In this report, SULAIMON OLANREWAJU writes on the scams, frauds and sordid tales of malfeasance, which have thrown the country into economic hardship, concluding that an urgent critical effort must be made to stem the dangerous tide.

DESPITE earning almost N100 trillion from crude oil sales in about 59 years, Nigeria has little or nothing to show for it. The sum is enough to transform Nigeria from a third world country to a first world country. That sum is enough to give the country first class infrastructure, provide constant electricity supply, modern refineries, world class education facilities, top of the range health services, world class public transport system, provide serene and secure environment, and guarantee quality life for every Nigerian but that did not happen. Rather, the bulk of the money has been lost to series of scams, frauds, phantom projects, embezzlement, and underhand dealings.

But how has this fraud, which has intensified in the last 16 years been perpetrated.  Sunday Tribune investigation uncovered a series of methods that were (still are) carefully designed to fleece the nation of trillions of its hard earned revenue.

Some of these methods are: Fuel subsidy; oil swap deals; oil theft; investment in power sector, aviation and other infrastructural designs.

Fuel subsidy

Fuel subsidy, which was instituted to cushion the effect of high cost of petroleum products on poor Nigerians became a window of opportunity for powerful Nigerians to fleece the country as trillions of naira was lost to the scheme.

According to the Nigerian Extractive Transparency Initiative, NEITI, the Federal Government spent about N4.5 trillion between 2006 and 2012 on fuel subsidy. The breakdown goes thus in 2006, N151.9billion was spent on PMS subsidy. This went up to N188billion in 2007, N256.3 billion in 2008, N421.5 billion in 2009, N673 billion in 2010, and N2.19 trillion in 2011. In 2012, it was N1.355 trillion; in 2013, it was N971billion; in 2014, it was N1.69 trillion and in 2015, N913billion was paid between January and September.

NEITI said the amount expended on fuel subsidy during that period was more than enough to get the nation’s refineries up and running, adding that it could even get the nation new refineries. The body said that the subsidy regime was fraught with fraudulent practices.

Although the quantity of fuel consumed by Nigerians did not increase significantly during that period, there was a huge increase in money expended on PMS subsidy. This is what resulted in the probe instituted by the House of Representatives after the national protest that took place following the attempt by the Goodluck Jonathan administration to remove fuel subsidy in January 2012. The probe revealed a number of fraudulent practices by some operators in that sector with some of them prosecuted and convicted. As recently as January 2017, a Lagos High Court sitting in Ikeja, sentenced Walter Wagbatsoma and Adaoha Ugo-Nnadi to 10 years in prison for fuel subsidy fraud.

Corroborating NEITI’s claim of how the subsidy regime was used to fleece the country, the Berne Declaration, a Switzerland based anti-corruption NGO, in a report published in 2013, showed a $7billion gap in Nigeria’s oil revenue retrieval. The report fingered the Nigerian National Petroleum Corporation (NNPC) as well as some Swiss oil dealers as being involved in underhand dealings that robbed the country of the said amount.

The report entitled “Swiss traders opaque deals in Nigeria” exposes various underhand dealings in the Nigeria oil marketing sector. The report shows, among other things, that Nigeria is the only major producing company that sells 100 per cent of its oil through private intermediaries, thus paving the way for oil cabal to bilk the country. The report says, “These middle men, ‘brief-case holders’ act as ‘letter boxes’ for politically exposed persons –the well-known and hidden Nigerian cabal.”
The report also shows that the secret calls for tender were done deliberately as “a setup between parties to get kickbacks in billions, and sell the nation’s oil at treasonous prices. Most of Nigeria’s oil is marketed through the Switzerland channel. Well known is the multibillion fuel subsidy scam which the ministry of petroleum allowed to fester for years, effectively robbing Nigeria of more than N2 trillion.”

Missing $20 billion

Ahead of this revelation by the Berne Declaration, former CBN Governor, who is now the Emir of Kano, Alhaji Muhammadu Sanusi, alerted the nation to a gap between what the NNPC earned and what it remitted into the Federation Account, which he put at $20billion. Refraining from alleging that the amount of money was stolen, he chose to describe it as missing.

