SUBSIDY FRAUD INCORPORATED (1): Fresh scandal surrounds FG’s committee

By Jide Ajani

This will shock you.  It is the report of Sunday Vanguard’s painstaking investigation with sources inside Aso Rock Presidential Villa, the Nigeria National Petroleum Corporation, NNPC, the Petroleum Products Pricing and Regulatory Agency, PPPRA, the Petroleum Equalization Fund, PSF, and the Petroleum Support Fund, PSF, just to mention a few.

It is about the serial complicity of some operators in the oil industry, government agencies and high ranking government officials in a mélange of corrupt practices occasioned by cover ups, deception and deliberate misinformation to unsuspecting members of the Nigerian public.  It is a story of conflict of interest regarding those investigating and verifying the claims of marketers, a story of filth and willful negligence fueled by insatiable greed.

It was an innocent memo; but panic oozed from it.

The genesis of what has today become the fraud in the management of subsidy funds all started with a directive from the Federal Government of Nigeria.  Although the House of Representatives Committee which investigated the management of subsidy on petrol presented its report which has become mired in scandalous controversy, occasioned by a bribery saga, the several committees set up by the federal government may not be about to get to the root of the matter by calling a spade a spade – there is the Nuhu Ribadu committee set up by the Nigeria National Petroleum Corporation, NNPC; there was the Aigboje Aig-Imoukhuede committee; and now there is another committee which just submitted its report penultimate weekend, headed again by Aigboje Aig-Imoukhuede.

Switching into a panic mode, the Peoples Democratic Party, PDP-led government of late President Umaru Musa Yar’Adua, sensing that long queues at the petrol stations across the country represents a clear and present national security challenge, sent a memo to the Petroleum Products Pricing and Regulatory Agency, PPRA.  This was in October, 2008.

Dated October 20, 2008, the memo, signed on behalf of the then Secretary to the Government of the Federation, from the Presidency came through the SGF’s (PARASTATALS DEPARTMENT, GENERAL SERVICES).
The reference: SGF. 19/S.53/II/

The title of the memo: “RE: OUTCOME OF THE STAKEHOLDERS MEETING ON IMPORT PLAN FOR 4TH QUARTER, 2008/REVIEW OF PSF IMPLEMENTATION”.

“I am directed to refer to your letter Ref. No. A.1/1/228/C.7/III/468 of 16th October, 2008”, the content of the letter reads, “on the outcome of the stakeholders meeting of 14th October, 2008 to harmonize import plan for November and December, 2008 and to convey the approval of the Secretary to the Government of the Federation for:
“1) The import plan for November – December, 2008 as harmonized with the marketers during the stakeholders meeting and as recommended; and

“2) The participation of the recommended companies with storage facilities or valid throughout agreement that have completed the necessary due diligence processes to import the products in order to sustain adequate supply in the system.

“I am to further inform you that you are required to submit a report on the performance of the participating companies to this Office at the completion of the import exercise.
“Please accept the warm regards of the Secretary to the Government of the Federation”.
What had happened just before that memo was that the PPPRA had recommended that there was need for an expansion of the frontiers of fuel importation into the country and had, therefore, requested an approval from the Presidency.

Whereas possession of storage facilities was an earlier condition precedent, the need to include importers who had valid throughout agreement, with a view to making the product more available became inevitable.

In fact, some of the marketers who preferred to speak on conditions of anonymity made it clear that most of the “so called major marketers were actually in agreement with other lesser known importers who took the risk of financing and importation of petroleum products”.  But this was to open the floodgate.

HOW SUBSIDY FRAUD IS COMMITTED
One of the major points where the fraud is committed is the Atlas Cove Jetty, Apapa, Lagos, which is Nigeria’s major delivery and re-distribution point for refined petroleum products.  The second, strategic, point is represented by the plethora of depots in Lagos.

Atlas Cove, first built in 1979, and rebuilt by Julius Berger in 2000, is owned and managed by the Pipelines and Products Marketing Company, PPMC, on behalf of Nigerian National Petroleum Corporation, NNPC, as a storage farm/facility that channels refined products through System 2B pipelines that runs through Ejigbo (a suburb in Lagos). These pipelines supply petroleum products to the entire Western region of Nigeria, Kwara and Edo States. Depots served by the Atlas Cove Jetty include Mosimi, Ore, Ibadan and Shagamu. The Atlas Cove Jetty is also used to off-load coastal vessels as well as pump petroleum products to the Atlas Cove Depot for storage.
This command center for refined petroleum products is administered from Abuja by the PPMC, a subsidiary of the government owned NNPC.

