Corporation, NNPC, in cohort with major Swiss oil trading companies,
is draining Nigeria of billions of dollars of revenue through the sale
of crude oil below the market value.
The report, titled Swiss Traders' Opaque Deals in Nigerian, released
on Monday by Swiss non-governmental advocacy organisation, the Berne
Declaration, also described the schemes employed by Nigerian and
foreign fuel importers, such as creating offshore subsidiaries
referred to as "letterbox companies", ship-to-ship transfer to create
untraceable paperwork, payment of subsidy money to phantom and
non-existing importers, and partnering with politically exposed
fraudsters to defraud the country over $6.8 billion from 2009 and
2011.
Berne Declaration describes the Nigerian oil scam as the greatest
fraud Africa has ever known.
The report narrates the specific roles played by seven major oil
marketers and fuel importers through their shell companies in
Switzerland and notorious offshore tax haven, Bermuda, to deny Nigeria
billions of naira in tax earnings.
NNPC opaque deals
Describing the NNPC as the "all-powerful," the report says the
government owned corporation "plays a significant role in maintaining
the 'resource curse."
According to the report, oil, which makes up 58 per cent of Nigeria's
revenue, is not contributing to the country's development as much as
it should. The report blames the engrained poverty and inequalities in
the country partly on the siphoning of the nation's resources through
the NNPC and other shady deals by fuel importers in collusion with
foreigners, especially Swiss commodity trading firms.
Prominent among these shady deals are the partnership between the NNPC
and two Geneva-based commodity trading firms, Vitol and Trafigura,
registered in Bermuda.
Through NNPC partnership with Vitol (the largest oil trader in
Switzerland) and Trafigura (the third largest) described as
'operational and financial black boxes' billions of naira that should
have accrued to the government are wired to Bermuda where the joint
venture is established.
"In reality, the profit generated by these entities escapes State
coffers, first, because no taxation in Bermuda is paid, since the tax
on profits is zero," the report stated.
"Vitol and Trafigura alone took respectively 13.44 % and 13.49 % of
Nigerian crude oil exports in 2011 for a cumulative value of 6.7
billion dollars."
More than 56 per cent of oil put up for sale by the NNPC in 2011
valued at $14.004 billion were sold to Swiss companies or Nigerian
companies with "letterbox" subsidiaries in Switzerland.
The report shows how NNPC is cashing in on the disrepair of the
country's refineries to feed its fraudulent partnership with these oil
dealers. Despite the fact that local refineries operate at less than
40 per cent capacity, the NNPC still allocates crude to them as if
they were operating at full capacity. The excess allocations are then
sold to Geneva-based companies or Nigerian oil marketers through their
letterbox subsidiaries in Switzerland at knockdown prices or exchanged
for refined petroleum products in shady swap contract.
"Nigeria is the only major producing country that sells 100% of its
crude to private traders rather than market it itself and benefiting
from the resulting added value. A number of beneficiaries of export
allocations are nothing but letterbox companies whose sole merit is
that they are linked to high-ranking political officials or their
entourage," the report stated, a view similar to that by a Nigerian
government investigation team headed former anti-graft boss, Nuhu
Ribadu.
The report suggested that Politically Exposed Persons (PEP) and their
fronts are also cashing in on the absence of money laundering
legislation in Switzerland to hide their loots. In fact, many of the
"letterbox" subsidiaries may have been set up for that specific
reason.
"Politically-linked holders of such letterboxes are known, in banking
terminology, as 'politically exposed persons' (PEPs), towards whom any
financial intermediary must exercise particular duties of due
diligence by virtue of the law on money laundering in order to ensure
the legality of the funds. In Switzerland traders are not subjected to
such duties and have no obligation to question the credibility of
their partners. This leaves them with full latitude to trade with such
fake entities. But in Nigeria such entities represent a major part of
the 'market'," the report explains.
Geneva, a haven for Nigerian Fraudsters
Oil importers that have been indicted in the subsidy scam have found a
convenient hide out in Geneva where they have established
subsidiaries.
Berne Declaration explains why Geneva has become a haven for these companies:
"There are two reasons underlying the creation of these subsidiaries…
In certain cases, it is a matter of benefiting from the tax that the
cartons offer for companies working primarily abroad – which is
undoubtedly relevant for a Nigerian importer in other case the primary
motivation is to get closer to banks specialising in financing
trading. This hope has often proven vain due to the reputation of
Nigeria and the relative anonymity of these firms. This is all the
more so since several of these companies have no real activities in
Switzerland, have contended themselves just with an address in a
fiduciary or lawyer's office."
The report identifies seven major Nigerian fuel importers as the worst
culprits. They include:
MRS Group, which owns a subsidiary, called Petrowest Services SA. MRS
Group was indicted by the Technical Committee on Payment of Fuel
Subsidy for collecting tens of millions of dollars between 2011 and
2012 that it could not back up with documents of physical
transactions.
The Presidential Committee on Verification and reconciliation of Fuel
Subsidy Payment later cleared MRS. The committee did not give any
reasons to show that its transactions were legitimate, according to
the Swiss report.
Ontario Oil and Gas limited owned by Ugo-Ngadi Adaoha has a Swiss
Subsidiary named Ontario Trading and located at the premises of Nimex
Petroleum in Geneva. Nimex Petroleum was once suspended from trading
in Nigeria for not supplying required maritime documents.
Mrs. Ugo-Ngadi was arrested by the Economic and Financial Crime
Commission, EFCC, in August 2012 for fraud and conspiracy but was
later released on bail. Ontario was indicted for over N4 billion false
subsidy claims.
The report revealed that despite dropping Ontario Oil and Gas from the
list of fuel importers for 2013, the company was allowed to continue
its crude oil export business.
Rahamaniyya Group, which owns a subsidiary called Rahamaniyya Oil and
Gas SA in Geneva since October 2010 is also located in the premises of
the shady Nimex Petroleum which seems to be acting as an incubator for
shady companies.
The company was asked to reimburse over N507 million subsidy funds
collected, but has not been stopped from importing fuel.
Tridax Energy and Limited and Mezcor Limited have Swiss subsidiaries
named Tridax SA and Mezcor SA in Geneva. They both received N2.544
billion ($15.9 million) without importing any petroleum products. In
fact, the companies received permits to import products before
applying for it. The companies, according to the Swiss report, have
been traced to close associates and the younger brother of the
Minister of Petroleum, Diezani Alison-Madueke.
Sahara Energy's Swiss subsidiary is called Sahara International Pte
Limited. The company was requested to reimburse the government's N6
billion subsidy fund it falsely collected. Despite importing less fuel
than they should have and have been paid for, the company is still
being allowed to import fuel.
There is also the Lagos-based Aiteo Energy Resources Limited owned by
Benedict Peter and Francis Peter. Its subsidiary in Geneva is called
Aiteo Suisse AG. Aiteo was asked to reimburse the government over N578
million in subsidy fund it falsely collected. Just like Tridax and
Mezcor, Aiteo also received the permit to import fuel without
requesting for it.
Efforts to reach the NNPC spokesperson, Tunmini Green, on the agency's
reaction to the report were unsuccessful. Ms. Green's phone was
switched off.
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