How N422bn was lost to Fuel Subsidy Fraud

The Federal Government committee set up to verify 2011 fuel subsidy payments to oil marketers and importers has uncovered 17 infringements committed by the companies, which have cost the nation N422,542,937,668.59 in overpayments, THISDAY has learnt.

The committee, headed by the Managing Director/Chief Executive Officer of Access Bank Plc, Mr. Aigboje Aig-Imoukhuede, with Sola David-Borha, Managing Director, StanbicIBTC Plc as secretary, was set up by the Federal Ministry of Finance last May to undertake a forensic audit and verify claims by oil marketers and the Nigerian National Petroleum Corporation, and the payments made to them by the ministry.
The report, which was submitted on Tuesday to the presidency and finance ministry, a copy of which was obtained by THISDAY reporters from sources in the presidency last night, showed that there are 17 broad categories of infringements used to defraud the Federal Government.
In fulfilling its assignment, the committee used a team of Central Bank of Nigeria (CBN) examiners of the Banking Supervision and Trade Exchange Department, experienced bank auditors selected by the Chairman, Committee of Chief Inspectors of Banks and chief compliance officers of banks to review the subsidy payments made to the oil marketers, and went on to recommend that the N422 billion be refunded to the Federal Government and the companies investigated "provided that the parties involved in the transaction are unable to provide evidence contrary to the committee's findings."
The 17 infringements are: No evidence of sales proceeds in the banks – N157,549,854,482.55, meaning that the marketers did not have evidence of sales proceeds based on banks' available records at the date of verification;•Subsidy payments without the signatures of external auditors and independent inspectors on shore tank certificates – N121,897,757,962.56;•Subsidy payments for which mother vessels were not found in locations claimed at the time of transshipment – N21,361,071,313.24;•Subsidy payments for which there were no shipping documents or evidence of payment for the products in foreign exchange – N20,463,525,859.79; and•$10 additional margin given to traders from November 2010 to 2011 with approval of the Federal Government contrary to the Petroleum Support Fund (PSF) guidelines.Others include specially mentioned transactions with various infractions – N15,944,918,661.23;•Use of 1 per cent as bank spread instead of the maximum 50 kobo approved by the CBN in computation of foreign exchange rates used for subsidy payments – N14,021,193,230.89;•Subsidy payments for which the mother vessels could not be traced – N12,942,254,466.24;•Transactions disclaimed by banks – N12,154,918,932.18;•Subsidy payments without proof of existence of the mother vessel bill of lading or daughter vessel bill of lading – N11,762,998,358.89; and•Subsidy payments for which mother vessels were no longer operational at the time of transshipment – N8,138,502,416.70.
Also included in the report are infringements on subsidy payments for which there was no copy of the bill of lading for ship-to-ship transfer – N4,634,317,239.53;•Payment of subsidy claims with no mother vessel bill of lading in the file – N1,938,927,804.98;•Subsidy payments for which mother vessels were located in the Far East (China) and in the South Pacific when transshipment took place off the coast of Cotonou – N1,713,787,473.21;•Differences between subsidies advised by PPPRA and subsequent verification by external auditors – N747,534,804.00•N20 million re-engagement fees not charged for non-performance by marketers – N200,000,000•Difference between the volume on the shore tank certificates and the volume used for the subsidy payment – N33,383,300.79.
Following the widespread protests that followed the removal of subsidy on petrol and its subsequent partial reinstatement last January, there were claims for a thorough investigation of the subsidy regime. This prompted the Federal Government to set up the committee of technocrats, apart from the National Assembly's committee, which presidency sources said, "was unduly politicised and plagued by high drama."
The Federal Government committee was made up of Aig-Imoukhuede (chairman); Director General, Budget Office of the Federation, Dr. Bright Okogu; Dr. Director General, Debt Management Office, Dr. Abraham Nwankwo; Accountant General of the Federation, Mr. Jonah Otunla; and Executive Secretary, Petroleum Products Pricing and Regulatory Agency (PPPRA), Mr. Reginald Stanley.
Other members included former Group Executive Director, Finance and Accounts, Nigerian National Petroleum Corporation (NNPC), Mr. Michael Akorodare; Deputy Director, CBN, Mrs. Onyinye Ahuchogu; Mrs. David-Borha; National Secretary, Independent Petroleum Marketers Association of Nigeria (IPMAN), Mr. Mike Osatuyi; and Executive Secretary, Major Marketers Association of Nigeria (MOMAN), Mr. Obafemi Olawore.
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