On August 17, 2011, when I began my second term as Nigeria’s Finance Minister, I did not know that I would be stepping into one of the biggest corruption scandals in Nigeria’s history. For three decades, Nigeria had subsidized the price of gasoline at the pump to make it cheaper for its population. The world’s thirteenth-largest oil producer at the time had limited refining capacity, so crude oil was exported, and refined petroleum products were imported and sold to the public at below-market prices. The government covered those subsidies, paying them to the marketers and importers who brought in the products, including its own oil company, the Nigerian National Petroleum Corporation (NNPC). The issue of payments for oil subsidies triggered my mother’s kidnapping (chapter 1).
Nigerians were distrustful of government, fed up with politics and corruption, and therefore clung to these subsidies, feeling they were the only direct benefits they enjoyed from their country’s oil resources. The subsidies were a heavy fiscal burden, but all attempts to phase them out over the years were strongly resisted by labor unions, civil society, and the general public. During the second Olusegun Obasanjo administration (2003 to 2007), when I first served as Finance Minister, a complete phaseout was achieved in 2004, despite protests by the public, led by the labor unions. But by 2006, oil prices had gone up, so the subsidy was restored, leading to total subsidy payments of about ₦261 billion ($2 billion at prevailing exchange rates). By 2011, the burden of the subsidies was absurdly heavy on the nation’s finances. Net Federation revenues totaled about ₦5.2 trillion, and subsidy payments had ballooned to ₦1.73 trillion ($11.2 billion), or 33 percent of net revenues.
One of the first briefings I had, on practically my first day on the job, was from Dr. Bright Okogu, who had been retained by President Jonathan in his position as Director General of the Budget Office. He explained that large payments had already been made for the subsidies that year and that seemingly unending bills were coming in from the more than 143 companies that had been certified by the Petroleum Products Pricing Regulatory Agency (PPPRA) as eligible to import oil. By mid-August 2011, almost ₦1.3 trillion ($8.4 billion at the prevailing exchange rates) had already been paid to these companies. My colleagues in the Finance Ministry and I were alarmed by the size of the payments. When I left office in 2006 after my first stint as Finance Minister, oil subsidies had only been about $2 billion. Now a figure four times that amount had already been paid, and there were still four months left in the financial year. Something was clearly wrong! By the end of 2011, a total of ₦1.73 trillion1 ($11.2 billion) would come due as subsidy payments on imported oil.
By this time, the country was abuzz with stories of massive fraud within the oil subsidy program. Looking at the nation’s finances, I knew that Nigeria could not sustain such a punishing fiscal regime of oil subsidies. So on the basis of suspected fraud and the lack of fiscal sustainability, I supported discussions underway between the President and governors of the thirty-six states of the Federation that oil subsidies needed to be phased out.
The plan to phase out petroleum subsidies was intensely discussed, debated, and agreed by the Economic Management Team (EMT) chaired by the President (see box 3.1). As members of the National Economic Council, the governors were strong supporters of the phaseout of oil subsidies. The subsidy payments amounted to substantial reductions in both state and federal government revenues, given that the subsidies, which were supposed to benefit all Nigerians, were paid off the top of total revenues before those revenues were shared among the different tiers of government. I understood that governors had been demanding that the subsidies be phased out soon after the Jonathan administration took office in May 2011—well before I joined the administration on August 17, 2011.
One of the first priorities that President Goodluck Jonathan and I focused on soon after I started my second term as Finance Minister (2011 to 2015) was the formation of the Economic Management Team (EMT). Such a team of reformers had been created during my first term as Finance Minister (2003 to 2006) under President Olusegun Obasanjo. It formulated and debated critical reform measures, ushered them through the cabinet and legislature, and pushed implementation on the ground—all of which led to improved economic performance.2
The idea was to replicate this success and form an EMT that could deliver on the administration’s reform agenda. This time around, with diversification of the economy an important priority, the team would include representatives from key ministries, such as the Ministries of Agriculture, Power, and Trade and Investment, whose portfolios would be vital to the diversification agenda.
The President also put his stamp on the team by including private sector participants. After initial hesitations about possible conflicts of interest, I saw that this addition might help the private sector understand the government’s need for reform and persuade them to participate as partners in the reform process. The President also included two state governors to provide input and counsel from the viewpoint of the states.
The EMT was chaired by the President and included the Vice President; the governors of Anambra and Adamawa states; the Ministers of Agriculture, Finance, Health, Petroleum Resources, Planning, Power, Trade and Investment, and Transport; the Minister of State for Health; the Minister of State for Finance; the Governor of the Central Bank; the Chief Economic Adviser to the President; the Adviser to the President on Performance Monitoring; the Chief of Staff to the President; the Executive Chair of the Federal Inland Revenue Service; the Comptroller General of the Customs Service; and the Directors General of the Budget Office, the Debt Management Office, the Bureau for Public Enterprises, the Bureau of Public Procurement, and the Securities and Exchange Commission.
The private-sector members were the President and Chief Executive Officer of Dangote Industries, Aliko Dangote; Chairman of Stanbic-IBTC, Atedo Peterside; Managing Director of Access Bank, Aig Imokhuede; Chairman of Zenith Bank, Jim Ovia; and businesswoman Dr. Wasilat Titiola Shittu. The Economic Management Team met monthly with the President as Chair and the Finance Minister as Secretary.
Because the Economic Management Team was rather large, the President also decided to form an Economic Management Implementation Team (EMIT), chaired by the Finance Minister, to meet weekly and follow up on implementation. This smaller group was made up of all the ministers and DGs in the EMT, the Executive Chair, Federal Inland Revenue Service; the Chief Economic Adviser to the President; and the Adviser to the President on Performance Monitoring.
As chair, I later received permission from the President to add a few more members to the EMIT, such as the Accountant General of the Federation, the Statistician General of the Federation, the Permanent Secretary of the Finance Ministry, and the Minister of Education. These members brought important knowledge and implementation expertise to the EMIT and eventually also to the EMT.
The weekly meetings of the EMIT greatly facilitated my role as Coordinating Minister of the Economy because the EMIT also became a venue where ministers could solve interministerial and cross-sectoral issues at a technical level.
With seeming agreement by all concerned in the government that the situation was not sustainable, the issue became rolling out a plan to convince the public that such a policy action was best for the country. There was some debate within the Economic Management Team as to whether the subsidies should be phased out in stages or in one fell swoop. The consensus was that experience in Nigeria had shown that even a small partial phaseout would draw the same large protests as a complete phaseout, so the feeling of the team was “Why die in stages?” Perhaps it was better to do it all at once.