Sanusi had put this in a letter he wrote to President Goodluck Jonathan which was later leaked to the public. In that letter, he had identified three methods through which the country allegedly allowed middlemen, including government officials, high-flying individuals in the society and politicians, to channel oil funds away from the CBN.
The methods used, he said, are contracts being awarded non-competitively to two companies that did not supply services but sub-contracted the work; a kerosene subsidy that didn’t help the people it was meant to; and a series of complex, opaque “swap deals” that might be short-changing the state.

Oil swap deals

The Natural Resource Governance Institute (NRGI), an international independent body that monitors the oil and gas sector globally, in a report released in 2015, said the NNPC swapped about 352 million barrels of oil worth a total of $35 billion (N7trn) between 2010 and 2014. In the report titled Inside NNPC Oil Sales: A Case for Reform in Nigeria, NRGI stated that “NNPC data shows that the corporation allocated just over 79 million barrels (or roughly 218,000 barrels a day) to swaps in 2011 alone. This accounted for nearly half of the DCA and around a tenth of the country’s average daily production. For 2011, the oil involved in swaps was worth approximately $9 billion, internal NNPC data suggests.”

The report noted that while it could not be categorical on how much the swaps had cost the country, it found out that some contract terms were unbalanced or underspecified and unduly favored the traders and that swaps were vulnerable to a number of rackets around transportation, distribution and sales of imported fuel in Nigeria.

According to NRGI, “NNPC’s swap deals have been opaque. More so than for any other transaction covered in our examination of NNPC oil sales, NNPC and its oil trader partners control the flow of information around swaps. NNPC publishes only high-level figures for the crude lifted and products supplied. Contracts are not published; instead, they circulate through industry and press leaks.”
It added that the processes for awarding the contracts “were low on transparency, due process and oversight.”

The report added that swap demurrage payments were a major point of revenue loss from NNPC crude sales.
It stated: “Payments are high in large part because of chronic congestion at Nigeria’s ports and PPMC’s chaotic systems for scheduling fuel discharges. The arrangement with some contractors allowed them to reduce the amounts of fuel they delivered to recoup their demurrage costs. This effectively meant that the country paid for demurrage in oil. Available data shows large demurrage offsets under the contract. For example, in 2011, according to NEITI, PPMC owed $23,118,074 on vessels carrying 949,143 MT of gasoline and kerosene.

“By dividing that figure by the total barrels of crude lifted (10,231,122), we can estimate that demurrage cost the nation an average of $2.26 a barrel in 2011.”
NRGI said NNPC unilaterally deducted the value of swap demurrage offsets from domestic crude sale revenues under the guise that it should be reimbursed for the costs of maintaining a “strategic reserve” of fuel for the country.

The report continued, “The many unanswered questions around NNPC’s swap deals boil down to one: have their holders delivered fair value for the oil they lifted, and if not, why? Only a robust performance audit with financial, process and value-for-money components, undertaken by competent downstream sector experts with NNPC’s full cooperation, could answer this definitively.
“Any audit should answer two main questions: (1) Did the traders party to swap contacts deliver all of the fuel they owed and purported to supply under their contracts? (2) Was the fuel the traders delivered good value for the crude oil they lifted?”
It concluded that it saw no evidence of the swaps being robustly audited.
“PwC and NEITI have done some limited work, mostly on reconciling financial flows. Instead, the previous government relied almost totally on periodic reconciliation meetings among the parties to the RPEAs and OPAs to ensure the traders met their delivery obligations and detect mismanagement.”

Another $17 billion missing

Recently, the House of Representatives resolved to investigate the $17 billion allegedly undeclared from crude oil and liquefied natural gas exports. This followed a resolution by the House as a result of a motion of urgent matters of public importance sponsored by Johnson Agbonayinma.
The lawmaker had alleged that 20 companies, two government agencies, two law firms and a consultant appointed by immediate past administration were involved in the ‘misappropriation’ of the sum.

He had said, “The data gathering of shipment of the USA for the period 2011 to December 2014 through critical NNPC data and the central bank pre-shipment inspection shows undeclared crude oil short falls of 57,830,000 of Nigeria crude oil, translating to well over $12 billion to the USA, also over $3 billion to China and $839,522,600 to Norway.