A very dependable source at Atlas Cove told Sunday Vanguard that the country had always been held hostage by the petrol import cabal in connivance with the government that claims to be serving and protecting Nigerians.

A source said what has been in place at Atlas Cove can best be described as “round-tripping, as some of the marketers with allocation for importation are involved in the scheme.

According to the source, “they bring in a particular amount of refined product, declare the product on arrival to the relevant government agencies’ staff (DPR, PPPRA, Petroleum Equalisation Fund, PEF) and after these officials have okayed the product quantity in preparation for subsidy application, about half of the product originally meant for domestic consumption would then be diverted to other neighbouring West African states”.

In the case of private depot owners, “some of them doctor the figures they submit with a view to making undeserving claims.  The quantity of products discharged some times does not tally with the inflated figures that are recorded.

It is one big, very big conspiracy.  The importers are involved; the depot owners are involved; the people who are supposed to verify the claims are also involved.  People collect subsidy for what they did not import.  That is why the figures and claims keep going up.  Those involved know themselves; and those to whom they make returns also know themselves.  It is for government to dig deep and find these people out”, the source concluded.

Had it been limited to these categories of people alone, the corruption associated with the subsidy funds may not have assumed the humongous nature it assumed.  But there were all manner of petty crooks in the toga of government officials and importers as well as depot owners who doctored records.

For instance, those with “valid throughout agreement that have completed the necessary due diligence processes to import the products” also connive with depot owners to make illegitimate claims.

CAUSE OF PANIC BY FG
Back to the FG’s memo of

2008! Before the memo, there was beginning to appear at gas stations across the country long vehicular queues.  The PPPRA, Sunday Vanguard has been made to understand, designed a seemingly “more flexible import plan” which accommodated a few more companies.

There was need for the federal government to approve the arrangement made by PPPRA.  That was the message conveyed by the letter from the Office of the SGF.

But it was not a magna charta for PPPRA to enthrone a regime of recklessness.
However, what was to follow was to create its own muddle.
On January 21, 2009, the federal government decided to reduce the pump head price of petrol.
The consequence of that was the creation of even longer queues.
Importers and marketers began to complain and there was need for the federal government to address their concerns.

Therefore, through the PPPRA, the FG summoned a ‘Technical Committee’ meeting of stakeholders.  The meeting was held on Thursday, January 29, 2009.

A source in the Office of the SGF made Sunday Vanguard understand that the meeting needed to be called because “the government of the day was beginning to feel that there might be sabotage because of the growing shortage of petroleum products”.

At the meeting that day, there were representatives of NUPENG, PPMC, MOMAN, DPR, PENGASSAN, Ministry of Petroleum, IPMAN, TUC, CBN, DAPPMA, and a host of other stakeholders.  It was at that meeting that marketers complained of the removal of standard deviation from the PPPRA Template.
After the meeting which lasted hours, resolutions were reached.

A copy of the resolution obtained by Sunday Vanguard reads: “On the issue of exchange rate, it was agreed that the CBN Marginal Rate plus 1% CBN commission and 1% bank charges should be added in the Template.

“Members agreed that the Freight Rate based on the 2009 World Scale will be considered
“For the financing cost element, it was agreed that the PPPRA should confirm bank interest rates and other charges that make up the cost and come up with a submission.
“Members agreed that the PPPRA should adopt the weighted average of Port Charges (NPA), on the Pricing template.

“Members agreed that the PPPRA should update the Pricing template with the reviewed parameters, and present same to the next meeting for consideration.
“The meeting advised that recommendation should be made on the need to dialogue with the NPA with a view to reducing their charges.

“In addition, the PPPRA may also seek intervention in the FOREX by exploring the possibility of a special window for an exchange rate for the wet products that capture a reasonable rate that guarantees predictable products importation”.

The resolutions of this meeting were conveyed to the federal government in a letter with reference number A3/9/118/C.7/T/84, on February 5, 2009.

However, typical of government activities in Nigeria, there was no immediate response.
This was at a time when the federal government brought down the price of petrol from N70 to N65.  This led to serious shortages and queues were once again back at the filling stations.
Sunday Vanguard was informed by an industry source that the PPPRA “was instructed by the Office of the Honourable Minister of Petroleum Resources to immediately address the Marketers complaints with a view to eliminating long queues at the filling stations”.

It was in addressing that challenge that some smart Nigerians, made up of bankers and government officials, along with importers began to make the kill, as disclosed above.

