Attempts to end fuel subsidy fraud mired in confusion

Fuel-dispencer06 December 2013, Lagos – Nigeria’s drive to clean up a gasoline subsidy scheme that soaks up a fifth of federal spending is mired in confusion, with the government’s anti-graft investigators and fuel importers at odds over attempts to root out massive fraud.

President Goodluck Jonathan has promised that importers will be prosecuted if either of Nigeria’s two anti-corruption bodies finds evidence they are defrauding the scheme, the total cost of which was N1trillion ($6.3 billion) last year.

According to Reuters, some firms under investigation by anti-graft officials are still receiving cash, even though Finance Minister Dr.Ngozi Okonjo-Iweala has said that only those whose subsidy claims are proven legitimate will be paid. A parliamentary inquiry said last year that it had found evidence of huge fraudulent payments in the fuel subsidies, provoking a public outcry.

Under the scheme, importers apply to the government for subsidy payments. If successful they buy gasoline on the international market which is then sold in filling stations at the heavily subsidised price of about 60 U.S. cents a litre.

Last year’s inquiry by the lower house of parliament found that dozens of importers had claimed up to $6.8 billion between 2009-11 for fuel that was never delivered or diverted to neighbouring countries where prices are unregulated.

Subsidies were being claimed for almost twice as much gasoline than Nigeria consumed, it reported. A separate presidential inquiry produced similar findings.

Okonjo-Iweala has since tried to bring transparency to the scheme by withholding payments for claims until they are verified, and periodically publishing what Nigeria pays to fuel importers. She acknowledged that some firms felt unfairly treated but said they had to prove their claims genuine.

“Some people thought they were being witch hunted and the government said: ‘no, if you produce evidence to exonerate yourself, you’ll be cleared and can claim’,” she told Reuters.

Yet late last month the finance ministry announced subsidy payments to three importers that anti-graft officials are investigating for fraud. While such payments don’t break any rules, they are contrary to the ministry’s own policy of not paying firms under suspicion.

– The Nation

About the Author