Restoring normalcy: A synopsis of the Makarfi report

Those familiar with Nigerian politics will recall that 11 years ago the political climate was overheating. It was the year that the APC gained momentum. It was the year after the big protest against the rise in fuel price led by the APC members. Some may remember this with regret. This nostalgia is from today’s […]

Those familiar with Nigerian politics will recall that 11 years ago the political climate was overheating. It was the year that the APC gained momentum. It was the year after the big protest against the rise in fuel price led by the APC members. Some may remember this with regret. This nostalgia is from today’s concerns, especially over opaque subsidy payments and widespread racketeering. As crude oil production declines and revenues drop, the inefficiencies of past administrations seem less troubling compared to the current state of affairs under the Bola Tinubu-led government.

Crude oil production has declined significantly in Nigeria. During its peak in 2011, 2012 and 2013, it sold for $110 per barrel. Nigeria produced an average of 2.4 million barrels per day. Today, we are averaging 1.44 million. This means Nigeria was richer as it had a high inflow of foreign exchange from revenues. And if we worry that the decline is impacting both revenues and foreign exchange reserves, we must also worry about the administrators of the Tinubu-led government who are managing our affairs.

Let’s look back!

In December, 2013, the Senate responded decisively to subsidy-related concerns. Senator Olubunmi A. Adetunmbi raised a matter of public importance about $49.8bn in unremitted oil revenues which led to a thorough investigation. Unlike today, when such matters would linger, the Senate promptly mandated the Senator Ahmed Makarfi Committee to investigate. Similarly, on February 20, 2014, Senator Babajide C. Omoworare sponsored a motion on the urgent need to stop the N700m a day illegal kerosene subsidy.

If issues of such magnitude were to happen today, the National Assembly would have spent days deliberating on how to announce it or may have to await Presidential directives. Similarly, a motion of similar significance may never see the light of day under the current leadership of the National Assembly.

Unlike today, the Senate at the time did not delay mandating a joint committee to investigate the matter. The chairman of the committee was Senator Makarfi, hence called the Makarfi Committee. In a public hearing, the committee was declared open by the then Senate President, David Mark, and subsequent hearings were conducted. The report of the committee was the first to tell Nigerians about the discrepancies in oil revenue management by the then Nigerian National Petroleum Corporation (NNPC). The investigation found deep-rooted inefficiencies, mismanagement, and unapproved spending that continue to plague the sector.

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The committee was able to tell Nigerians about its discoveries. They reported that between January 2012, and July, 2013, crude oil worth $67bn was lifted. However, only $47bn was remitted to the Federation Account. This left a gap of $20bn, with conflicting figures from the Central Bank of Nigeria (CBN), NNPC and other stakeholders over the true unremitted sum. Naturally, this raised eyebrows.

A significant portion of the unaccounted funds was linked to fuel subsidy payments. The Senate confirmed they allocated $5.7bn for petrol subsidy in 2012 and 2013, while NNPC claimed it spent $8.76bn – well above what was budgeted. The silver lining here is that the public was aware of the country’s financial position when there was no pressure for them to know, unlike the present day when the public desperately needs to know.

The most glaring example of mismanagement in the Makarfi Committee’s report was in kerosene subsidy payments. The then President Umaru Musa Yar’Adua directed NNPC to halt kerosene subsidies in 2009 due to inefficiencies, but NNPC continued these payments without the National Assembly’s appropriation. Between 2012 and 2013, $4.43bn was spent, much of it benefiting private players rather than the masses. This is against the intended goal of supporting Nigerians with affordable energy.

The committee report noted that these payments appear to have benefited private players in the kerosene distribution market, who turned the subsidy into a form of rent-seeking rather than supporting the Nigerian masses as intended. Some may not be aware, but these kerosene subsidy payments were used to prosecute every form of energy subsidy programme irrespective of the principle behind it. Hindsight tells us this should be different.

Overall, the Makarfi Committee’s report paints a troubling picture of Nigeria’s oil sector. Despite the clear evidence, the incoming government took no proactive measures to mitigate these bad practices in NNPC, even with two successive presidents serving as petroleum ministers.

To be objective, the Makarfi Committee made several crucial recommendations to reform the petroleum sector, including asking the NNPC to refund $888m in unsupported expenses. Some things never change.

They described the subsidy system as unsustainable. However, the committee urged the government to carry out wide consultations with stakeholders before removing it. The committee would have recommended against how Tinubu rushed to remove fuel subsidy from his first day in office.

The committee noted that poor coordination between key agencies such as NNPC, CBN and the Ministry of Finance had contributed to the problems. It recommended regular reconciliation meetings between these agencies to prevent future revenue shortfalls. Yes, today, the finance minister is coordinating these agencies, but the underlying problems remain. The trading of words with the Dangote Refinery over pump prices and similar issues like the Malta racketeering tells you the bad governance problem is still there.

Lastly, the Makarfi Committee urged the immediate passage of the long-delayed Petroleum Industry Bill to reform the governance of the oil and gas sector. Yes, it was a good initiative by Buhari to sign the Petroleum Industry Bill. However, the NNPC Limited is now out of reach of the public scrutiny. We now have a less transparent and less efficient oil industry. No doubt, it is more a commercially-driven entity, with the market forces determining prices, making petroleum unbearable for the poor.

Unfortunately, the lack of continuity gave the next government a chance to legalise this mismanagement by making NNPC a private limited company, which is now less transparent than before. The shenanigans in the petroleum industry are becoming a daily circus for the media despite having the President as the Minister. This is definitely different from what the Makarfi committee prescribed.

I brought this report to light as I feel if people were given an option, they would choose a return to those good old days. There is no perfect system or leadership, but one cannot deny Nigeria is going through a disastrous set of administrators who have a misrepresented ideology that cares less for its citizens.

True, it is impossible to return to the past, but there are lessons from the Makarfi Committee that remain relevant today. The proper consultations seen in 2013 are sorely missing. What is needed is not nostalgia but a return to the normalcy that prioritises the Nigerian public over vested interests. But the good thing is that these leaders, Senator Makarfi and company, who advocated reforms back then, remain active in Nigerian politics today. If anything, they now have better experience, maturity and wisdom in both the art of governance of the country.