There was overwhelming agreement that such an action would require a period of communication with and education of the public to build a larger consensus on the matter. To this end, an important televised public debate was organized in Lagos with the help of Mr. Nduka Obaigbena, the proprietor of the country’s most respected daily newspaper, This Day. Three members of the Economic Management Team—the Governor of the Central Bank of Nigeria, Mallam Sanusi Lamido Sanusi (now Emir of Kano); the Minister of Petroleum Resources; and me, Minister of Finance—represented the government. Labor and civil society representatives participated on the panel. There was a wide cross-section of the public in the audience, including market women, private-sector representatives, and workers.
The debate was tough but highly successful. The feedback from participants was that members of the public felt better educated about the benefits and drawbacks of the subsidy. The key points were that (1) although the subsidy benefited poor people by lowering transportation and other costs, it benefited the rich far more, and (2) there would be better ways to target low-income people directly with benefits, using the resources that would accrue from phasing out the subsidy.
It was clear from the feedback that the audience felt there was a lot of fraud in the system. One comment that recurred repeatedly was that if the fraud was eliminated, the oil subsidy program would be cheaper and more affordable, and therefore the phaseout might not be necessary. It also was evident that distrust of government was high. There was great skepticism as to whether government would actually implement programs that would benefit the population, especially poor people, with any monies that might be saved. Based on the public feedback from that first debate, the Economic Management Team planned to hold further debates around the country, perhaps in the six geopolitical zones, before any action was taken to phase out the subsidy.
The debate took place in early December 2011, and it was agreed that the remaining public debates would take place after the Christmas and New Year holidays. There was a tentative understanding that January to March 2012 would be used for further debates and communication with the public, with a tentative implementation of the subsidy phaseout in April 2012. On December 19, 2011, I traveled to Washington, DC, to join my family for the holidays, planning to return to Abuja on January 5.
On the morning of December 31, I received a shocking call from my friend and colleague, Professor Sylvester Monye, Special Adviser to the President on Performance Monitoring, telling me he had just heard something strange and was calling to check if I was aware of it. He had run into a senior official from the Nigerian National Petroleum Corporation (NNPC) in the corridors of the Villa (the Nigerian equivalent of the White House). The man was in a great hurry, but told him that he was scurrying because the President was going to announce the phaseout of the fuel subsidy on January 1 and had asked NNPC to prepare for this. Sylvester was shocked and instantly wondered whether I was aware of what was going on. He therefore rushed to call me.
I was taken aback by the news. It made no sense in light of the agreements we had reached to educate the public further before implementing the phaseout. I felt something was terribly wrong and someone had given the President bad advice. How would Nigerians feel if their New Year’s gift from their President was a hike in fuel prices? The timing was all wrong!
I told Sylvester I would try to phone the President to find out what was going on and advise him not to proceed. I tried all day December 31, and stayed up all night trying to get him, but I was always told by “Control,” the central telephone exchange in the Villa, that the President was unable to speak on the phone, even though the President was always exceedingly generous in taking my phone calls. It was almost as if someone (or something) stood in the way of my talking to him.
I was frantic and powerless to stop what I felt was a major mistake and had a great sense of foreboding about the outcome. I tried to imagine who could have given the President such poor advice and wondered if, in the toxic political atmosphere that was Nigeria, such advice was meant to undermine the President and the administration. I told my husband that I was sure that I would be blamed if things did not go right because everyone would feel that in my rush to implement so-called neoliberal policies informed by the International Monetary Fund (IMF) and the World Bank, I had rushed the President into this decision.
The President announced the subsidy phaseout on January 1, 2012, and I advanced my return to Nigeria to January 3. There was an immediate and mounting sense of rage among the public, led by the labor unions. Bus fares for those returning from the villages to town after the holidays virtually doubled—even though most of the intrastate buses operated on diesel fuel and diesel prices were not affected (having been deregulated in 2007 under President Obasanjo’s administration). Labor vowed to lead nationwide demonstrations and strikes asking the government to reverse the policy.
Indeed, nationwide strikes began, but the epicenter of public agitation was in Lagos. The demonstrations there were massive and extremely well organized, with food and entertainment, including concerts by famous Nigerian artists, that kept people on the streets. Demonstrators wore printed T-shirts calling for action against corruption. Civil society movements such as Occupy Nigeria were active. It soon became clear that the opposition political parties had seized the opportunity to play politics against the government. The mood was ugly, and it was obvious that the agitation was going far beyond expressions of dissent with the fuel subsidy phaseout to encompass a demand that the President resign or be impeached.
The turbulence in Nigeria was widely covered by domestic and international media. Many protesters were interviewed, and they sharply criticized the government’s policy. Yet no one came out to defend the government or explained the basis for the policy action. The state governors who had called for implementation of the policy were nowhere to be seen. The administration’s communication failure was so evident that I got calls from concerned friends in the United States and Europe who thought the government was brave to implement such an important policy but was failing woefully in explaining its actions to its citizens and the world. It would not be the first time the Jonathan administration would have a serious communication failure!
I tried to persuade those responsible for communication within government to take up the challenge, but no one was willing to speak, especially to the international press. I took a risk and spoke to CNN, knowing that my defense of the government’s action would probably confirm for some people my culpability for the unpopular policy. By the time the government’s communication team presented its case, it was too little, too late. The government had completely lost the public on the issue.
The tense situation led the President to call for negotiations with labor. A team was formed, of which I was a member. Negotiations went on for several days. But unlike previous protests, when labor was eager to engage, this time labor seemed reluctant—even frightened—to negotiate or appear to give in to any government demands. A labor delegate I knew later whispered to me that labor leaders were indeed afraid because they had received threats from unknown sources that if they called off the protests, their families would suffer. Eventually, the President was able to reassure labor representatives that they would be protected. A compromise was reached whereby the government pulled back from a total phaseout to a 50 percent phaseout of the subsidies on refined petroleum and gasoline.
Labor and civil society demanded and government agreed that the money saved would be applied to expenditures in transportation, maternal and child health, and employment creation, which would benefit poor people, and to infrastructure and other investments that would benefit society at large. The monies would be managed transparently. Management also would be separate from the budget to avoid red tape and facilitate faster implementation. A committee headed by an eminent and trusted Nigerian and including labor, civil society, and a cross-section of Nigerians would be set up to oversee and manage the funds. This program would be known as the Subsidy Reinvestment and Empowerment Program, popularly known as SURE-P.
With this agreement, labor called off the protests on January 16, 2012. Demonstrations continued in Lagos for a few more days with a much more political tone, calling for the President to step down. The police and army were deployed on the streets to keep order, and eventually these protests also stopped. But the government and the nation had been scarred by the episode.
One of the most interesting questions in my mind was, Who had advised the President to make the premature announcement on January 1 about phasing out the subsidy? I wanted to know because I had become the scapegoat for that action. That I was “a political figure … that has attracted an amount of hostility” was noted by former US ambassador to Nigeria John Campbell, in a Daily Beast article on December 11, 2012, at the time of my mother’s kidnapping. The article continued, “Okonjo-Iweala is a controversial figure who often is blamed for a sudden slash in Nigeria’s fuel subsidy program early this year.”3
Most of the media reports did indeed blame me—yet I was one of the last to know about the proposed New Year’s Day announcement. No one owned up to giving this poor advice to the President, and Goodluck Jonathan, to his credit, refused to blame anyone, taking total responsibility for the policy action.
