations of the committee, institutional mechanisms be urgently developed to ensure the monitoring of actual delivery of kerosene to the Nigerian masses.
47.       The PPMC should deploy modern state-of-the-art devices to protect its facilities and pipelines to eliminate wastages arising from vandalism. In the short-term however, PPMC should establish a surveillance system which should incorporate Community-protection and using part of the bridging funds on the PSF Template to finance this.
48.       All the extant circulars preventing the Nigeria Customs Service from carrying out its statutory functions be immediately withdrawn by the Central Bank of Nigeria and the Federal Ministry of Finance.
49.       The Committee recommends that NNPC takes immediate action to pay the N46billion owed the Nigeria Customs Service and the N6billion owed to the Nigeria Ports Authority
50.       The failure of NPA to provide this Committee the vital vessel data particularly the IMO numbers is an indication that either NPA has a very poor record keeping system or that it was a deliberate ploy to cover up the collusion between its officials and importers. We recommend an investigation into the operations and activities of this Authority.
51.       The port operations of the Nigerian Ports Authority be investigated with a view to determining the extent to which its officials are complicit in the classification of maritime areas for reception of Nigerian bound petroleum products as “offshore Cotonou” and “offshore Lome” in the face of evidence that these Vessels never did lighter at those Ports.
52.       In the course of this investigation, a lot of efforts were made to establish cases of round tripping and diversion of products, including the use of the data from Llyods List Intelligence resulting in the cases so far reported. However given the scale of connivance and collusion by government officials involved in the certification process, the Committee believes that further investigation will reveal more cases. It is therefore recommended that all the data obtained in the course of this investigation, especially from the Llyods List Intelligence be forwarded to the relevant anti-corruption agencies for a more detailed investigation.
53.       The present Management of PEF (M) B should be overhauled and the Board when constituted should comprise of persons of impeccable integrity who should be knowledgeable in aspects of its mandate. This is without prejudice to the coming into force of the Petroleum Industry Act.
54.       PEF (M)B should establish a tracking system on all trucks from point of loading to point of discharge (retail outlets) and direct that all trucks involved with transportation of products should install approved tracking devices on them.
55.       It is hereby recommended that the regulatory capacity of the DPR be strengthened. The National Assembly should commence the process of amending the Act to make the Agency autonomous.
56.       The DPR should take immediate steps to bring all facilities and depot owners into compliance with international best practices by ensuring the installation of modern metering gadgets and sealable and non-return valves, to eliminate the rampant cases of round-tripping.
57.       The DPR should brace up to its role of Regulation and compel the NNPC/PPMC to comply with all the regulations issued to ensure transparency and accountability.
58.       In order to reduce and gradually eliminate lightering, associated inefficiency and cost, Government should invest in the provision of Single Point Mooring (SPM’s). This provision should be followed up by instituting Regulations to compel Owners of Jetties, depots and storage facility owners to develop pipeline throughput availability to facilitate direct delivery of imported products by heavy vessels, in-shore Nigeria.
59.       There should be a deliberate policy by Government to encourage the utilization of gas in automobile, domestic (cooking), and industrial facilities.
60.       As a matter of urgency and in furtherance of our national security requirements, a national strategic reserve should be immediately enhanced so to accommodate 90days stop gap strategic reserve.
61.       We strongly recommend that relevant Standing Committees of the National Assembly should be more proactive in their oversight responsibilities to forestall future occurrences.