Nigerian fuel subsidy probe uncovers $ 550 mm fraud

A probe by Nigeria's anti-graft agency on the disbursement of subsidies on imported fuel by the state fuel pricing regulatory agency has uncovered fraud involving the illegal payment of naira 64.07 bn ($ 550 mm) in subsidies to fuel importers.
Three top officials of the Petroleum Products Pricing and Regulatory Agency have been suspended following the discovery of the fraud by the Economic and Financial Crimes Commission.

The naira 64.07 bn was part of funds diverted from the money the government allocated to the Petroleum Support Fund -- a pool of funds budgeted by the government to pay for subsidies in order to keep domestic prices of fuel low.
"We have uncovered two types of scandal in the PPPRA. The first has to do with the payment of naira 64.07 bn to five oil firms that ought not to benefit from the intervention fund in 2006," a government source was quoted as saying.

"By our findings, 28 companies applied for the PSF in 2006 but only 18 has so far benefited. And of the 18, the five oil firms which got the naira 64.07 bn subsidy either did not have branded outlets or failed to meet the conditions for benefiting from the fund," the report said.
The EFCC has submitted an interim report to President Umaru Yar'Adua on its findings, the report said.

In September, Yar'Adua, who has pledged zero tolerance on corruption in the oil sector, ordered the EFCC to probe the disbursement of over naira 800 bn ($ 7 bn) as subsidies on imported petroleum products by the PPPRA. The president also directed the suspension of the head of the PPPRA Oluwole Oluloye pending completion of the investigation of his office.
The government has recently expressed worries over the continued increase in the costs of subsidizing imported gasoline and kerosene, which is funded through contribution from the federal government and the state governments into the PSF.

Nigeria has been dipping into its extra oil income to pay for the subsidy in order to keep the domestic fuel prices low. Separately, the Central Bank of Nigeria also began investigating commercial banks on the utilization of foreign exchange provided by the government to fund importation of petroleum products so far this year.
The country's oil minister Odein Ajumogobia said in August that the government plans to phase out fuel subsidies beginning January 2009, which would result in an increase in gasoline prices. But labour groups, including oil unions, said they would resist the government plan to withdraw fuel subsidy.