Abdulrasheed Bawa, the former chairman of the Economic and Financial Crimes Commission (EFCC), says Nigeria lost $450 million to subsidy fraud under the Petroleum Support Fund (PSF) scheme between 2006 and 2012.
In his new book, ‘The Shadow of Loot & Losses: Uncovering Nigeria’s Petroleum Subsidy Fraud’, Bawa documents the massive fraud that marred the scheme.
Bawa served as the chairman of the anti-graft agency from February 2021 to June 2023. He was a key investigator on the EFCC’s special team that probed the subsidy fraud.
In the book, the former EFCC boss said some of the indicted oil marketers were prosecuted and jailed, while 80 percent of the stolen fund has been recovered.
He added that Nigeria has spent over N16.5 trillion in petrol subsidy since the return of democracy in 1999.
“Our investigations revealed that, as admitted by the oil marketing companies involved, fraud related to petroleum subsidies exceeded N68 billion, which translates to over $450 million in direct fraudulent activities. This fraud involved 59 out of the 141 companies that participated in the PSF scheme from 2006 to 2011. We also uncovered fraudulent claims amounting to N19.6 billion on issues related to traders (sellers), of which the oil marketing companies denied knowing anything about,” Bawa wrote.
“Our investigation further identified an attempted fraud of N9.4 billion wherein oil marketing companies forged documents to align with altered dates on the mother vessel bills of lading to secure higher subsidy payments. However, due to existing contingencies in the application of the guidelines, these altered bill of lading dates were ultimately not utilized.
“Interestingly, there were no recorded infractions in 2006 and 2007. However, by 2008, 2009, and 2010, we uncovered significant fraud totalling N11.5 billion, N4.88 billion, and N10.3 billion respectively. 2011 marked what I consider the peak period of petroleum subsidy fraud, during which we identified fraudulent activities amounting to N41.7 billion. In total, the fraudulent schemes accounted for approximately N68 billion, of which around 80% has been recovered. The unrecovered funds are associated with cases still pending in court or involve promoters who have since passed away.
“These direct losses in revenue, alongside many additional undisclosed amounts and indirect revenue losses, could have been used to finance essential public services, infrastructural development, and social welfare initiatives. Sadly, the fraudulent drain on public funds has exacerbated fiscal deficit, resulting in budget cuts in critical sectors such as education, healthcare, and social welfare programs.
“Table 6.1 presents the financial reports of subsidy payments under different administrations since Nigeria’s return to democracy in 1999. Over the last 25 years of democratic governance, Nigeria has expended a staggering N16.5 trillion on subsidies.”
Bawa added that a “substantial portion of the expenditure” was linked to false claims and theft from the national treasury.
‘N5.7TRN SPENT ON PETROL SUBSIDY WITHIN SEVEN YEARS OF PSF’
The former EFCC chairman said the accumulation of debt to finance subsidy payments and other expenditures created an unsustainable fiscal situation.
He said the fraudulent diversion of subsidised petroleum products to black markets and export channels resulted in significant fuel shortages, thereby contributing to inflationary pressures in the economy.
He added that corruption and fraud within the petroleum subsidy system also deterred foreign investment, particularly in the downstream sector of the economy.
“Between 2010 and 2011, PPPRA permits became a lucrative asset in Nigeria. They were often referred to as a ‘gold mine’. The allure of quick profits led to rampant abuse by which certain companies received permits to import PMS registered despite their lack of the prerequisite experience in the oil industry,” Bawa wrote.
“Investigations revealed that many of the new participants, especially those registered from 2008 onward, were established under compromised conditions….Some of the companies were ‘briefcase’ companies, which issued import permits through political patronage rather than through genuine business credentials.
“The year 2011 marked a peak in subsidy payment regime, reaching a staggering N2.10 trillion. The dramatic increase was linked to extensive fraud and abuse within the subsidy system. However, due to the widespread investigations led by the EFCC and public scrutiny concerning the management of the PSF in 2012, subsidy payments dropped significantly to N1.35 trillion despite the adjustments in petrol prices from N65 to N97. This decline occurred regardless of participants consuming similar or unchanged levels of PMS, pointing to inconsistencies in reported quantities across the various stakeholders.
“Within seven years of the introduction of the Petroleum Support Fund (PSF) scheme, Nigeria disbursed a staggering total of approximately N5.755 trillion in subsidies. The breakdown of the payments made to Nigerian National Petroleum Corporation (NNPC) and other Oil Marketing Companies (OMC) reflects the scale and impact of the subsidy regime on Nigerian economy during the period.”
Published by Cable Books, an imprint of Cable Media and Publishing Ltd, ‘The Shadow of Loot & Losses: Uncovering Nigeria’s Petroleum Subsidy Fraud’ is available for purchase online via Roving Heights and on Amazon.
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