Companies indicted for multi-billion subsidy fraud to lift Nigerian crude in 2017
The list of companies released by the Nigerian National Petroleum Corporation for the 2017/2018 crude oil trade includes firms indicted and some facing criminal charges for fuel subsidy fraud.
The oil subsidy regime between 2009 – 2011 recorded one of the most monumental cases of fraud in Nigeria’s history, with the government paying importers subsidy for 59 million litres of fuel per day, while the country actually consumed about 35 million litres.
In 2011, Nigeria spent N2.5 trillion on fuel subsidy, a 900 percent increase from the N245 billion in the year’s budget.
More than 30 companies were indicted after investigations were launched, and several of them are still facing criminal charges in Nigerian courts for making hugely inflated subsidy claims.
Last week, the NNPC released the names of 39 winners for the sale and purchase of Nigerian crude in 2017/2018. The contract would run for one year effective from January 1 for consecutive 12 circles of crude oil allocation and involves 18 Nigerian companies, 11 International Traders, five foreign refineries, three National Oil Companies (NOCs) and two NNPC trading arms.
The NNPC said all the contracts for the 2017/2018 crude trade were for 32,000 barrels per day except Duke Oil Ltd, an oil trading arm of the NNPC, which shall be for 90,000 barrels per day.
The indigenous beneficiaries include Oando, Sahara Energy, MRS Oil and Gas, AA Rano, Bono, Masters Energy, Eterna Oil and Gas, Cassiva Energy, Hyde Energy and Brittania U.
Others are NorthWest Petroleum, Optima Energy, AMG Petroenergy, Arkiren Oil and Gas Limited, Shoreline Limited, Entourage Oil, Setana Energy and Prudent Energy.
“Many of these multinationals, oil companies, and other high-level investors in the system, they have a way of manipulating the system that you won’t be surprised if many of them also have contributed to the campaign and funding of some of these political parties and government officials,” said Olanrewaju Suraju, chairman of Civil Society Network Against Corruption, a coalition of anti-corruption organisations.
“So they pay them back which is usually considered an investment in the electoral process. They get to pay them back with these kinds of contracts.”
ACCUSED OF FRAUD
On October 19, 2011, a vessel, MT Zhen Star, purportedly docked on Nigerian waters with 58,000 metric tonnes of petrol owned by two companies – Masters Energy Oil and Gas Limited and Caades Oil and Gas Limited, according to findings by a technical committee set up by the Nigerian government in 2012 to investigate subsidy payments.
Masters Energy claimed it discharged 28,000 metric tonnes of petrol from the vessel in the presence of officials of the Petroleum Products Pricing Regulatory Agency, Department of Petroleum Resources, Navy, Customs, and others.
In reality, however, MT Zhen Star does not exist, but Masters Energy collected N2.9 billion as subsidy claims from the Nigerian government, the committee concluded. Despite the indictment, Masters Energy was among some other indicted firms that were never prosecuted.
Also, in 2013, the Police Special Fraud Unit charged Oando Plc alongside three other companies and two managing directors for allegedly obtaining N2.9 billion from the federal government under false pretence of importing petroleum products into the country.
For Eterna Oil and Gas Plc, after initially arraigning them in 2012, the Economic and Financial Crimes Commission, EFCC, in 2014 re-arraigned the firm and its director, Mahmud Tukur, son of former chairman of the Peoples’ Democratic Party, alongside other suspects over a N3.1 billion fuel subsidy scam. The accused persons were charged on a 38-amended count charge bordering on conspiracy, obtaining money under false pretence and forgery.
Also in 2012, a House of Representatives committee led by Farouk Lawan named AMG Petroenergy, Setana Energy, and Prudent Energy in a list of 68 oil marketers that collected subsidy funds from the federal government illegally. The committee mandated the three companies to refund the sums of N7.2 billion, N2.7 billion, and N1.3 billion respectively to the Nigerian government.
Prudent Energy, which failed to appear before the committee, was also listed among marketers that were not registered with the PPPRA before they got their first allocation for product supplies. The company received its first allocation on August 12, 2011, ten days before it registered with the PPPRA, the lawmakers found.
The House committee listed Setana Energy as a marketer that had no tank-farm, never used its through-put agreement yet used it to claim N44.8 million as fee for importation of petroleum products under the Petroleum Support Fund (PSF) scheme.
The trio of AMG Petroenergy, Eterna Oil, and Prudent Energy and Resources Ltd were also listed as tax defaulters under the PSF scheme.
In 2009, the Accountant-General’s office paid N999 million each for 128 subsidy payments in a record-breaking 24 hours, an equivalent of about N42 million paid out every hour. The companies that benefitted include Oando Plc, N25.9 billion (26 cheques); Brittania U Nigeria Ltd, N999 million (one cheque); and NorthWest Petroleum, N8.9 billion (nine cheques).
