Banks Wash Hands Off Oil Subsidy Claims By Marketers

By Clara Nwachukwu and Kunle Kalejaye
LAGOS—The federal Government committee on fuel subsidy verification has discovered that eight oil marketers in identified 13 transactions made  total subsidy claims of N12.154 billion for which the banks denied financing.

The transactions were declared by the verification committee to be false as they were disowned by banks through the Form M for which the oil marketers claimed they used in opening letters of credit with the banks for the importation of products.

This implies that the products were never imported but subsidy was paid.

The Report of the Technical Committee on Payment of Fuel Subsidies, a copy of which was sighted by Vanguard said: “A total of 13 transactions belonging to eight customers as contained in (Petroleum Products Pricing Regulatory Agency), PPPRA subsidy payment due schedule were disclaimed by banks. The transactions were not found in their records as at the date of the verification.

 “The total subsidy claims for this category of transactions stood at N12, 154,918,932.18.

“The disclaimer of these transactions by the banks shows that they did not exist in the first place and consequently, there was no basis for the payment of subsidy claims,” the Report said.

The Committee thus recommended that: “Unless the oil marketing and trading companies provide evidence of how these transactions were executed; how the products were paid for and how sales proceeds were received into a bank account before payment of subsidy, they should refund the subsidy payments received, and where the subsidy has not been paid, it should be withheld.”

No letter of credit for N13.40bn claims

Furthermore, out of the transactions above, there was no evidence that the underlying Letters of Credit in respect of 12 of them had been negotiated. The customers in this category were credited with Sovereign Debt Notes (SDN) with related subsidy claims for the total sum of N13,404,395,769.01. The Report therefore, said: “This implies that there is no evidence that the products were paid for or that they were sold within Nigeria.”

Click here to see Transactions of 8 oil marketers disclaimed by banks

It further recommended that “unless the oil marketing and trading companies provide proof of receipt of sales proceeds into a bank account before payment of subsidy, they should refund the subsidy payments received and where the subsidy has not been paid, it should be withheld. In addition, for the transactions without evidence of negotiation of the letters of credit (or of foreign currency payment for the products), PPPRA should drop them from the scheme if they are unable to provide proof of receipt of sales proceeds and payment of foreign exchange.”

More spurious claims

The report also discovered various other ways through which oil marketers and importers devised to make huge spurious subsidy claims with no documentary evidence to defend them.

For example,  it discovered 18 other transactions with subsidy payments in excess of N20.46billion, which “either had no shipping documents or evidence of payment for the products in foreign exchange.”

This also implies that the products were not paid for and they may not have been imported into the country.

According to the committee, “Unless the oil marketing and trading companies provide evidence of how the products were paid for, they should refund the subsidy payments received and where the subsidy has not been paid, it should be withheld”.

It further discovered that: “Form “M” number MF803765 established for Bills for Collection by Messrs Sifax Oil and Gas Limited on the 20th March 2010, and approved by a bank since 30th March 2010, had remained unpaid till date. A review of the transaction file showed a Bill of Lading dated 30th December 2010, and a Collection Order stating 30th March 2011, as the value date of the transaction, although there was no Bill of Exchange to the effect.

In addition, there was no SGD form to evidence that the consignment had arrived in Nigeria. On inquiry, the bank claimed that they were waiting for the customer to make payment but there was no evidence that the bank made any contact with the customer.

The committee

It would be recalled that the idea of the Technical Committee on Subsidy was hatched on February 28, 2012, and was meant to “review outstanding claims for fuel subsidies,” as fallout of the stakeholders’ meeting of the downstream petroleum sector.

The meeting was chaired by the Coordinating Minister of the Economy/Minister of Finance, Dr. Ngozi Okojo-Iweala, who constituted the 10-man committee on April 17, 2012, headed by the Group Managing Director/Chief Executive Officer, Access Bank Plc, Mr. Aigboje Aig-Imoukhuede.

The terms of reference included to authenticate the backlog of outstandingpayments of subsidy payments to marketers in 2011; verify the legitimacy of backlog of claims already submitted by marketers for 2011; and review any other pertinent issues that may rise from the exercise.

Other members included the Director General, Budget Office of the Federation, Dr. Bright Okogu; Director General, Debt Management Office, Dr. Abraham Nwankwo; Accountant General of the Federation, Mr. Jonah Otunla; Executive Secretary, Petroleum Products Pricing Regulatory Agency, PPRA, Mr. Reginald Stanley.

Others were the Group Executive Director, Finance and Accounts, NNPC; and representatives of the CBN, Bankers Committee as well as Mr. Obafemi Olawore for the major and Mr. Mike Osatuyi for the  independent marketers respectively.

Marketers build proof

Meanwhile, the exposure of the report has sent marketers and oil importers scampering to gather proof in their defence.

One of the affected companies, Integrated Oil and Gas, at a press briefing in Lagos on Monday, refuted collecting N1.734,920,131.20 as PSF refund without an auditors signature.

The Managing Director, Integrated Oil and Gas, Capt. Emmanuel Iheanacho, told newsmen that his company did not receive the said amount.

He said “In line 22 of the schedule of 88 companies, Integrated Oil and Gas Ltd was alleged by the technical committee to have been paid the sum of N1.734,920,131.20 as PSF refund without an auditors signature.

“This allegation is not correct for the simple reason that we do not recongnise this as a transaction which integrated Oil and Gas had undertaken at all. We do not know the transaction under reference; we do not recognise the amount quoted as a payment which we may have received under any circumstance.”