It was not until a meeting of the National Economic Council weeks later, when the issue was under discussion, that Governor Babaginda Aliyu, former governor of Niger state and then chair of the Northern Governors Forum, bravely acknowledged that it was the governors who had urged the President not to delay any longer but to announce the subsidy phaseout at the beginning of the year. The mystery was solved, but I found it incredible that none of the governors came to the rescue when the policy roiled the nation and that they were content to let others take the blame!
Nigeria’s oil subsidies in 2011 totaled a frightening ₦1.73 trillion ($11.2 billion, at the prevailing exchange rate), of which kerosene subsidies were ₦310.4 billion ($2 billion). This represented 2.7 percent of GDP, 33 percent of net Federation revenues, and 38 percent of the federal government’s budget. With the phase-down, consumers went from paying ₦65 at the pump for a liter of gasoline to ₦97 ($0.62 or the equivalent of $2.35 a gallon). Monies saved were channeled into SURE-P and shared between the federal government and the states according to the standard Federation sharing formula of 52 percent to the federal government and 48 percent to state and local governments. Pursuant to the agreement with labor, the federal government invested its savings into safety net programs for transportation, job creation, maternal and child health, and infrastructure development—mainly roads and rail. Oversight for the program was the responsibility of a national committee headed by Dr. Christopher Kolade, Nigeria’s much-respected former High Commissioner to the United Kingdom.
One of the most discussed issues during the protests was alleged fraud in the oil-subsidy program. These fraudulent dealings went beyond the smuggling of oil shipments over the border into neighboring countries such as Benin and Niger, where prices were much higher. Allegations were rife that companies were claiming subsidies for shipments of oil never delivered. For shipments of kerosene, allegations swirled that corrupt payments were being made to assign the rights to import cargos of subsidized kerosene to certain companies, which then sold the kerosene to consumers at nonsubsidized prices.
The legislature decided to investigate these allegations. In an extraordinary emergency session on Sunday, January 8, 2012, the House of Representatives set up the Ad-Hoc Committee to Verify and Determine the Actual Subsidy Requirements under Resolution No. HR.1/2012. The committee was chaired by the Honorable Farouk Lawan from Kano, a well-known feisty legislator from the People’s Democratic Party and former chair of the House Finance Committee. Honorable Lawan was also chair of the self-styled “Integrity Group” within the House, a group dedicated to transparency and good governance. The House described the Committee this way:
The Federal Government had informed the nation of its inability to continue to pump endless amounts of money into the seemingly bottomless pit that was referred to as the petroleum products subsidy. It explained that the annual subsidy payment was huge, endless and unsustainable. Nigerians were led to believe that the colossal payments made were solely on PMS (petrol) and HHK (kerosene) actually consumed by Nigerians. Government ascribed the quoted figures to [an] upsurge in international crude price, high exchange rate, smuggling, increase in population and vehicles, etc. However, a large section of the population faulted the premise of the government subsidy figures, maintaining that unbridled corruption and an inefficient and wasteful process accounted for a large part of the payments. To avert a clear and present danger of descent into lawlessness, the leadership of the House of Representatives took the bold and decisive action of convening the first ever Emergency session on a Sunday (8th January 2012), and set up the Ad-Hoc Committee to verify the actual subsidy requirements of the country. The Committee decided that the scope of this investigation should be for three years 2009–2011.4
The Committee held hearings over three months with oil marketers, the private sector, government officials, and all concerned with the oil-subsidy regime. In April 2012, it issued its findings, including sixty-one recommendations. Essentially, the Committee found that there was indeed fraud and mismanagement in the oil-subsidy regime; subsidy claims for products not delivered; overcharging of the government by oil marketers; requisition of foreign exchange for imports of refined products, with the foreign exchange diverted to other uses; unauthorized deductions by the Nigerian National Petroleum Corporation (NNPC) to itself; and mismanagement by government officials. According to the report of the Ad-Hoc Committee:
We found that the subsidy regime as operated between the period under review (2009–2011) was fraught with endemic corruption and entrenched inefficiency. Much of the amount claimed to have been paid as subsidy was actually not for consumed PMS [petrol]. Government officials made nonsense of the PSF (Petroleum Subsidy Fund) guidelines due mainly to sleaze and, in some other cases, incompetence. It is therefore apparent that the insistence by top government officials that the subsidy figures were for products consumed was a clear attempt to mislead the Nigerian people.5
The report made several important recommendations: the sum of ₦1.067 trillion ($6.8 billion) deemed to have been misappropriated as subsidy payments during the period under review should be repaid to the Treasury by the Nigerian National Petroleum Corporation (NNPC), the Petroleum Products Pricing Regulatory Agency (PPPRA), and oil marketers; government agencies and officials deemed to have participated in the misappropriation or mismanagement of the subsidy regime should be sanctioned; oil marketers involved should be further investigated and prosecuted; NNPC and the Ministry of Petroleum Resources should be restructured to make their operations more transparent; and the kerosene subsidy should be continued, given its impact on poor people. The report went further to make recommendations on the amount of petroleum products the country should consume daily, how much should be budgeted for these, and a revised monitoring process for implementing the subsidy regime effectively.
Ironically, as the Ad-Hoc Committee’s report was being made available, a new scandal broke. A Nigerian billionaire businessman, Mr. Femi Otedola, accused Hon. Farouk Lawan, the chair of the Ad-Hoc Committee, of demanding a bribe of $3 million from him to facilitate the Committee’s removal of the names of his two companies, Zenon Oil and Gas Ltd. and Synopsis Enterprises Ltd., from the list of oil marketing companies to be sanctioned for receiving millions of dollars in foreign exchange for oil imports that were not made. Hon. Lawan initially denied the charge, but when a video was leaked that showed him and an associate purportedly receiving $620,000 of the $3 million bribe from Mr. Otedola, Hon. Lawan said he had taken this money as proof to show the Economic and Financial Crimes Commission (EFCC) and other authorities the type of blackmail and pressure the Committee was under by oil marketers and others to stop the investigation or remove company names from the list of offenders. The House of Representatives found this explanation less than credible because the record showed that at a House session Hon. Lawan asked for two company names to be expunged from the Committee’s report. He was suspended from leadership of the Ad-Hoc Committee while the House undertook an investigation into the new allegations.
In the meantime, strong political undercurrents were building about this report. There was a feeling in the House of Representatives, voiced by some members, that Mr. Otedola’s attempted bribe of Hon. Lawan was a move by the executive branch of government to discredit the report and thereby the House and prevent action. On the government side, some felt that the report unfairly targeted certain agencies and persons in government and therefore was an unfair and biased report.