“At the period of the payment approval, the marketers listed were owed several billions cumulatively and as such payments were broken down to N999 million per cheque in line with financial regulation.
While the technical committee, headed by Aig Imoukhuede, recommended that illegal payments made to oil marketers be recovered, the House committee called for the prosecution of fraudulent beneficiaries.
In the end, not all indicted marketers were prosecuted by the Nigerian government. For instance, Masters Energy, Setana Energy, Prudent Energy, and AMG Petroenergy were not charged to court.
INTERNATIONAL FIRM TOO
Trafigura Beheev BV (TBBV), one of the international beneficiaries of the crude lifting contract, had been involved in a crude oil swap agreement with the Nigerian government since 2010. The agreement saw the Pipelines and Products Marketing Company (PPMC) supply crude oil to the company in exchange for refined products.
But last year, the Federal Inland Revenue Service said the Amsterdam-based firm owed the Nigerian government $62.5 million (about N20 billion) in taxes from a 12.5 million metric tons crude oil swap worth $24 billion.
PREMIUM TIMES reached out to all the companies indicted or charged for oil subsidy fraud included in the latest list of crude traders by the NNPC.
Setana Energy, Oando Plc, and AMG Petroenergy did not respond to e-mail enquiries.
A spokesperson for Prudent Energy, Kamil Adebumola, said the company was erroneously included in the list of marketers indicted for oil subsidy fraud and had been cleared of the allegations.
“Also, at no point did we import product under the PSF scheme without due application and approval from PPPRA,” Mr. Adebumola said in an emailed response to PREMIUM TIMES.
A spokesperson for Masters Energy also denied that the company was indicted in the oil subsidy scam.
“As a major player in the downstream operations of the oil and gas sector, we were invited like other marketers during the petroleum subsidy investigation, which we attended and satisfactorily made presentations on our various transactions during the period backed with relevant documents,” said Emma Iheanacho, the company’s Head of Corporate Communications.”
“We were thereafter cleared by SFU and EFCC.”
Last year, Trafigura had denied the FIRS accusation of tax evasion, noting that it chartered vessels for the purpose of delivering refined products to PPMC and taking delivery of the corresponding swap of crude oil at the designated ports.
“TBBV did not import petroleum products into the country as PPMC was responsible for all inward customs clearance and importation,” the company said in a statement on its website.
“Neither TBBV – nor any of its subsidiaries – has an office in Nigeria or staff (employees or third parties) locally acting on behalf of TBBV. No inventory was kept onshore and/or bonded storage. In the absence of these, both under Nigerian and international tax law TBBV has no obligation to register for tax purposes in Nigeria. As a result, the company does not have an income tax or any other tax obligation in Nigeria.”
‘BUSINESS AS USUAL’
Nigeria had only five fuel importers in 2006. One year later, the number rose to 10. In 2008, the figure grew to 19, and by 2011, it reached 140.
In 2013, under then president Goodluck Jonathan, the country widened the number of its fuel importers and included those indicted in the fuel subsidy investigations, angering government’s critics and opposition.
President Muhammadu Buhari defeated Mr. Jonathan in the 2015 election on the back of a campaign promise to tackle widespread corruption, especially in the petroleum industry.
Activists say the latest move to include indicted oil marketers among those to purchase and lift crude oil means not much has changed.
“If the EFCC is yet to issue a clean bill of health to those oil companies that were found wanting in the oil subsidy scam and the government is already engaging them for the same services that they, in the past, were stealing from the government and the people of Nigeria, then it is also saying that it is still business as usual,” said Mr. Suraju.
But the spokesperson of the NNPC, Ndu Ughamadu, said the government does not have any reason to blacklist any oil marketer because the charges against them are still before the courts.
“If proceedings are still in court and there are no injunctions that company A should be temporarily barred from doing certain things, the organisation is not obliged. They are still in court, and their filling stations are all over the place and they’ve been importing products for the country and in the interest of the country.” said Mr. Ughamadu.
“If the court puts an injunction on a particular company and the NNPC is served, maybe as the major stakeholder that deals with that particular company, NNPC is a corporate entity and we abide by all the rules and regulations of the country and all the injunctions of the courts.”
Wilson Uwujaren, the EFCC spokesperson, said most of the people investigated and charged for subsidy scam by the Commission are still in court.
“Even though it’s people who are charged, they are still doing business, the fact that you are charged does not mean that you will stop your business,” Mr. Uwujaren said.
“Even if you are a criminal, you have a criminal charge in court it doesn’t mean that once you are charged to court you abandon your businesses, you can do your business and face your charge in court.”