Farouk Lawan and the Fuel Subsidy Scandal

Written by | The Breakdown

The Nigerian oil boom was a significant shift in the culture and economy of the country. It made the government shift its attention from agriculture to oil. The state then became a major player in African and world politics. Unfortunately, fifty years since its discovery, Nigerians are yet to record any positive impact from the discovery of oil. Many challenges persist, such as the refineries being underdeveloped for production and the massive corruption driven by the black gold. 

The fuel subsidy scheme was first introduced in Nigeria in the 1970s in response to the oil price shock in 1973. However, despite numerous attempts at reform, Nigeria has never successfully removed gasoline subsidies, in large part due to strong opposition to reform.

The opposition comes from the different interests of all stakeholders involved. These stakeholders include; the masses vulnerable to any hike in oil prices, the oil companies, tycoons and the distinct web of corruption that joins these parties together.  

In January 2012, things came crashing the removal of fuel subsidy. It caused an uproar and led to the famous #occupyNigeria protests, followed by committee investigations by the National Assembly. A supposed man of integrity, Farouk Lawan, chaired this committee. However, his actions proved otherwise. 

Farouk Lawan before Prison

Farouk Lawan was a four-time member representing Bagwai/Shanono Federal Constituency of Kano State in the Federal house of representatives. Before his sojourn into politics, he worked at the Kano State Polytechnic, rising to the role of registrar. He served as Chairman of the ad-hoc committee investigating the fraud around the oil subsidy in 2012. 

Farouk Lawan always prided himself as a man of integrity and preached it on the floor of the National Assembly. During the 620m scandal in 2006 involving former Speaker Patricia Eteh, he led the integrity group that opposed the former speaker for fraud. It was only proper that his colleagues and the public embraced his appointment as the head of the ad hoc committee investigating fuel subsidy fraud. His stance and demeanour during the hearings gave assurance that the proceeds of the investigations will bring the long-awaited justice. Unfortunately, his actions behind the scene showed he was no different from the people he openly resented.

Fuel Subsidy in Nigeria

Fuel subsidy is when the government decides to pay a fraction of the price that consumers are supposed to pay to enjoy the use of petroleum to ease the burden from the citizens. In Nigeria, the refineries do not function at an optimum level to take care of the needs of the citizens. As a result, crude oil is exported out of Nigeria, refined and then imported back to Nigeria as a finished petroleum product. To ensure compliance and regulations, the NNPC issues a license to oil marketers hoping to import oil into the country. 

The regulatory framework produced a flawed system for oversight and productivity. According to a report by Reuters“The number of fuel importers rose from 5 in 2006 to 10 in 2007, 19 in 2008 and 140 in 2011. The supervisory department PPPRA being complacent in their responsibility made room for fraudulent activities. Many firms only existed on paper and collected subsidies on products that never existed.” The oil marketers were allegedly ripping Nigeria off money. The total removal of fuel subsidies has always been a priority of past administrations. However, the effects and reality of the subsidy removal make any tangible improvement in the system impossible to foresee. 

Jonathan Increase and Subsequent Protests

Some months after President Jonathan won the election in 2011, his administration spoke out about removing the fuel subsidies. The National Economic Council held several town hall meetings trying to make citizens understand what was going on. His administration made commitments to reinvest the money gotten from the removal into society to help and have a lasting impact. These discussions gained momentum around the Christmas season of that year. Unfortunately, due to the trust deficit between the citizens and government, it was hard convincing them why the subsidy had to go. On the citizens part, they did not see why they should be the ones to pay for the failures of government and past administrations.

On the 1st of January 2012, Nigerians received a new year gift from the Federal Government. This gift was the removal of the subsidies. The effect of this removal took the price of premium motor spirit (PMS) from 65 Naira to 143 Naira per litre. The whole country was in chaos, and people had to cut short their holidays and make other plans. Nationwide protests erupted for some days and turned violent in some parts of the country. The government also deployed the military to quell the protests in some areas.

The Nigerian government had to succumb to pressure and reduce the price to 97 Naira per litre. Unfortunately, the damage was heavy and cost some lives in the process. The subsidy, protests and strikes around the nation left so many unanswered questions in the minds of Nigerians. For this reason, the house of representatives set up an ad hoc committee to look into corruption surrounding fuel subsidies.

Farouk Lawan
The House Investigation

The house of representatives carried out investigations into the issue of fuel subsidy. They held a couple of hearings, and several revelations came to light. For instance, the number of oil importers had grown to 140 in 2011 from 5 in 2006. The findings showed that many of these firms existed on paper and collected subsidies for fuel that did not exist. The reports further indicated that oil marketers were being paid for 59 million litres a day while the country consumed 35 million litres. In all, it was clear the involvement of oil marketers cost Nigeria at least $6.8 billion.

Otedola’s Role

One of the firms indicted in the fuel subsidy scandal was Zenon Petroleum and Gas belonging to Mr Femi Otedola. Farouk Lawan allegedly demanded $3million to remove Otedola’s name from the list of indicted companies. Otedola insisted his firm was innocent but decided to play along with Lawan. Otedola gave him $500,000 in cash. Unknown to Mr Lawan, Otedola had organised a sting operation with the department of state services to show proof of allegations of fraud. The DSS provided Otedola with the marked bills and set up a camera in his house. Between April 21 and 24, Lawan visited Otedola’s residence and collected $250,000 in cash on two occasions.

Soon a phone recording and a video surfaced online showing Farouk Lawan collecting a bribe in Otedola’s house. This pointed at allegations of bribery and corruption by the chairman of the committee. However, the issue went public and compromised the investigation. 

Aftermath 

The Economic and Financial Crimes Commission indicted Farouk Lawan in February 2013, on seven-count charges. The case stalled for nine years with different judges coming and leaving the case. Justice Otukola of the Federal High court in Abuja finally sentenced Farouk Lawan to seven years in jail for collecting a bribe of $500,000 from the Femi Otedola. He is to return the money back to the government coffers. 

Also,

Hon. Lawan’s actions swayed the eyes away from the main reason for the investigation. The trust deficit with the government was already low, and his actions compromised everything so much so, the committee released its report, ignored by the President.

Although unconfirmed, people said a couple of names implicated in the report were allies to the government and needed to compromise the investigation to keep their base.

The Farouk Lawan scandal is one of the numerous corruption cases in Nigeria. It shows the level of rot in the system. A sad case where the person at the forefront of the campaign for integrity ends up compromised by cash baits. Lawan never recovered from this error. His political career hit rock bottom when he failed to return to the House of Representatives in 2015. He served in the house from 1999 – 2015. After 100 months of going in and out of court, the judge found him guilty. He is to serve time in jail.

A lot of actions take place within the government. Therefore, The Breakdown exists to provide clarity on some of these issues. Click here for previous stories.

Last modified: August 29, 2021

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