The brouhaha about the bribery scandal quickly eclipsed discussion of the report and its findings. Indeed, the report seemed to have become tainted in the eyes of the public. It became clear that the report’s important findings and recommendations might be abandoned, which would suit many of the protagonists. A great deal of pressure was being exerted on the Finance Ministry and on me personally to approve subsidy payments to the dozens of marketers making claims.
The dilemma I faced was on what basis would the Ministry make those payments, knowing that many of the transactions were possibly fraudulent? The Finance Ministry risked public scorn and legislative censure if it paid without having sound verification. My immediate staff and I determined that one possibility could be to conduct our own verification of the subsidy claims, but we worried that the issue had become so politicized that we would not be able to do so without interference. In the end, I decided that we should take the risk and use the cover of the noise still ongoing at the National Assembly to set up a verification committee and find a very brave person to lead it.
In late May 2012, I asked one of the most respected private-sector members of our Economic Management Team, Mr. Aig Imoukhuede, Managing Director and CEO of Access Bank, if he could lead this project. Despite the risk, he saw it as a service to the country and agreed to do so. We formed a Technical Committee made up of various actors with a stake in finding the truth—Dr. Bright Okogu, Director General of the Budget Office in the Finance Ministry; Dr. Abraham Nwankwo, the Director General of the Debt Management Office; Mr. Jonah Otunla, the Accountant General of the Federation; and representatives from banks, oil marketing companies, the Central Bank, and the Ministry of Petroleum Resources.
The Technical Committee needed experts to perform field visits to petroleum tank farms and depots, ports, and other places where the subsidy-claim paper trail might lead, so it hired about fifteen forensic auditors, accountants, and bank examiners from PricewaterhouseCoopers and other accounting companies, the Central Bank, and elsewhere to assist with the work. We agreed that the Committee’s goal would be to verify and reconcile the first ₦1.3 trillion ($8.4 billion) in subsidy claims by the private oil marketers for 2011, identify all cases of overpayment or irregular payment, identify all likely fraudulent cases for criminal investigations, review any other pertinent issues that might arise from its work, and make appropriate recommendations. We estimated the work might take about five weeks, but it ended up taking almost double that amount of time.
After I briefed the President about the Technical Committee and received his permission to proceed, many fraudulent transactions and other infractions were uncovered, so I briefed him on the interim findings. He decided to transform the Technical Committee into a Presidential Committee and move its activities to the Villa—the President’s Office. This would protect the Committee and give it more clout for the next stage of its work, which involved more detailed investigative and forensic work. The Committee was beefed up with State House lawyers and representatives from the Attorney General’s office, the police, and the State Security Services. The Presidential Committee had its inaugural meeting on July 6, 2012, and building on the work already completed by the Technical Committee, it submitted a report of its findings in late July.
Many of these findings mirrored the findings of the House of Representatives Ad-Hoc Committee to Verify and Determine the Actual Subsidy Requirements, but this time the findings were meticulously researched and well documented. The Presidential Committee found subsidy claims for shipments by “ghost vessels” that never supplied any products and for shipments by vessels that were in China and the South Pacific at the times it was claimed they were transshipping off the coast of Cotonou, Benin. These were verified by Lloyd’s Register, which tracks the movements of ships all over the world. There were subsidy claims for which there were no shipping documents or evidence of payments for the products in foreign exchange.
Various other overpayments, wrongful claims, and breaches of the Petroleum Subsidy Fund guidelines also were detected. The Presidential Committee found that of the ₦1.3 trillion ($8.4 billion) verified, ₦382 billion ($2.5 billion) was fraudulent or questionable and should be recovered from the 107 oil marketing companies whose activities were verified. The door was left open on some questionable transactions for companies that could produce further verifiable documentation to come forward for the transactions to be validated. The report recommended that several procedural and regulatory improvements be implemented to the process for managing the subsidy. It also recommended sanctioning offending agencies and individuals, including the executive secretaries of the main regulatory agency overseeing the Petroleum Subsidy Fund, the Petroleum Products Pricing Regulatory Agency, and the external auditors of the Finance Ministry, Akintola Williams Deloitte, and Olusola Adekonola and Associates,6 which were found negligent in their duties.
Based on the report findings and recommendations, it became clear that the Finance Ministry could not make payments to the oil-marketing companies implicated in the fraudulent ₦382 billion ($2.5 billion) in transactions. This decision was met with tremendous anger and resistance on the part of the companies whose transactions were implicated. There was also anger and impatience on the part of several companies not implicated because they felt the Presidential Committee’s investigations and verification had further delayed their payments. The tension was palpable throughout this time, and the head of the Presidential Committee, Aig Imoukhuede, came to tell me that he was moving his family out of the country to London because he felt that these were dangerous times. The refusal to pay fraudulent marketers—many of whom had powerful connections in government and society—was a difficult and dangerous one, as I soon came to know when my mother was kidnapped, and I was threatened with being maimed to get me to leave office (see chapter 1)!
While I battled oil marketers and others outside the government, there were also internal battles related to the oil sector going on within government. The Finance Ministry was at the receiving end of these battles because at the end of the day, it had to run after the revenues needed to fund the budget, and the bulk of this (70 percent) needed to come from the oil sector. These battles generated a great deal of tension and antagonism between the Finance Ministry and the Ministry of Petroleum Resources and its mammoth parastatal, the Nigerian National Petroleum Corporation (NNPC). NNPC was one of the most powerful, if not the most powerful, government agencies of all time in Nigeria and was seen as one of the least transparent and least accountable. It had been that way since 1977, when it was set up by the military governments to be accountable essentially to the Head of State, who in some administrations also assumed the role of the Minister of Petroleum Resources.
NNPC and the Ministry of Petroleum Resources had absolute control over the country’s oil and gas resources. When I became Finance Minister for the first time in 2003, I learned that the Finance Ministry had little or no role to play in the management of the country’s oil industry. There were few statutory links between the Finance Ministry and the Ministry of Petroleum Resources, except that the Permanent Secretary of the Ministry of Finance was on the board of NNPC—a board that met only irregularly (depending on the government in power).
The Finance Ministry was responsible for budgeting for the joint-venture cash calls that paid for Nigeria’s share of costs for the production of oil in the joint-venture agreements with the major oil companies such as Shell, Total, and ExxonMobil. This was done in consultation with the relevant departments of NNPC and the Ministry of Petroleum Resources. These agencies also were consulted in setting production numbers, oil benchmark prices, and revenue parameters for the budget. But other than this, the Finance Ministry was simply a recipient of whatever revenues were budgeted for the Federation from the oil and gas sectors. It had no control over the sales, marketing, or proceeds of these activities. These usually were presented and discussed at the monthly Federation Accounts Allocation Committee (FAAC) meetings chaired by the Minister of State Finance (Deputy Minister of Finance), which brought together the thirty-six states of the Federation, the Federal Capital Territory (FCT), the federal government, and major revenue-generating agencies (such as the Federal Inland Revenue Service, NNPC, and the Customs Service) to account for and share oil and nonoil revenue proceeds per the Constitution.