“These were conclusively ascertained by buyers, bill of lading, arrival dates, destination ports, quantity of crude oil and other documented information.

“This job has been done in 51 countries where Nigerian crude oil has been exported. The report of the USA, being the largest receiver of crude oil and that of other countries, was made available to the former president, the office of the attorney-general, NIMASA and the EFCC.
“As of today, the country has to its credit over $17 billion of recoverable shortfalls from undeclared crude oil exports to global destinations.”

Oil theft

A former Chief of Naval Staff, Rear Admiral Usman Jibrin once disclosed that Nigeria was losing about 100,000 barrels of oil to oil thieves daily.
Jibrin, who spoke at the Senate when he appeared before senators to defend the 2015 budget of the Navy before the Senate Committee on Defence (Navy), cited the Chatham House as his source.
According to Chatham House, “Oil is being stolen on an industrial scale in Nigeria and the country’s politicians and security officials are among those profiting.”

But the figure went up to almost a million barrels of crude oil being stolen daily, going by the account of Minister of State for Petroleum, Dr. Ibe Kachikwu, who early last year said that the country could only manage to produce about 1.2million barrels daily instead of the 2.2milion barrels proposed in the 2016 budget principally due to militants’ attacks on oil facilities in the Niger Delta region as well as oil theft.

If one million barrels of crude oil were being stolen when a barrel was sold for $100, it would translate to a daily loss of $100 million by the country. If it happened when a barrel was $40 a barrel, it meant the country lost $40 million daily. The import of this is that at a period in this country, between $40million and $100 million was lost daily to oil theft and pipeline vandalism.
Crude oil thieves, apart from stealing crude, which the country should have sold, also destroy the pipelines bearing the product, thus forcing the country to bear the cost of repairing the pipelines.

Power gulps N2.74 trillion in 16 years, yet Nigeria runs on generators

A former Permanent Secretary, Ministry of Power, Ambassador Godknows Igali, said, while addressing a Senate Ad-hoc Committee probing the power sector in 2015, that the country spent N2.74 trillion on power generation in 16 years. This is in spite of the privatization of some segments of the sector. This sum is shared between allocations made to the Ministry of Power (as it was then known) and the National Integrated Power Projects (NIPP).

According to a former Managing Director of Niger Delta Power Holding Company (NDPHC), Mr. James Olotu, N1.64 trillion of the expended amount went into the NIPP while the balance of N1.10 trillion went into the ministry.
But the House of Representatives is currently probing NDPHC for alleged diversion of $9 billion received from the Central Bank of Nigeria (CBN) during that period. The House Committee on Power is also to investigate the alleged selling of NIPP assets, including power plants, in addition to awarding numerous inflated contracts without due process.

The investigation is sequel to a motion sponsored by Honourable Mark Gbillah, who alleged that NDPHC, which manages the utilisation of over $12 billion already approved by the National Assembly and the National Council of State since its incorporation in 2005, does not submit its annual budget and project plans for appropriation by the National Assembly.

Aside the N1.64 trillion spent on the power sector directly by the Federal Government, the CBN has also made available to the sector the sum of N213billion through the Nigeria Electricity Market Stabilisation Facility (NEMSF). The facility, which is to be repaid within a 10-year period, is to enable electricity distribution and generation companies to address the challenges hampering power generation and distribution in the country. The facility was targeted at enabling the beneficiary companies to settle outstanding payment obligations due to market participants under the IRP Debts as well as legacy gas debts of the PHCN generation companies owed to gas suppliers and the Nigeria Gas Company which was transferred to the Nigeria Electricity Liability Company Limited with the objective of putting the NESI on a route to economic viability and sustainability.

To ensure judicious utilization of the facility by the beneficiary Discos and Gencos as well as the participating banks, the CBN issued compliance rules for banks participating in the scheme. According to the CBN, any deposit money bank (DMB) which utilizes monies received under the CBN- NEMSF and fails to repay or set off any existing or future plans would face monetary sanctions.

The CBN,  in a circular by its  director, Financial Policy and Regulation, Kevin Amugo, said it would impose monetary sanctions as well as terminate the participating mandate of any bank that violates the terms and conditions of the CBN/NEMSF.

