Fraud, Lies, and-Video Tape

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 Pcople'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 tho 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. 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 products, with the foreign exchange diverted to other uses unauthorized deductions by the Nigerian National Petroleum Corpo 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. The report made several important recommendations: the sum of N1.067 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.