A Review of the Nigerian Energy Industry

Nigeria’s 2012 petroleum subsidy depletes: Deregulation imminent

*Lloyds disowns vessels used to steal N58bn

Clara Nwachukwu

03 July 2012, Sweetcrude, Lagos – As the controversies over the fuel subsidy rages, there are indications that the Federal Government may adopt the option of deregulating the downstream petroleum sector, in a bid to stop the corruption that has trailed the process particularly in the last three years.

Meanwhile, Llyods Intelligence has revealed that some of the vessels used by Nigerian petroleum marketers to make subsidy claims were either no where near West African waters when the claims were made or had been decommissioned, indicating that over N58 billion was siphoned by these marketers making ficticious claims.

Government has already spent more than half its budget for subsidy payments in 2012, and has declared that it is very unlikely it will seek a supplementary budget to support the funding of claims for the rest of the year, as suggested by a committee it set up to review subsidy funds management.

The committee in a report submitted to government last month noted that “The total provision for subsidy payments in the 2012 budget of the Federal Government was N888.1 billion, inclusive of N231.8billion for 2011 outstanding subsidy claims”, and N656.3billion for 2012 subsidy claims. It is obvious that the 2012 budget provision will be insufficient given that N451 billion had been spent already for 2011 claims (N241 billion to private importers and N21 billion to NNPC).

Against this backdrop, government may decide to deregulate the sector sooner than anticipated, as recommended by a committee rather than choose the option of either increasing the budgetary provisions for subsidy payments or making drastic changes in the Petroleum Support Fund, used for financing subsidy claims.

The Aigboje Aig-Imokhuede 10-man committee suggested three ways to end the malfeasance that is fuel subsidy in Nigeria. They include:

·        Deregulation of product pricing i.e. elimination of subsidy

·        Increase in the 2012 budgetary provision for subsidy payments

·        Implementing drastic changes to the Petroleum Support Fund scheme and enforcing stringent compliance going forward

It added that “This is without prejudice to the Committee’s recommendations for refund of subsidy payments to the Federal Government for a total sum of N422billion (provided that the parties involved in the transactions are unable to provide evidence contrary to the committee findings)

Of the three choices prescribed, the most likely may be deregulation, which process government started on January 1, amid nationwide protests before resorting to partial deregulation options.

Even with partial deregulation, the money realised from the difference between the old and new pump prices could hardly finance the palliatives envisaged, let alone provide a buffer for subsidy payments.

Furthermore, considering the plethora of regulatory lapses associated with the Petroleum Support Fund, PSF, through which fuel subsidy is managed, it may be difficult to prevent oil marketers and trading companies from resorting to the numerous ways of using false documentations to make claims.

Lloyd evidences

Of the N422billion to be recovered from the identified oil marketers and traders, shipping intelligence agency, Lloyd disowned shipping documentations through which over N58billion were paid to them as claims.

In some cases there were no proof of the mother vessels claimed to have been used to import the products, while in some others the vessels were anywhere in the world but near west African waters or Nigeria’s for that matter.

In yet more curious cases, the vessels were already declared dead and could not have carried any petroleum products as at the time of the claims. As shown in the various Lloyd’s observations and committee’s conclusions below:

There is no proof of the existence of the mother vessel bill of lading or the daughter vessel bill of lading for some transactions for which subsidy was paid. The total value of subsidy paid in respect of these transactions was N11,762,998,358.89. It appears that PPPRA paid subsidies for products that were not supplied and/or delivered.

The L10yds List Intelligence (as of June 1, 2012) revealed that the mother vessels for the following transactions were not in the location claimed at the time that the daughter vessels supposedly loaded from them:

Company Transaction MV Name DV Name Date Location MV
Name Reference claimed claimed actual
loaded loaded location
from MV from MV at the
date of




Company Transaction MV Name DV Name Date Location MV
Name Reference claimed claimed actual
loaded loaded location
from MV from MV at the
date of
A-Z A- MT Ocean MT 5 May Offshore Panama –
Petroleum Z/1742/CAP/PMS/141 Force Delphina 2011 Cotonou Central
Ltd 05/11 America
Nasaman NAS/2089/FAT/PMSI MT MT Liquid 27 Jan Offshore US Gulf
Oil 19/10/11 Overseas Fortune 2011 Lome
Services Limar
Brila BRI/1619/0BA/PMA/0 MT MT Dani 1 Oct Offshore China
Energy 8103/11 Delphina 2011 Cotonou
Ltd Ex. MT

This implies that subsidy was paid on PMS that might not have been delivered. Subsidy claims were paid on the above transactions for a total sum of N21,361,071,313.24.

cr 10. The L10yds List Intelligence (as of June 1, 2012) revealed that the mother vessels that daughter vessels supposedly loaded from at Offshore Cotonou in °T-espect of the following transactions could not be traced and thus may not exist:

Company Transaction Reference MV name DV name Date
Name supposedly
loaded from
In this article

Join the Conversation