IT is evident from the report of the House of Representatives' Committee on fuel subsidy that failure by legislators to carry out oversight functions made it possible for agencies administering the petroleum subsidy scheme to stray from the existing rules and connive with importers of refined fuel to defraud the Federal Government through escalated claims. One area of large-scale abuse of the subsidy scheme involved inflation of ship freight charges by importers to obtain foreign exchange, which was then stashed away in foreign bank accounts.A loophole created by the Central Bank of Nigeria (CBN) requirement for accessing foreign exchange, led importers to arrange for foreign fuel-laden mother vessels to anchor outside Nigerian territorial waters (that is offshore Cotonou or Lome). And to meet the condition for importation of products, petroleum marketers deployed daughter vessels to ferry the fuel from the foreign floating ports of origin to their storage facilities in Lagos. The ship-to-ship operations were neither monitored by relevant government agencies nor were volumes of product transferred properly verified. That left ample room for collusion and organised swindle of government through bloated subsidy claims based on blown-up import figures. Supporting falsified round-trip transfer of refined products not supplied, pushed up freight charges in foreign currency, which importers got the CBN to transfer abroad. In the absence of appropriate legislative oversight action, the fraud festered despite a CBN directive issued in 2008 that made it mandatory for banks and shippers to obtain from the Nigerian Shippers' Council (NSC) a confirmation letter of reasonableness of freight rate for importation of petroleum products into the country.But following the recommendation by the House Ad-hoc Committee last April asking the CBN to 'review the policy guiding payment for importation of petroleum products,' the apex bank finally took steps to enforce its earlier directive by notifying commercial banks, importers and exporters that the presentation of NSC confirmation letter on the reasonableness of freight rates was part of the guidelines for the processing of imports and exports to and from Nigeria. The stipulated condition has led to astounding revelations. Firstly, the NSC has announced a slash of the charges of 24 companies seeking freight confirmation letters by an average of US$1.0 million. Secondly, the freight charge for two shipments amounting to $2.64 million turned out to have been inflated by some 90 per cent. Given Nigeria's annual average ship traffic of 4,000 vessels, the above example point to the stunning degree of rip-off suffered by the economy through freight charges over the years.In addition to the above unmistakably self-promoting freight savings, the NSC wants the public to believe that 'the status of freight rate for wet cargo in our market is now in tandem with what is obtainable in the global market.' But there is need to be wary as there is suspicion that applications for verification of freight are few with freight rate usually being fixed by a cartel. There is need, therefore, to thoroughly scrutinise freight charges for imported refined petroleum products over the years to establish the extent to which the landed cost of such imports was padded (possibly inflated insurance costs should not be ignored). Such an exercise will substantially scale down the level of subsequent petrol subsidy claims as well as reduce the retail prices of all refined products. Those found culpable for aiding and abetting the inflation of landed cost of products in the past should be sanctioned.To be sure, the CBN guideline requiring individual shippers to obtain confirmation letters of reasonableness of freight rate from the NSC not only introduces avoidable element of bureaucratic delay into import and export transactions, but also provides avenue for haggling and entrenchment of opaque freight rates that would be steeped in corruption. The functions of the NSC, which was established in 1977, include advising the Federal Government on matters relating to the structure of freight rates. Instead of issuing freight verification certificates on shipment-by-shipment basis, the NSC should fix and circulate to stakeholders at regular intervals standard Platts-related freight rates for various ship cargoes to and from Nigeria.All in all, thanks to the public mass action in January, the charade of the subsidy claims has been exposed. The lesson is for all parliamentary committees to diligently carry out their oversight functions in order for ministries, departments and agencies to adhere to best practices in their respective areas of responsibility at all times. Nigerians deserve nothing less.
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