The apex bank noted that sanctions that might be imposed were not limited to those listed as it might impose additional sanctions, adding that “penalties imposed as a result of sanctions may be directly offset against any fees payable to a Deposit Money Bank under the CBN-NEMSF.”
But with the level of power generation and distribution in the country many people keep wondering if all the funds provided for the sector had been judiciously utilized.

Dasuki’s arms deal

Shortly after the change of power in 2015, former National Security Adviser, Sambo Dasuki, got embroiled in the alleged $2.2 billion arms deal. The alleged deal came into the open after an interim report of the presidential investigations committee on arms procurement under the previous administration. The committee had reported an extra-budgetary spending to the tune of N643.8 billion and an additional spending of about $2.2 billion in the foreign currency component.
Investigation into the disbursement of the fund that was domiciled in the office of the NSA has resulted in the arrest and interrogation of a number of people including Shaibu Salisu, a former Director of Finance in the office of the National Security Adviser; former Sokoto State governor, Attahiru Bafarawa; and a former Minister of State for finance, Bashir Yuguda.

Diezani’s dollar accounts

Mrs Diezani Alison-Madueke, former Minister of Petroleum, has been linked with alleged fraudulent acts even before her exit from office in 2015.
Two weeks ago, a Federal High Court in Lagos ordered the permanent forfeiture of a sum of $153,310,000, claimed to belong to Mrs Alison-Madueke, which was said to have been diverted from the coffers of the Nigerian National Petroleum Corporation.

This was sequel to the prayer of the EFCC to the court asking that the said sum be forfeited to the government because it was proceeds of crime. The court had granted the interim forfeiture order and gave 14 days for anyone interested in the money to appear before it to show cause why the money should not be permanently forfeited to the Federal Government.
Similarly, earlier in the month, the EFCC had announced the discovery of a $37.5 million luxury building on Banana Island, Ikoyi, Lagos, allegedly belonging to the former Minister of Petroleum Resources.

While serving as Minister, Diezani had been embroiled in a N10bn private jet scandal. Some members of the House of Representative had revealed that they had discovered that the NNPC was paying over N10 billion for the lease of two aircraft for the use of the minister. When invited to appear before the lawmakers, the former minister got a court order restraining the lawmakers from compelling her to appear before them.

Andrew Yakubu’s $9.8 million

The nation was stunned a few weeks back when it was discovered that a former Managing Director of NNPC, Mr Andrew Yakubu, had hidden $9.8 million and 74,000 pounds in a fireproof safe in one of the houses in Sabon Tasha area of Kaduna.
The former NNPC boss, who admitted that the money was his, said it was a gift from his friends.
However, the Federal High Court in Kano, presided over by Justice Zainab Abubakar, has ordered the forfeiture of the money to the Federal Government. This is currently being challenged by Yakubu.

Piling up debt to consume

Emir Sanusi, while delivering a paper titled, “Nigeria In Search Of New Growth model” at the 15th meeting of the Joint Planning Board and National Council on Development Planning, last year observed that between 2002 and 2008, Nigeria moved from being at 50 per cent debt to GDP and came down to literally 5 per cent after the Paris Club and HIPC debt reliefs. He, however, added that what happened afterwards was that Nigeria went back to borrowing.

His words, “Nigeria kept borrowing, not externally, but internally. I think our external debt was just about $8 billion on the balance sheet. But, the Naira indebtedness of the Nigerian government, we were spending over 30 per cent (maybe 40 per cent now) of every Naira earned just servicing debts.
“That’s what you have. Nobody was noticing it. We have written off the debts, and then we kept building it up bit by bit. And when you look at where that debt was going into, you will see why, or part of the answer to the problem we are having. So, we have these two pillars – rising commodities prices, and we monetise oil revenue, we will be able spend money. We were able to borrow because the balance sheets could accommodate more debts.

“Where did all these debts go? Did they go to roads, power, refineries, or infrastructure? No. The new borrowings were simply recycled into much higher recurrent expenditures. What that did was that it helped sustain a consumption boom. And GDP was growing, largely driven by consumption spending.”

