Read and weep, again !!!!

The title should be something more like "The Rot In Nigeria's Petroleum Sector: How the FG & Friends Swindled the Nigerian People"

[url]http://thestreetjournal.org/2012/01/the-rot-in-nigeria%E2%80%99s-petroleum-sector-how-marketers-swindle-the-federal-government/[/url]

By NewsAdmin on January 20, 2012


Though the battle for the reversal of the pump price of petrol to N 65 per litre has been won and lost, the resultant effects still linger on. With the commencement of the probe into the removal of the subsidy on petrol, many Nigerians expect heads to start rolling soon.

Street Journal’s investigations revealed that the fraud being perpetrated in Nigeria’s oil sector defies competent description. The whole structure has been eroded by corruption thereby leaving the Government at the mercy of corrupt marketers, fraudulent staff and even not so clean government officials.

Incidentally, many of those behind these shady moves that set the Federal Government back by billions of Naira on a daily basis are friends of the ruling class- some have even received national honours.

Street Journal’s investigation revealed that the Chief Executives of some the companies involved in the fuel subsidy scam that blew open recently own companies outside the country. They are the ones that obtain PFI (Pro Forma Invoice) for such companies to import petrol into Nigeria. As it is almost always the case, they build up margins in the PFI for onward importation of products. That way, it is ensured that both the company here and the one abroad make money.

It was discovered that one of the companies that has become a name in Nigeria’s oil circles, Fineshade Energy Inc. is owned by billionaire business mogul, Femi Otedola whose other company, Zenon bought AP over.  Running checks on the company, it was found out that the company situated in the United Kingdom claims it has annual revenue of $ 158, 472 while the staff strength was put at 2.

Though the scandal only blew open when the N 1.3 trillion figure was quoted as subsidy and the Federal Government could no longer cope with the burden, Street Journal found out that the country had been milked for years as members of the “Oil Cabal” have been sourcing money through various means in the sector. For instance, from way back in 2009, Femi Otedola had issued a directive that compelled AP (one of his companies) to source its petroleum products needs from Zenon Petroleum & Gas Company Limited, Fineshade Energy Limited and Platinum Fleet Limited at bloated rates. It was gathered that by the third quarter of 2009, AP was already indebted to the tune of about N 10 billion. Meanwhile, AP was also being owed N 15 billion by the other companies belonging to its Chairman. Findings revealed that Otedola might have gotten involved primarily in order to source for funds to pay up various debts that have mounted in a number of banks. Sources close to the Epe born businessman say his debts run into hundreds of billions.

It was also found out that in 2009, the amount that accrued to AP from the Petroleum Products Pricing and Regulatory Agency as subsidy on importation was N 32 billion. The amount was however allegedly forfeited as the company did not import but bought its products from other companies belonging to Otedola. In other words, the businessman’s other companies were importing on behalf of AP.

One of the things that caused friction between Otedola and Clement Aviomoh, AP’s Director of Finance was that the Chairman forced AP to use Zenon’s tank farm for the storage of its products. The products bought by AP were loaded into tank farms belonging to Zenon and Otedola’s other companies, so even AP trucks had to load from there.

Apart from overstating subsidy costs which the government ends up paying, it is an open secret that products are diverted. Even the Petroleum Minister confirmed that most of the petrol meant for Nigerians end up in Niger and Chad.

At a Board meeting to solve issues between AP’s Directors and the Zenon Chairman, three transporters, Nana Brothers Transport, Zaytun Transport and Kafura Enterprises were openly accused of diverting products estimated at N1bn.

Incidentally, the sharp practices in the oil sector are not limited to Otedola’s companies alone. Ifeanyi Ubah’s Capital Oil & Gas was believed to be helping Nigerians when it launched the Kero-Direct Scheme (KDS) late last year. The scheme which was launched in conjunction with the NNPC was aimed at supplying Kerosene directly to households through the use of ultra-modern mobile dispensing trucks belonging to Capital Oil.

Though officials of Capital Oil claimed the scheme recorded success in Lagos and some parts of the East, events have since proved that the company made much more gains than anyone ever imagined. The Central Bank of Nigeria recently issued a directive through AMCON, the Government owned asset managing firm has issued a directive that Capital Oil & Gas should pay back N 5 billion which the company received as “rogue” proceeds made from Kerosene subsidy or face prosecution.

Street Journal has also found out that at times, marketers inflate the quantity of the products they imported, just to make extra cash, and where documentation is inadequate, it is easy to get away with such practices. Central Bank Governor, Sanusi Lamido Sanusi also confirmed recently that it is quite possible to “just forge documents and have them stamped without bringing in anything and collect the subsidy-PPPRA pays based on documents,” he stated.

It was also revealed that on a certain day, there were documents that twelve vessels offloaded at the Lagos Ports. Apart from being almost impossible, the same officer signed all the papers brought forward by the companies to claim subsidy. Yet no one deemed it fit to ask the officer why he chose to work extra hours or why the person that ought to relieve him did not come to work.

While the government has blamed companies for sharp practices, it has also been discovered that the Government itself might not be innocent in the scandal that has unfolded. The House of Representatives probe has also shown Nigerians the quality of leadership the country has. It was quite evident that not even the Petroleum Minister could state the amount of petrol used by Nigerians on a daily basis. While the Petroleum Minister said Nigerians use 35 million litres of petrol daily, the Petroleum Products Pricing and Regulatory Agency stated that Nigeria imports 59 million litres of petrol daily, thereby leaving an excess of 24 million litres which is not only unneeded but cannot be accounted for.

It might not also be wrong to conclude that the excess 24 million litres serves as “excess allocation” which the marketers smuggle to neighbouring countries for sale. The marketers have nothing to lose as they have already received subsidy on the fuel and will also be able to sell at prices much higher than what obtains in the home market.

And by the Minister’s calculation that N 76 is paid on every litre as subsidy, it means while it lasted, the government paid N 1.824 billion on a daily basis.

A startling revelation that indicted the government agencies was also made when the Customs Department disclosed that the NNPC imports petroleum products without valid documentation thereby making it easy for the products to be moved without being tracked. Where that happens, it is impossible to have accurate data on imported products.

The Government has resolved to get to the root of the matter and has given the job of auditing the Oil and Gas industry to Saada Idris & Co while that of the Solid Minerals sector will be handled by Haruna Yahaya & Co for N 226 million and N 137 million respectively.

Though this has been hailed in some sectors as a step in the right direction, most Nigerians are of the opinion that the auditors will not achieve anything new, and that is if the reports of the audit do not get swept under the carpet.