In 2012, in addition to the serious issues of the oil subsidy fraud, tensions began to rise in FAAC meetings over the lower-than-projected disbursements of oil revenues to the Federation accounts. The lower disbursements put states and federal government in the position of not being able to implement budgets fully. The 2012–2015 Medium-Term Expenditure Framework (MTEF) had set the benchmark oil price at which states and the federal government should budget at $72 per barrel, compared to an average price per barrel for Nigeria’s premium crude (Bonny Light) of $113. With projected production of 2.48 million barrels per day, it was expected that monthly oil revenues to the Federation Account would average ₦808 billion ($5.1 billion). Further, the difference between the benchmark oil price and the market price per barrel (after deductions of various costs and payments for NNPC transactions—always uncertain as to amount) would accrue as savings in the Federation’s Excess Crude Account (a savings fund we developed in my first term as Finance Minister under President Obasanjo’s administration to help manage oil price volatility and save for a rainy day).7
However, starting at the beginning of the second quarter of 2012, the Accountant General of the Federation (AGF) and the Minister of State Finance began to report serious shortfalls in the amount of oil revenues disbursed by NNPC to the Federation Account. When the senior management team in the Finance Ministry reviewed the accounts, we found a lot of variability from month to month in terms of shortfalls, with an average monthly shortfall of about ₦160 billion ($1 billion) if budget and Excess Crude Account shortfalls were added together.
FAAC participants asked for an explanation for the shortfalls from the NNPC. The Finance Ministry also convened meetings with officials from NNPC and the Ministry of Petroleum Resources to understand the disturbing trend. Month after month, the explanation was that revenues were being lost to oil theft and pipeline vandalization. At a time of rising oil prices, when Nigeria should have been maximizing its output and revenues, the country was suffering considerable losses. NNPC said that an average of about 150,000 barrels per day were being lost to theft via siphoning from the pipelines. But the impact was well beyond the amounts stolen. Pipeline vandalization, using increasingly sophisticated underwater equipment, was causing companies to implement large shut-ins (shut-downs of an entire pipeline that is carrying petroleum products), up to an average of about 400,000 barrels per day, leading to huge revenue losses of $1 billion per month.
While we collated the shortfalls and unaccounted-for monies monthly at the Finance Ministry, I started publicly sounding the alarm about the missing monies as early as mid-2012. A June 27, 2012, article in Oil Change International quotes me as saying “Nigeria is losing $1 billion a month in oil theft.”8
The situation worsened in 2013, and by April of that year, multiple reports on Nigerian television channels, on the Internet, and in national and international print media quoted me on the severity of the oil-theft and revenue-loss problems. In addition to loss through theft, NNPC also made deductions for items such as pipeline and other repairs. It deducted oil and kerosene subsidy payments to itself. Many times, the shortfall was so substantial that it led to tensions at the meetings of the FAAC, with state Commissioners of Finance and Accountant Generals walking out of meetings and refusing to accept the figures presented by NNPC for the month.
I called several meetings with NNPC and the Finance Ministry team to discuss the problems and get some accountability. In one such meeting, the then-Group Managing Director of NNPC, Austin Oniwon, challenged my right to ask for information on production volumes and sales or even to try to hold NNPC accountable to deliver the needed volume of funding. In the presence of his colleagues and senior management from the Finance Ministry, such as the Director General of the Budget Office, he aggressively challenged me to the point that I had to walk out of the meeting so that the discussion would not degenerate further.
I took these issues to my colleague, the Minister of Petroleum Resources, and it took some time before she and her team internalized the detrimental impact of the shortfalls on the budget and the economy. But relationships between the Finance Ministry and Ministry of Petroleum Resources were not that good; in fact, they were tense at virtually all levels. Finance Ministry officials had to bear the responsibility for shortfalls in Federation revenues, and the Petroleum Resources colleagues often acted as if they did not need to be accountable to anyone.
The matter went to the President on virtually a monthly basis. With his help and intervention from time to time, some months we received more resources, and others fewer. This process became an enormous strain on Finance Ministry staff and on me personally, and our relationship with NNPC and the Ministry of Petroleum Resource was rarely cordial. The situation spilled over to the National Economic Council, where the state governors also demanded action on the oil-theft and revenue-loss issue. Rumors were rife that vested interests—including former and serving military officers as well as former employees of oil companies—were involved in the oil theft.
It just seemed a terrible situation, but one that was surely tractable if corrective action could be taken. I discussed the situation with the President several times, seeking a solution, and ultimately, he set up a task force to ascertain the extent and impact of the oil-theft problem, determine the reasons that proposed solutions were not working, and propose and implement new solutions. The task force was chaired by Dr. Emmanuel Uduaghan, governor of the oil-rich Delta state. Other members included the governor of Bayelsa state, employees from oil companies, members of paramilitary agencies, and representatives from the Ministries of Finance, Justice, Petroleum Resources, and Defense and its Joint Task Force. I felt this was the right group to solve the problem and was very hopeful.
But over time, my hopes faded as we continued to meet looking for solutions but without much change. Some oil thieves were caught, and their ships were impounded, but there was no comprehensive approach. The situation would improve for a month and then would degenerate, and revenues would be tight again. Overall in the country, there was an atmosphere of suspicion, accusations, and tension surrounding the oil sector, and it was difficult to dispel, given the continued cash-flow stress the country was under. It was in this atmosphere that the saga of the missing oil-revenue billions was unfolded by Mallam Sanusi Lamido Sanusi, the Governor of the Central Bank and now Emir of Kano.
At 10 p.m. in early October 2013, I was sitting in my office trying to wrap up for the day when an event began to unfold that would damage the reputations of the Goodluck Jonathan administration and the country and place me in a terrible dilemma. It started with a phone call from Sanusi Lamido, the Central Bank Governor, who was responsible for monetary policy through the instrumentality of an independent central bank. To coordinate monetary and fiscal policy, we had the instrument of the Economic Management Team, but Lamido and I also spoke frequently—sometimes once or twice a day. We got on well and respected each other’s views, even if we did not always agree. The Governor had also been very concerned with the shortfalls and unaccounted-for revenues from the oil sector, since this impacted the quantum of foreign exchange reserves, the stability of the exchange rate, and the conduct of monetary policy. We often lamented the serious impact of this on the economy. It was not strange that he would ring me this late.
However, what he had to tell me on the phone hit me so hard that I froze. He said he was calling to tell me that he had sent a letter to the President some days earlier (September 25, to be exact), alerting him that there was $49.8 billion missing or unaccounted for from the country’s oil accounts for the period from January 2012 to July 2013. This assessment was based on work that had been done by his staff at the Central Bank. He was motivated to tell the President because the large sums involved would have a serious economic impact on the country.
