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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