Corroborating this, former President Olusegun Obasanjo, in a lecture entitled “Nigeria Yesterday, Today And Tomorrow: Governance And Accountability” at the first Akintola Williams Annual Lecture in Lagos last year, said,  “If we borrow some $30 billion in less than three years, we would have mortgaged the future of Nigeria for well over thirty years to come. There may also be the problem of absorptive capacity which will surely lead to waste. A careful scrutiny of the projects with prioritization and avoidance of waste and taking into account avoiding bunching of debt service in future especially when no one can accurately forecast the global and national economy, will indicate less than thirty per cent of the foreign loan being requested as prudent.

“We must not be unmindful of internal borrowing either. It impacts somewhat differently on the economy but it must not be allowed to crowd out the ability of the private sector to borrow to grow the real economy which is to lead us out of the recession.”
In a report the Daily Mail of London, titled Nigeria: A Country so corrupt it would be better to burn our aid money, Michael Burleigh wrote, “By the end of its term of office, the British Government will have handed over £1 billion in aid to Nigeria.

“Given the appalling levels of  corruption in that nation, this largesse is utterly sickening — for the money will only  be recycled into bank accounts in the Channel Islands or Switzerland.
“Frankly, we might as well flush our cash away or burn it for all the good it’s doing for ordinary Nigerians.”

Tax waivers

According to the Country Director of Action Aid Nigeria, (AAN), Ms. Ojobo Ode Atuluku, Nigeria loses $2.9 billion annually to corporate tax waivers.
Atuluku who was speaking at the West African Summit on Tax Treaties in Abuja themed, ‘A Common Treaty Protocol: Cutting the Giveaways’, added that Nigeria lost over $3.3bn in 10 years to tax incentives under the Nigerian Liquefied Natural Gas (NLNG) Act.

She said studies by her organisation and other development agencies showed that there is need to take more than a cursory look at the treaties which have become major sources of revenue loss for African countries.
Speaking at another forum, the Policy Advocacy and Campaigns Manager of AAN, Tunde Aremu, called for the investigation of the tax waivers.
He said, “How are these incentives negotiated? Our suspicion is that the processes of negotiating these incentives are not open.

“The companies go under the rugs to negotiate these incentives. The Nigerian parliament should start querying the processes and demand that they should be open and transparent and that the representatives of the people should be informed when these incentives are being negotiated.” He added that though tax avoidances were legal, they could be turned to legal means of stealing money.
He described e-trading, over invoicing, mispricing and price shifting as some of the technical terms adopted by the companies to encourage illicit financial flow from the country.

According to him, “Over 75 per cent of the money leaving Africa illicitly is actually through tax avoidance practices which unfortunately are not regarded as illegal.”

Aviation Intervention Fund

To help the aviation sector when it ran into troubled waters, the CBN released N120bn to the operators out of the N500bn intervention fund for the power and the Small and Medium-scale Enterprises sectors in 2011. But this money has become a source of concern to Nigerians because of the problem of repayment.
The Senate Committee on Aviation and Anti-Corruption, during a public hearing, alleged mismanagement and diversion of the bailout.

At the hearing, CBN representative, Mudashiru Olaitan, said out of the N120bn injected into the sector, only N39.5bn had been recovered, while the balance of N81.2bn was still outstanding.
According to him, some of the 10 airlines that benefited from the fund had folded up, citing Air Nigeria and Chanchangi Airlines as examples. He explained that other beneficiaries of the fund such as Arik, Dana, Aero Contractors, Kabo, Overland, First Nation and Odenegene are still in operation.
In his own remarks, Vice Chairman of the committee, Senator Bala Ibn Na’Allah, said one of the airlines diverted its share of the fund to Ghana.

He said, “As soon as the management of the airline got access to the money, it transferred a huge sum of money to a company in Ghana, apparently to acquire a business in Ghana with the money that is meant to develop aviation in Nigeria.
“Then, there were other transfers that were non-aviation related and they are in huge amounts. What we are saying is that they have collected this money to enhance the growth and development of aviation.

“Wherein lies the wisdom of making these huge transfers to non-aviation related areas, including transfers across the borders of Nigeria?”

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