Nigeria is an oil-rich country, but a
lack of refineries means it still imports the bulk of its fuel. To keep prices
low at the pump, the government subsidises fuel that is sold to it through the
Nigerian National Petroleum Corporation (NNPC). Yet fraud is rife in the
system, costing Nigeria over $6.8 billion in the past three years. It’s a
scandal that is rocking the Nigerian political world and stoking much anger
among citizens. Talking to Nigerian media, a government official revealed the
six ways used to syphon money off the subsidy program.
Product Double Dipping
To meet NNPC orders, fuel is imported by
ships. The paperwork for delivery is presented and signed off by corrupt NNPC
Officials. The importer then claims back on the subsidy. But the fuel never
reaches Nigerian shores: instead it is diverted in a ship-to-ship transfer. The
fuel is then reintroduced to the Nigerian market and subsidies are claimed a
second time.
Dead Vessel Declarations
A common tax fraud scheme is to create
fake companies and them claiming back taxes on products these companies never
sold. Dead Vessel Declarations work in a similar way: paperwork is filed on the
name of a vessel that is actually ‘dead’, decommissioned or not in Nigerian waters.
Using dodgy paperwork, subsidy claims are made on the cargos of these vessels -
even though in reality the ships never delivered anything.
Onshore Tank Backloading
In the previous two schemes, the fuel
never even reaches Nigerian soil. Here it does - the fuel is pumped into
onshore tanks. But through the help of corrupt officials, the fuel is then
pumped into another ship berthed at the harbour, which then sails away and
sells it elsewhere. At the same time claims are made for the subsidy on the fuel
- which never reach Nigerian consumers. There have apparently even been cases
where the fuel is offloaded and then reloaded by the same ship.
Land border Smuggling
This method seems to cut down most on
involving corrupt officials. It’s fairly simple: fuel is imported and offloaded
in Nigeria. The goods are then smuggled across the land borders with tanker
trucks and resold at international rates. The paperwork for claiming on the
subsidy is put through anyway, netting the scamsters a nice profit both ways.
Bills For Collection Round Tripping
This method is quite technical. An
importer, with the help of an agent, declares that its operation is financed by
foreign credit facilities - in other words, money outside of Nigeria. Using
methods such as ‘dead’ vessel registrations, it is claimed that fuel was
imported when there was none and the subsidy claims are filed accordingly. By
claiming to be financed abroad, extra claims can be made and the money is
quickly sent overseas.
Diesel Adulteration
‘Adulteration’ simply means to reduce
something’s quality. If you suspect a bar’s whiskey has been watered down, you
can formally refer to it as ‘adulterated whiskey’. In Nigeria kerosene makes up
part of the subsidy system, leaving importers with such big profits that they
can afford to use the fuel for something else: thinning out diesel. Also called
‘Rice and Beans’ fuel, the kerosene is mixed with diesel. That diesel is then
passed off as unadulterated - pure - diesel, but sold at under market value.
‘Rice and Beans’ fuel is a leading cause for damaging generators and heavy
machinery in Nigeria.
Colluded from MSN.
Nigeria is still a major producer of oil in the world today and the economy according to analyst to set to rise by 2015 with the current leadership of President Goodluck Ebele Jonathan. His administration seemed to have faced so much critism by the Nigerian people, but the government still pushes on and believes it would get better by 2015.
Credit: http://african.howzit.msn.com/how-oil-fraud-fleeces-nigeria#image=1
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