Although I appreciated the alert to the President, the point was the Finance Ministry had been fighting this battle on a monthly basis by sharing with the President how much of a shortfall we were experiencing in the Federation Account. Nevertheless, I was taken aback by the size of the shortfall the Governor mentioned. I told him right away that I thought unaccounted-for monies could not be that large because that sum was 50 percent or more of the total amount earned from oil revenues for that period, and if that much was missing, the country would not be able to function. The fiscal stress would be highly visible. As he was aware of from the FAAC accounts, the Finance Ministry had been keeping track of revenue shortfalls every month. We had a spreadsheet that showed $10.8 billion to $12 billion was unaccounted for during the same period—huge amounts for a poor country like Nigeria but far from the almost $50 billion he was talking about.
I was concerned and completely baffled that he had sent such a letter to the President without mentioning the Central Bank’s findings to me or reviewing the figures with me, as he normally would have done. As the government’s banker—essentially the banker to the Finance Ministry, he and I had discussed and worried about the unaccounted-for funds many times. I could not imagine why the Central Bank would bypass the Treasury and the Finance Minister with such a serious problem.
My other worry was that such a sensational letter would be leaked to the press and reflect negatively on the country. In which kind of country could $50 billion go missing or unaccounted for? Surely a banana republic!
Sanusi Lamido Sanusi assured me that only three people knew of this letter—himself, myself, and the President. But I was skeptical. I asked if he had typed the letter himself, and he said no, so other people had handled the information and were in the know. I was sure the letter would leak to the press very soon. I was also surprised that the President had not mentioned the letter to me and resolved to ask him about it the next morning.
At an early morning meeting, the President acknowledged that the Central Bank Governor had indeed sent him such a letter. He said he was astonished at the amount and asked if Lamido had discussed the matter with me beforehand. I said no. When the President asked my opinion about the unaccounted-for amount, I gave him the same answer I had given Lamido the night before—that the Finance Ministry estimate was in the range of $10.8 billion to $12 billion.
The President then said that he found the situation troubling and wondered if it was related to an ongoing investigation with the Governor that I had not been aware of. He said that the Financial Reporting Council (FRC), a financial oversight body located in the Ministry of Industry, Trade, and Investment, had drawn the President’s attention to irregularities in the 2013 internal accounts of the Central Bank. The President sent the FRC’s queries to the Central Bank Governor for action, and Lamido had sent the accounts back with full responses to all the questions raised, but this was still not acceptable to the FRC. According to the President, if the situation became public, it could reflect badly on the Central Bank Governor. So the President wondered whether the letter on missing oil-sector revenues was a way to divert attention from the ongoing situation and get the matter dismissed. I was quite surprised at this narrative, as this was the first time I had heard about alleged irregularities in the Central Bank accounts. The President felt that I should convene a meeting with representatives of the Central Bank, the Ministry of Petroleum Resources, and the Finance Ministry to discuss the Central Bank Governor’s concerns and reconcile figures between the three agencies.
Later that day, I called Governor Sanusi Lamido Sanusi and told him I had spoken to the President, who asked for a reconciliation of numbers by the three agencies. He readily accepted. I also spoke to the Minister of Petroleum Resources, who said that her ministry was ready to participate. I formed a technical task force made up of senior people from the three agencies and headed by the Director General of the Budget Office, Dr. Bright Okogu, a petroleum economist and experienced macroeconomist who had worked at both the Organization of Petroleum Exporting Countries (OPEC) and the International Monetary Fund (IMF). The task force was to look at all the evidence on sums that were unaccounted for among the funds that the NNPC should have disbursed to the Federation Account during the period in question, and reconcile all numbers from the three agencies. The task force was given one week to do this work.
The atmosphere was very tense and antagonistic between NNPC and Ministry of Petroleum Resources officials and those of the Central Bank, with the former feeling that this letter by the Governor could only have been written to discredit them and accuse them of corruption. The Finance Ministry was in the middle. We felt that our job was to manage the situation such that we could get numbers we all agreed on, but more importantly, perhaps this exercise could lead to the Finance Ministry recovering unaccounted-for monies. Whatever the unaccounted-for amount was, I was interested in moving the monies into the Federation Account to ease the pressure on federal, state, and local government budgets.
But while the task force was working, my worst fears materialized. I got a call on the afternoon of December 11, 2013, from William Wallis, the Africa correspondent of the Financial Times of London, telling me he had a copy of a letter to the President that said $50 billion was missing from our oil accounts and asking for my views. I told him that I believed the numbers were too large and that the President had asked me to set up a task force to reconcile the numbers. The task force would report in a week. But it was too late. The next day, the missing $50 billion was headline news in the Financial Times and other domestic and international media. Although it was not the first time in Nigeria’s history that large amounts of oil revenues had been reported missing, this was huge and was devastating for Nigeria. Other than the missing Chibok girls—the 276 teenage girls kidnapped by Boko Haram militants in the town of Chibok in northeastern Nigeria in April 2014 (see appendix C)—this was the most distressing event that took place during the Jonathan administration.
The task force reported in a week and said numbers had been reconciled and accepted by all agencies involved. Governor Sanusi Lamido Sanusi’s letter alleged that $65 billion worth of crude oil had been lifted (produced and sold) by NNPC between January 2012 and July 2013, that only $15.2 billion of that money had been remitted to the Federation Account, and therefore that $49.8 billion was unaccounted for. The reconciliation showed that the Central Bank colleagues who came up with the $49.8 billion number had not fully accounted for some of the detailed transfers and arrangements of the oil accounts. For example, about $15 billion of monies earned had gone directly to the Federal Inland Revenue Service as tax revenues and from there to the Federation Account. NNPC had lifted domestic crude oil worth $28 billion, which was swapped in exchange for refined oil. There were other third-party transactions, such as crude-oil revenues used to pay for alternative financing provided by joint-venture partners. At the end of the exercise, all agreed that unaccounted for funds were within the range calculated by the Finance Ministry of $10.8 billion to $12 billion and perhaps closer to $12 billion, the outer end of that range.
Nevertheless, by this time the country was in an uproar over the missing $50 billion, and the Senate Committees on Finance and Petroleum (Upstream and Downstream) had called for hearings in the National Assembly. I thought that an engagement with the press to announce the task force findings would help clarify matters. To his credit, Governor Sanusi Lamido Sanusi agreed to attend a joint press conference with me and the Minister of Petroleum Resources to announce the task force findings. At the press conference, the Governor graciously admitted that his staff had made a mistake, and after reconciliation the Central Bank of Nigeria accepted that the unaccounted-for funds due to the Federation Account were about $12 billion.
The press conference helped clear the air, and I thought we now could focus on how to recover the unaccounted for $12 billion. This was still a very large amount for the Treasury, and would plug a serious fiscal drain. We all agreed that we would present a joint front at the National Assembly hearing the following week, given that we now were all on the same page. There was an air of cordiality among us all that I had not seen in some time.
