Bloomberg News

Nigerian Groups Want Minister Fired Over Fuel Subsidies

April 27, 2012

Nigerian labor unions and civic groups want Petroleum Minister Diezani Alison-Madueke to be fired after a parliamentary probe found the government made illegal payments of about 1.1 trillion naira ($7 billion) for fuel subsidies.

The subsidies, which President Goodluck Jonathan partially removed in January, were “fraught with endemic corruption and entrenched inefficiency” from 2009 to 2011, a House of Representatives committee said in a report that lawmakers approved on April 25 in Abuja, the capital. Levi Ajuonuma, a Petroleum Ministry spokesman, didn’t respond to three calls to his mobile phone today and a text message seeking comment.

Nigeria fixes gasoline prices by subsidizing oil importers such as state-owned Nigerian National Petroleum Corp. and Total Nigeria Plc (TOTAL), because Africa’s largest oil-producing nation doesn’t have the refining capacity to meet domestic needs. Fuel subsidies amounted to 2.5 trillion naira in 2011, about 56 percent of the budget.

Alison-Madueke should resign or Jonathan should fire her, and “the federal government should investigate who is lying and who is not,” Owei Lakemfa, secretary-general of the Nigeria Labour Congress, the country’s biggest trade union federation, said in a phone interview from Abuja on April 25. If Jonathan “is interested in fighting corruption, that’s what he should do immediately.”

‘Depth of Fraud’

According to the parliamentary report, more than 10 companies obtained foreign currency under the subsidy program and didn’t use the funds to import gasoline. The state Petroleum Products Pricing Regulatory Agency gave approvals to 35 companies to import products before they were formally registered with the agency, the committee said.

NNPC received 310.4 billion naira in subsidies for kerosene, which is deregulated and shouldn’t attract state payments, and 285.1 billion naira in excess of the amount recommended by the PPPRA for 2011, the committee said. The regulatory agency paid itself 312.3 billion naira in excess of approved administrative charges in 2009 and 2010, it said.

“The amounts uncovered are big enough to allow both increased spending on infrastructure and improve fiscal savings and foreign-exchange reserves, all of which would be positive for creditworthiness,” Richard Fox, a senior director of Sovereigns at Fitch Ratings, said in an e-mailed statement today. “A key test will be the penalties suffered by perpetrators and what is done to make the system more transparent.”

Prosecutions Sought

The petroleum minister should quit, “given the depth of fraud uncovered,” Yemi Adamolekun, a spokeswoman for Enough is Enough, a civic coalition that led protests against higher fuel prices, said in a phone interview yesterday.

Lawmakers, when approving the report, called for the prosecution of officials who oversaw the payments. The committee was led by Farouk Lawan, a lawmaker from the northern Kano state and a member of Jonathan’s People’s Democratic Party.

The committee recommended the overhaul of NNPC’s management and board and the prosecution of those involved in illegal activities. Alison-Madueke is the chairwoman of the board of the company, the biggest gasoline importer in the country. The committee also recommended Finance Ministry officials involved in extra-budgetary spending from 2009 to 2011 be sanctioned.

Looking to President

“I’ll be surprised if nobody resigned,” Peter Esele, president of the Trade Union Congress, said in a phone interview from Abuja on April 25. “Everyone is looking at how the president will handle this matter.”

Jonathan’s attempt to scrap the subsidy on Jan. 1 sparked a week of strikes and protests, forcing the government to partially reinstate it, raising the gasoline price to 97 naira a liter from 65 naira. Labor unions and activists who opposed the fuel-subsidy removal said the government should fix oil refineries and tackle corruption before raising costs for Nigerians, 61 percent of whom live on less than $1 a day.

“If the president is able to take action on some of these recommendations following expected amendments by the Senate, we feel it would go a long way to boosting the president’s anti- corruption campaign,” economists led by Guy Czartoryski at London-based CSL Stockbrokers Ltd. said yesterday in an e-mailed statement.

To contact the reporter on this story: Maram Mazen in Abuja at mmazen@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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