Swiss and Nigerian Firms Indicted in Fuel Import Fraud - This Day Newspapers

08 Nov 2013

Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke

•NNPC accused of colluding with Trafigura, Vitol, Mercuria, Gunvor, others to siphon billions of dollars

Ejiofor Alike

The deep-rooted corruption in the downstream sector of Nigeria’s oil and gas industry has been the subject of an international probe, as a Swiss non-governmental organisation, the Berne Declaration, has released a report that has indicted Nigerian oil marketing companies for widespread subsidy fraud, involving several billion of dollars.

The latest report titled “Swiss Traders’ Opaque Deals in Nigeria,” also accused the Nigerian National Petroleum Corporation (NNPC) of colluding with international oil traders to defraud the country.

The report further revealed that Nigeria’s Sahara Energy, Rahamaniyya Group, Aiteo Energy Resources Limited, Ontario Oil and Gas Limited, Tridax Energy, Mezcor Limited and MRS Group had established subsidiaries, called letter-box companies, in Geneva, Switzerland, with no real business activities.

The report noted that these companies established the subsidiaries, primarily for tax advantages and also for easy access to international capital.

Ironically, four of the companies – Sahara Energy, Rahamaniyya, Aiteo Energy and MRS – were investigated by the House of Representatives Ad Hoc Committee that probed the subsidy scheme and the two committees headed by the Managing Director/Chief Executive Officer of Access Bank Plc, Mr. Aigboje Aig-Imoukhuede, but they were absolved of complicity in the subsidy fraud.

The directors of Ontario Oil and Gas, led by the company’s chairman Walter Wagbatsoma, were, however, prosecuted for subsidy fraud, with their case still pending in a Lagos High Court.

Investigations further showed that Tridex Energy, a company with no track record in the oil and gas sector, was only registered less than three years ago. It is owned by a US-based lawyer, Donald Chidi Amamegbo, who attended the same university – Howard University – in Washington DC, with the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke.

Citing Geneva as a “haven for Nigerian fraudsters”, the report said beyond the role played by Swiss traders in the subsidy scam in Nigeria, there was a link between these seven Nigerian companies, which were suspected of having participated in the subsidy fraud and their subsidiaries in Geneva.
“Although most serve only as letter-box companies, they have listed, without any inspection, in the trade register,” said the report.

Several of these companies, according to the report, have no real activities in Switzerland and have contented themselves with an address in a fiduciary or lawyer’s office.

The report also detailed the connections between the Geneva subsidiaries and the fact that they are being criticised in Nigeria within the context of the fraud concerning the subsidies for the import of petroleum products.

“A first fraud plan consists in receiving subsidy on a cargo, while physically importing only a part of it; the balance is thus exported on the international markets or sold locally on the black market, and constitutes an illegal profit.

“Sometimes, the subsidies have been received, while not a single drop of petrol has been imported. Another technique consists in falsifying the maritime documents, in particular the date, to choose a day when the price is higher than the price actually paid.

“The balance goes back into the pocket of the importer,” the report said.
Citing the two subsidy probe reports of both the House of Representatives and Imoukhuede’s committees, the Swiss report said around 70 marketers were suspected of having taken part in the massive subsidy fraud.

The Berne Declaration affirmed that of the seven of these marketers, with subsidiaries in Geneva, only one marketer was the object of proceedings in Nigeria.

Referring to the report of the Imoukhuede Presidential Committee on Verification of Subsidy Payments, which was the third subsidy probe report that exonerated most of the firms, the Swiss report said: “Perhaps this is because a third report, also instituted by the presidency, exonerated majority of the major firms of all misappropriation, judging as ‘legitimate’ all the questionable transactions cited in the two previous reports.

“Curiously, the auditors, who worked in a hurry, do not explain in what way the transactions were ‘legitimate’.”

The Swiss report pointedly said Rahamaniyya Group has had a subsidiary in Geneva, Rahamaniyya Oil and Gas SA, since October 2010, also domiciled C/O Nimex Petroleum, which seems to be acting as an incubator for fraudsters.

Ontario Oil and Gas Limited is also said to have a subsidiary called, Ontario Trading, domiciled C/O Nimex Petroleum, but the subsidiary is currently under liquidation.
Sahara Energy also has a subsidiary, Sahara Energy International Pte Limited, with the primary objective of supplying services to Sahara Group.

Aiteo Energy Resources Limited also had a subsidiary, Aiteo Suisse AG, in Switzerland.
The report further accused NNPC of colluding with Swiss international traders to siphon billions of dollars, stressing that Nigeria is the only major producing country that sells 100 per cent of its crude oil to private traders, rather than marketing it itself and benefitting from the resulting added value.

Vitol, Trafigura, Mercuria and Gunvor are some of the Swiss commodity traders cited as NNPC’s accomplices. Others include Arcadia Energy or Nimex Petroleum, though smaller companies and less visible than bigger trading giants.

According to the report, the opaque partnership between NNPC and the Swiss oil traders ensures that the profit generated by these entities escapes state coffers, first, because no taxation in Bermuda, where Trafigura and Vitol, two of the largest traders, are registered, is paid.

The report goes on to say that these sums are by no means trivial, adding, "By way of example, in 2011 the amount withheld from state coffers came to $8.739 billion. The public coffers were directly penalised: the same year, the revenues from oil fell by 39 per cent against the amount budgeted. And this is despite a rise in the price of oil."

The report attributed this to the unilateral retention of revenues which should have accrued to the federal government from the export of crude oil allocated to refineries.

The report alleged that a number of beneficiaries of export allocations letter-box companies “whose sole merit is that they are linked to high-ranking political officials or their entourage.”
The second problem identified by the Swiss report is that Swiss traders do not acquire Nigeria’s crude oil based on public and transparent calls for tender, “which would guarantee to the Nigerian population that its oil is sold at the best price.”

On the contrary, the report said each year, the NNPC grants the allocation of exports under obscure conditions and on the basis of criteria that are unknown outside the restricted circle of decision makers.