Unfortunately, this cordiality was shattered the day after the press conference by a television advertisement paid for by the Nigerian National Petroleum Corporation that declared that the NNPC had been absolved from the wrongful accusations of missing monies that had been made by the Governor of the Central Bank of Nigeria. The minute I saw this, I knew there was trouble. I phoned the Group Managing Director of NNPC, Mr. Andrew Yakubu, and asked him to take the ad off the air, as it was provocative and even humiliating for the Governor, who had graciously accepted the revised figures. That same evening, the Governor called me to complain about the ad, and I assured him that I had already asked NNPC to pull it. But the ad continued for another full day before it was pulled.
I can only surmise that this ad must have played into the drama we witnessed subsequently. The task force submitted its report on December 18, 2013. On February 4, 2014, we appeared before a Senate ad-hoc committee chaired by the very able Chairman of the Senate Finance Committee and former Governor of Kaduna state, Mallam Ahmed Markafi. Senator Markafi was clever and had a no-nonsense reputation. He had command of the material, so I hoped the session would go smoothly and quickly now that the executive side of government was all on the same page.
We were each called to testify in turn about the missing $50 billion. The Minister of Petroleum Resources went first and spoke to the facts we had all agreed on. The Central Bank Governor was next and gave us a surprise. In his testimony, Governor Sanusi Lamido Sanusi said that although the unaccounted-for funds might not be $50 billion, they were not $12 billion either but about $20 billion. He then tendered exhibits illustrating why he now thought the amount was $20 billion, including the nondisbursement to the Federation Account of up to $6 billion by a subsidiary of NNPC, the Nigerian Petroleum Development Corporation.
This bombshell caused the room to erupt because only a few days earlier the Governor had accepted that the unaccounted-for funds were in the neighborhood of $12 billion. I could see reporters making a dash for the exit, no doubt to send off the hot news!
Again, Governor Sanusi had not indicated to me—as he could have prior to the meeting—that he had now come to a new conclusion about the unaccounted-for funds. Once again, the government looked disorganized. A government whose major officials could not agree on amounts unaccounted for from government coffers was unacceptable.
For me as a Finance Minister, this was too much. When it came to my turn, after testifying to the reconciliation and the Finance Ministry’s own findings, I simply made the case that the only way this government could regain credibility on this issue and put the matter to rest was to request an independent forensic audit.
The Senate took this on board. It initially indicated that it would manage this audit, but later decided that the executive branch of government should commission the audit. In the following days, the NNPC submitted an accounting for the $20 billion, but the public did not see or accept this as credible, and the missing $20 billion became global financial news. It was spreading even more rapidly than the initial $50 billion.
The situation was made worse by the President’s suspension of Governor Sanusi for “financial recklessness,” ostensibly linked to the Central Bank of Nigeria’s problems with the Financial Reporting Council. The timing could not have been worse, as the move was interpreted domestically and abroad as punishment for whistle blowing on the missing billions. It helped give the story even more credence!
With the saga of the unaccounted-for monies, history seemed to repeat itself with ever larger numbers. As far back as 1978, when President Muhammadu Buhari was Minister of Petroleum Resources in the administration of General Olusegun Obasanjo, there was an allegation of a missing $3.5 billion not remitted by NNPC to the Treasury. In the 1990s, under the Ibrahim Babaginda administration, $12 billion was found to be unaccounted for by NNPC. And now the figures in question were $50 billion, $20 billion, and $12 billion. The importance of an independent forensic audit was paramount.
Getting the concurrence of the Senate to do a forensic audit was one thing. Actually commissioning the audit turned out to be extremely difficult because no one wanted ownership. Ultimately, the Senate decided to do its own investigation but have the Jonathan administration take charge of the forensic audit. But who in the administration could take charge? Neither the Finance Ministry nor the Ministry of Petroleum Resources could oversee the audit because they both were interested parties. As the issue languished for weeks, I worried that the audit would never get done and the country’s reputation would suffer further.
But interest in the forensic audit was very high, and the media kept asking about it. I met with President Jonathan to discuss the matter. It was eventually agreed that the Office of the Auditor General of the Federation should commission the audit. The Auditor General said that some aspects of the audit law might prevent him from launching such an independent audit and was initially reluctant to involve independent auditors. There also were unspoken career and personal risks to engaging in such sensitive work. After several discussions, the Auditor General agreed that it was in the best interests of the nation to have independent rather than in-house auditors conduct the audit. He engaged PricewaterhouseCoopers (PwC) for the job on June 5, 2014.
The scope of work for PwC, as summarized in its report, was: “a) Analysis of remittance shortfalls from NNPC into the Federation Accounts; b) Analysis of submissions made by key stakeholders in relation to the alleged shortfalls; c) Producing an independent Forensic report detailing our findings.”9 PwC submitted its report on November 28, 2014, based on materials received through October 31, 2014. In a letter dated January 7, 2015, the Auditor General for the Federation subsequently asked PwC to consider additional information tendered by the Nigerian National Petroleum Corporation up to January 29, 2015. The forensic audit report was thus amended to take into account the additional information. In its cover letter to the report, PwC warned that “the procedures performed did not constitute an examination or review in accordance with generally accepted auditing standards or attestation standards.” Nevertheless, it made the following findings:
The Nigerian National Petroleum Corporation provided information to account for the difference not remitted, including deductions for various operation and maintenance costs, management costs, and deductions to pay itself for subsidies for petroleum motor spirits ($5.32 billion) and subsidies for dual-purpose kerosene ($3.38 billion). These deductions were contestable and were noted by the audit report as such. They were the substance of the $10.8 billion to $12 billion unaccounted-for funds recorded by the Ministry of Finance. For example, the deductions for petroleum and kerosene subsidies ($8.70 billion) were contested by the Federation Accounts Allocation Committee and the Finance Ministry. They felt that transparency would be enhanced by having NNPC first pay the Federation Account all monies due and then submit a bill for subsidy expenses, which then would be verified before payment.
The kerosene subsidies were not budgeted for, which the Director General of the Budget Office and I had told the President at our prebudget discussions in 2012 and 2013. The reason was simple. The kerosene subsidy clearly did not benefit the majority of poor people targeted. Whereas kerosene was supposed to retail at ₦50 per liter (with a subsidy of ₦100 per liter paid by government), a survey conducted by the Finance Ministry in 2012 showed that retail prices across the country ranged from ₦97 to ₦200 per liter. Budgeting for a nonexistent subsidy therefore constituted in our minds a source of revenue leakage, so NNPC should not deduct any monies for a kerosene subsidy.