COMMITTEES APLENTY AND CONFLICT OF INTEREST
The probe into the shady deals was first instituted by the Senate under the chairmanship of Senator Magnus Abe.  Then came the drama of the House of Representatives’ Committee on Subsidy Management, with Hon. Lawan Farouk as chairman.  The Senate Committee is yet to conclude its work.  But the Farouk Committee which concluded its work has been entrapped by s bribery scandal involving a member of President Jonathan’s Economic Management Team, EMT, Femi Otedola of Zenon Oil and Gas,

Sunday Vanguard was informed last week in Abuja that the banks were also part of the problem, including the Central Bank of Nigeria, CBN.

Of particular interest is one of the banks whose Chief Executive is involved in some form of remedial activities being engaged by the FG.

Pouring through tones of documentary evidence, Sunday Vanguard was exposed to a verity of LETTERS OF CREDIT ostensibly opened for the transaction of fuel importation.

And whereas it could not be established during this investigation that the banks were directly involved in any form of “sharp practices”, according to a source, “the status of the committees chaired by Aigboje Aig-Imoukhuede of Access Bank can not escape the tar of conflict of interest”.
Whereas there was documentary evidence to prove that, like most other banks, Access Bank was involved in the financing of businesses conducted pursuant to importing petrol, the choice of Aig- Imoukhuede as the chairman of two committees involved in the verification of claims regarding subsidy does not in any way present the FG as conducting its investigations in an unbiased manner.

Firstly, some marketers and industry sources disclosed to Sunday Vanguard that “conducting a verification exercise the way the first committee set up by Ngozi Okonjo-Iweala, Finance Minister and co-ordinating minister for the administration’s EMT did, revealing that over N400billion should be refunded to the government, a sum which the committee said constituted wrongful payments, how would anyone explain the fact that the chairman of the committee also runs a bank that was involved in the business of financing importation of petrol?

“It was because some importers raised an alarm about the unfairness of the first committee by not allowing them to come forward and defend themselves that made Mr. President to set up another committee but again with the same individual as its chairman.  This is not about the person of Aig- Imoukhuede but, in coming to equity, there is need to come with clean hands.  It does more harm than good to the FG to appoint the chief executive of a participating bank to verify subsidy claims.  Some of us know what Aig-Imoukhuede represents but it is not even in his interest to chair such a committee.  Nigerians are watching and the insinuation is already there that all these is about man-know-man”, the source said.

Reminded that some of those who benefited from the subsidy wrongly are being prepared for prosecution, the source, who is one of the major importers, maintained, “Who does not know what will happen at the end of the day?  Some of those that would be arraigned would be the ones who are not connected.  Yes, some people would be prosecuted but the real issue here is the role of conflict of interest.”

When you add up the Senator Abe Committee, the Farouk Committee, the Ribadu Committee, the first Imoukhuede Committee and the second Imoukhuede Committee, the question to ask is, where would all these lead?

In addition, the role of the Economic and Financial Crimes Commission, EFCC, is gradually coming to light as inside sources say the commission is about to break loose.

HOW NOT TO TRACK
SUBSIDY ROUGUES
Yet, investigations have revealed that there is a very simple (even simplistic) approach to tracking the subsidy thieves.

A very dependable source inside Aso Rock Presidential Villa disclosed to Sunday Vanguard that on December 24, 2010, a near scandal almost broke out when the PPPRA issued a “Request for a notarized Letter of undertaking on accuracy of petroleum products supply and evacuation records”.
The Presidency source disclosed that the move to ensure that all petroleum products importers and depot owners sign an undertaking of performance was first rebuffed.

“It was an attempt at ensuring that depot owners and importers do not engage in what has now become the sharing of the subsidy loot.  When we got hint of the move, it was seen as a welcome development by some but again, there was need to ensure that a dislocation is not created in the supply chain for the availability of products as this was coming close to an election period”, the source said.

Even at that, Sunday Vanguard was able to discover that all the importers and depot owners were made to sign the undertaking that they would be straightforward in their dealings.
In fact, the undertaking that was signed by the importers and marketers also had penalties which, apart from leading to prosecution, also has the stringency of forfeiture of depots in the event that records are not accurate. Now, the PPPRA introduced a checklist.

NEXT WEEK
*PPPRA’S CHECKLIST (CONDITIONS TO BE MET BEFORE SUBSIDY FUNDS CAN BE ACCESSED)
*A THOROUGH ANALYSIS OF THE LATEST VERSION OF THE PIB
*THE NOTARIZED LETTER OF UNDERTAKING SIGNED BY THE IMPORTERS AND DEPOT OWNERS
*ROLE OF BANKS AND THE CBN
*STEP BY STEP APPROACH TO IMPORTATION