Subsidy: How Lloyd’s Register Traced Fraudulent Oil Marketers
In order to sift through the mountain of documentation and bills of laden submitted by major and independent oil marketers, and ascertain with near certainty companies that might have made false subsidy claims on phantom petrol imports, the House of Representatives ad hoc committee that was set up to probe the management of the fuel subsidy fund, has solicited the assistance of the UK-based Lloyd’s Register Group.
Lloyd’s Register is the foremost maritime classification society and independent risk management organisation in the world, specialising in maritime and shipping, oil and gas, transportation, and chemical and power.
Lloyd’s Register, THISDAY has learnt, provided the technical support to the Hon. Farouk Lawan-led committee, which was able to establish that an estimated N2.4 trillion was paid out as petrol subsidy by the Federal Government in 2011, of which N1.24 trillion (about $8 billion) was fraudulently paid to unscrupulous oil marketers or importers.
The report of the committee on the subsidy probe, which is expected to be tabled by Lawan tomorrow before the House of Representatives, has sent shock waves through the downstream oil sector, especially among oil marketers who are panicking over the recommendations in the report.
THISDAY had exclusively reported Sunday that oil marketers found to have taken part in the wide-scale subsidy fraud unearthed by the ad hoc committee would be made to refund billions of naira to the Federal Government.
Presidency sources, who have some insight into the findings of the committee, disclosed Sunday that the committee was able to identify oil marketers that had defrauded the system by sending the bills of laden and other shipping documents to Lloyd’s in the UK to ascertain the veracity of their claims.
During the subsidy probe, the committee had insisted that all oil marketers and importers of petroleum products submit their import allocations issued by the Petroleum Products Pricing Regulatory Agency (PPPRA), the letters of credit and Form Ms obtained from commercial banks and the Central Bank of Nigeria (CBN) to support the imports, and the shipping documents as evidence of the products they had imported.
Given Lloyd’s global reach, the company provided the committee with information on ships carrying petroleum products that berthed in Nigeria, those that genuinely off-loaded into depots in the country, vessels that back-loaded the products and took them back to resell on the West African coast and in Eastern Europe (in countries like Russia), as well as vessels that claimed to have carried a certain quantity but offloaded much lower volumes in Nigerian depots.
Lloyd’s was also used to authenticate genuine and fake shipping documents and bills of laden that fraudulent oil marketers submitted to the authorities to make their subsidy claims.
Presidency sources said it would be difficult for the fraudulent oil marketers to extricate themselves from the findings of the House committee, and that the Economic and Financial Crimes Commission (EFCC) was already on standby for the committee to submit its report and would make the necessary arrests.
One official in the Presidency revealed that the attempt by the Federal Government to withdraw the subsidy on petrol, which triggered the probe, was a blessing in disguise, as it had restored some measure of sanity to the fuel importation scheme.
He said that apart from compelling oil marketers found to have engaged in the subsidy fraud to refund the money to the Federal Government, even the Nigerian National Petroleum Corporation (NNPC) had been forced to clean up its act.
“If you recall, your newspaper over two years ago broke a story on the number of ships carrying petroleum products on behalf of NNPC’s subsidiary Products and Pipelines Marketing Company (PPMC).
“At the time, over 50 ships were berthed offshore Lagos conveying products on behalf of PPMC and incurring several billions of naira as demurrage. But all this has stopped.
“Right now, there are no queues on the high sea waiting to offload, and this has reduced NNPC’s demurrage bill to a fraction of what obtained in the past. What happened in the past was sheer madness,” he said.
He added that going by the drop in the importation of petrol, the country’s real consumption of petrol should be in the region of 20 million litres daily, not the 33-35 million litres per day estimates of the House committee.
To buttress this position, he said of the 42 companies that were given 2011 second quarter allocations by PPPRA to import petrol, only nine or 10 companies were performing, comprising mainly major oil marketers.
“This is indicative of the fact that oil importation is no longer as lucrative as it used to be due to the scrutiny on the subsidy scheme, so many of them have stopped importing,” he disclosed.
He added that one of the recommendations of the committee would include a request from the House that it conducts a public hearing on the NNPC swaps.
This, he explained, stemmed from the suspicion that NNPC, which gets allocated 445,000 barrels of crude oil daily for local refining, but swaps about 60 per cent of the volume in exchange for refined petroleum products, has not been transparent with the swaps.
Other far-reaching recommendations include the restructuring and unbundling of government oil and gas agencies in the downstream sector.
The House of Representatives Ad hoc Committee on the Management of the Petrol Subsidy Fund commenced a public hearing on the subsidy scheme in January.
This followed a nationwide strike called by the Nigerian Labour Congress (NLC) and Trade Union Congress (TUC) to protest the removal of petrol subsidy by the Federal Government. The three-week long public hearing ended on February 9.
About 140 oil firms that participated in the Petroleum Support Fund appeared before the committee during the hearings to explain their roles in the scheme.
Government officials such as the Ministers of Petroleum Resources, Finance, as well as top executives of PPPRA and NNPC also appeared before the committee.
The committee also extended invitations to the Accountant-General of the Federation and Nigeria Customs Service, among others.
In addition to the House committee, the Senate also embarked on a similar probe with its committee headed by Senator Magnus Abe.
The Senate Joint Committee on Petroleum Resources (Downstream), Appropriation and Finance began investigation into the management of the fuel subsidy scheme in November last year following the passage of a motion by Senator Bukola Saraki calling the attention of the chamber to Federal Government’s extra-budgetary spending on subsidy.
The EFCC has said it will need a harmonised version of the reports of the two chambers of the National Assembly to commence possible prosecution of those indicted by the probe