Our position was buttressed by a 2009 memo from President Umaru Yar’Adua abolishing the kerosene subsidy. But the NNPC contended that the memo was never published in the Federal Republic of Nigeria Official Gazette, as required by government regulations, and therefore carried no formal weight. In other words, they contended that a kerosene-subsidy regime was still in place and that they could withhold revenues to pay themselves for it. After review and reconciliation of all the numbers, the forensic audit team concluded that NNPC should refund the Federation Account a “minimum of $1.48 billion.” If certain deductions were deemed not valid and disallowed, this amount could rise to $2.07 billion, and if remittances due to the Federal Accounts Allocation Committee from the Nigerian Petroleum Development Corporation, the NNPC subsidiary, were to be added, the amount could rise to $4.29 billion. Although these were less than the amounts put forward as unaccounted for by the Finance Ministry or the Governor of the Central Bank, they were nevertheless substantial.
More important was what the forensic audit report had to say about the structure and functioning of NNPC: the report saw it as a model that does not work. Section 2.1 of the report concluded that
the Corporation operates an unsustainable model. Forty-six percent of proceeds of domestic crude revenues for the review period was spent on operations and subsidies. The Corporation is unable to sustain monthly remittances to the Federation Account Allocation Committee (FAAC), and also meet its operational costs entirely from the proceeds of domestic crude oil revenues, and has had to incur third party liabilities to bridge the funding gap. Furthermore, the review period recorded international crude oil prices averaging $122.5 per barrel (average Platts prices for 2012). As at the time of concluding this report, international crude oil prices average about $46.07 per barrel, which is about 62 percent reduction when compared to the crude oil prices for the review period. If the NNPC overhead costs and subsidies are maintained (assuming crude oil production volumes are maintained), the corporation may have to exhaust all the proceeds of domestic crude oil sales, and may still require third party liabilities to meet the cost of operations and subsidies, and may not be able to make any remittances to FAAC.10
The report further recommended
that the NNPC act be reviewed as the content contradicts the requirement for the NNPC to be run as a commercially viable entity. It appears the act has given the Corporation a “Blank” cheque to spend money without limit or control. This is untenable and unsustainable and must be addressed immediately. The Corporation should be required to create value, and meet its expenses entirely from the value created. Proceeds from the FGN’s [Federal Government of Nigeria’s] crude oil sales should be remitted entirely to the Federation Accounts. Commissions for the Corporation services can then be paid based on agreed terms.11
In the noise and politicization that followed the claims and counterclaims about the unaccounted-for monies, the audit’s most important findings—that the Nigerian National Petroleum Corporation lacked transparency and that its structure and mode of operation lacked sustainability—were ignored and never debated. This may be partly because the release of the forensic audit report became mired in controversy. Some people within the government did not want the report released, so it was unduly delayed. A press conference to share the results was held in early February 2015. The President finally accepted my arguments that holding on to the report was bad for the government and was leading to unwarranted speculation. It was eventually released on April 27, 2015, close to the presidential elections and too late for a genuine debate on the findings, particularly regarding the structure and functions of NNPC.
NNPC began life as the Nigerian National Oil Corporation (NNOC) in 1972, transforming into the present-day NNPC in 1977. Its design and the act underpinning it gave it such latitude and flexibility in the management of its finances that one can only surmise it was designed to act as a source of extrabudgetary funds for those who controlled it.
Throughout the years, Presidents controlled NNPC and the Ministry of Petroleum Resources either directly as Ministers of Petroleum Resources themselves or with a Minister of Petroleum Resources and Managing Director closely aligned to them. Managers of the petroleum sector felt no need to share information or be accountable to anyone except the President. Requests for information made by the Finance Ministry or others were often ignored or treated with disdain. The Finance Ministry was kept at a distance, with little knowledge of and no role in the production and sale of oil and gas resources, and the ministry had limited access to the revenue numbers before they arrived in the Federation Account.
In my first term as Finance Minister (2003 to 2006), I found this so anomalous that I created an oil and gas unit in the Finance Ministry, directly in the minister’s office, to interface with the Petroleum Resources Ministry and the oil companies, gather data that could enable us to model our oil and gas sector better, and improve our budget and financial planning. The unit was difficult to implement and received little cooperation from the Petroleum Resources Ministry or NNPC. It eventually began to work under the leadership of Dr. Bright Okogu, who at that time served as my Special Adviser.12
In 2012, I reengineered the Oil and Gas Unit and moved it to the Finance Ministry’s Technical Department, again with support from the UK’s Department of International Development. We still struggled to form working relationships with or to benefit from knowledge sharing with our colleagues in the oil and gas sector.
The lack of transparency in oil-sector institutions and their lack of linkage to other agencies such as the Finance Ministry and NEITI (Nigerian Extractive Industries Transparency Initiative) that should have a voice in the sector was one of the reasons why so many of us felt that it was essential to secure passage of the Petroleum Industry Bill (PIB)—designed to transform and improve the efficiency of the oil and gas sector—during the Jonathan administration. This never happened because vested interests inside government and outside, including international oil companies, blocked the bill as not being in their interest. If it had passed, this bill would have led to sweeping structural changes in the NNPC and the oil and gas sector toward more commercialization, partial privatization, and hence more transparency in the generation and management of oil revenues. The Petroleum Industry Bill was not perfect. It had many problems, but it could have moved the oil and gas sector toward more openness and accountability.
In the new Muhammadu Buhari administration, it appears that a different restructuring approach to NNPC and the oil and gas sector is being implemented. The hope is that this restructuring will lead to more commercialized, more independent, financially sustainable, transparent, and accountable petroleum-sector institutions. This is the only way Nigerians will ever gain confidence in their oil and gas sector and stop the saga of unaccounted-for monies!
To this day, under the new Buhari administration, claims and counterclaims continue to be made about unaccounted-for monies. Over the course of seven days, three separate claims were made. On March 15, 2016, the Auditor General of the Federation claimed that its 2014 audit showed that ₦3.2 trillion ($16 billion) was unaccounted for by NNPC in terms of remittances to the Federation Account. On March 17, 2016, NNPC countered that it owed only ₦326 billion and was in fact owed ₦1.37 trillion by the Federation Account. On March 22, 2016, the Revenue Mobilisation and Fiscal Affairs Commission claimed that ₦4.9 trillion was unaccounted for by NNPC. What country can operate like this?
The story of Nigeria’s oil and gas sector is ugly. Although revenues from the sector have, to a substantial extent, helped finance the country’s development, the impact of the sector has fallen far short of expectations because of inappropriate policies, inefficient and nontransparent institutions, corruption, capture by leaders, and rent-seeking internal and external elites. This makes the sector a minefield for anyone seeking transparency, accountability for revenue flows, or simply the honest and straightforward conduct of government business. Trying to block fraudulent oil marketers from access to government oil subsidies, pushing for accountability for revenues due to the Federation from the oil and gas sector, managing competing sectoral interests, and dealing with the noxious politics surrounding the sector has meant stepping on many powerful toes. Trying to bring transparency and accountability to this sector was probably one of the most stressful and dangerous tasks of my job as Finance Minister!