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$1.5bn underpayments: FG set to prosecute shady oil marketers

By on August 16, 2013

Federal Government has expressed its readiness to recover N232 billion ($1.5 billion) over-payments made to fraudulent oil marketers.

Ngozi-Okonjo-Iweala-pictureCoordinating Minister for the Economy and Minister of Finance, Ngozi Okonjo-Iweala, disclosed this at the

just-concluded National Council of Finance and Economic Development (NACOFED) in Minna, Niger State capital.

The official noted that in 2006, the total petroleum subsidies paid to oil marketing firms amounted to N256 billion (about $1.6 billion) and that by 2011 the bill for petroleum subsidy payments had risen sharply to nearly N2.1 trillion ($13 billion).

“Even more striking was the increase in the number of oil marketing firms. While most countries have a few well-organised fuel importers, Nigeria had a total of 143 such firms as at 2011” she said.

“The certification process to verify the actual delivery of imported fuel was also very lax, resulting in widespread fraud in the operation of the scheme,” she said.

According to her, there were cases where some firms submitted payment invoices for fuel deliveries in Nigeria when their stated cargo ships were actually berthed elsewhere in South America on the same dates, adding that the subsidized prices for domestic gasoline in Nigeria also created arbitrage opportunities and resulted in widespread smuggling of fuel products to Nigeria’s neighbouring countries.

Okonjo-Iweala said, Nigeria embarked on a comprehensive reform of the downstream petroleum sector by appointing the AIG Imoukhede Committee that discovered lapses in the payment processes, as well as putting in place a number of remedial measures to combat fraud in the subsidy scheme.

“First, a tighter payment regime was introduced with new auditors and stricter guidelines for disbursement of subsidy payments.

“The increased scrutiny has slowed down the payment process somewhat but also greatly reduced the likelihood of fraudulent payments.

“Second, we published the names of fraudulent oil marketing companies in the national press and are in the process of prosecuting these fraudulent marketers to reclaim the stolen funds,” the minister said.

To prevent further fraudulent payment claims, she added that government is introducing three electronic payment systems and oversight platforms.