NIGERIA: How Can You Be Oil Rich AND Gas Poor? - Listen, my children, and ye shall hear

Thursday, January 12, 2012

On the oil traders

This wikileaks cable tells you all you need to know about the role of dodgy oil trading companies such as Trafigura and Vitol. Surely no one needs reminding of Trafigura's dumping of toxic waste in the Ivory Coast a few years back.

 

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US embassy cable - 04LAGOS767

Why is this site black?

SCANDAL BREWING OVER NIGERIAN FUEL IMPORTS

 

Identifier: 04LAGOS767
Wikileaks: View 04LAGOS767 at Wikileaks.org
Origin: Consulate Lagos
Created: 2004-04-08 08:33:00
Classification: CONFIDENTIAL//NOFORN
Tags: EPET EINV EFIN PGOV NI
Redacted: This cable was not redacted by Wikileaks.

This record is a partial extract of the original cable. The full text of the original cable is not available.
C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 000767 
 
SIPDIS 
 
NOFORN 
 
E.O. 12958: DECL: 04/07/2014 
TAGS: EPET, EINV, EFIN, PGOV, NI 
SUBJECT: SCANDAL BREWING OVER NIGERIAN FUEL IMPORTS 
 
 
Classified By: J. GREGOIRE FOR REASONS 1.5 (B), (D), AND (E). 
 
1. (C) SUMMARY. A scandal is brewing in Nigeria over prices 
paid by the government for imported fuel. International fuel 
traders have been falsifying the dates of bills of lading to 
reflect particularly high market prices, overcharging the 
Nigerian National Petroleum Corporation (NNPC) by $300 
million or more. END SUMMARY. 
 
2. (C N/F) On April 2, Chris Finlayson, Chairman and Managing 
Director of Shell Petroleum Development Corporation of 
Nigeria (SPDC), told Consul General and Econoff that a 
scandal is brewing within the NNPC over payments made to 
international fuel marketers.  Finlayson said some marketers 
have been changing the dates when fuel shipments bound for 
Nigeria were loaded in order to take advantage of 
particularly high market prices.  He said the total 
overpayment by NNPC may be as high as $330 million. 
Finlayson noted that Shell is not one of the marketers in 
question, but is becoming a leading fuel supplier for NNPC. 
 
3. (C N/F) On April 6, Femi Otedola, President and CEO of 
Zenon Petroleum and Gas, the largest supplier of diesel fuel 
in Nigeria, essentially corroborated Finlayson's report. 
Otedola said over $300 million has been overpaid by NNPC for 
fuel imports, and that many leading international traders are 
involved.  According to Otedola, NNPC contracts to pay its 
suppliers the market price on the day a ship is loaded with 
fuel.  He said NNPC recently discovered, however, that bills 
of lading were altered to reflect loading on days of high 
market prices.  Discrepancies were found when comparing dates 
on the bills of lading with dates of landing in Lagos. 
 
4. (C N/F) Pointing to examples, Otedola said that while a 
tanker loading fuel at a refinery in Bahrain usually takes 
four weeks to arrive in Lagos, comparisons between the bills 
of lading and dates of arrival of some shipments reflected 
only a four-day difference, and in other cases, if taken at 
face value, indicated the journey took nine months.  Otedola 
said 73 shipments from refineries in the Persian Gulf, 
England, and Venezuela listed delivery times of only one day. 
 NNPC is attempting to get compensation for the over-charge. 
Otedola went on that most of the fuel traders supplying 
Nigeria are implicated in over-charging NNPC, and showed a 
list of 17 companies that supplied fuel in the first quarter 
of 2004, several of which, he said, are significant players 
in international markets, such as Trafigura and Vitol. 
Otedola added that three companies clearly not involved in 
the scandal are British Petroleum, ChevronTexaco and Shell. 
 
5. (C N/F) Otedola recommended that NNPC stop contracting 
with international fuel traders and negotiate purchases 
directly from refineries worldwide.  According to him, such a 
move would have two positive effects.  Otedola calculates 
that NNPC would save some four billion dollars a year in 
expenditures on imported fuel.  (Note: Prior to deregulation 
in October 2003, NNPC, then the sole importer of fuel, lost 
two billion dollars per year because it sold stock to 
retailers below purchase price. After October 2003, NNPC 
initially stopped subsidizing fuel sales, letting marketers 
import fuel to be sold at market prices.  However, sources 
agree that NNPC is back in the business of subsidizing 
gasoline sales while it maintains a facade of deregulation by 
encouraging private marketers to import fuel that NNPC 
purchases at market price.  NNPC then sells the fuel to 
marketers and retailers at a reduced price to ensure that 
those companies maintain a profit margin while holding 
consumer prices to informal caps set by the Department of 
Petroleum Resources. End Note.) 
 
6. (C N/F) Otedola added that by cutting out the 
international traders, NNPC would also enhance the 
environment in which Nigeria's refineries could be restored 
and operated.  Otedola said he believes international fuel 
trade "mafias" are behind the failure to bring Nigeria's 
refineries back on-line and to capacity.  Otedola is 
convinced these traders arrange for the vandalization of 
crude oil feeder pipelines, which keep the refineries at Port 
Harcourt, Warri and Kaduna closed or under-capacity.  He said 
the international traders generally receive at least one 
million dollars per shipload of fuel to Nigeria and have 
grown accustomed to the easy money Nigeria offers as long its 
refineries remain down. 
 
7. (C N/F) As an example, Otedola described an arrangement 
the National Electric Power Authority (NEPA) had with Sahara 
Energy for the provision of diesel to an emergency power 
generation plant in Abuja.  He said that while a pipeline was 
under construction to deliver fuel to the main power plant, 
NEPA paid some five billion dollars to Sahara over four years 
for diesel to the back-up plant.  It was later discovered 
that NEPA had received only about one billion dollars worth 
of fuel, according to Otedola.  Otedola said that he, too, 
was contracted to deliver diesel fuel to the plant on 
occasion; however, he petitioned the president to investigate 
the matter after becoming suspicious of NEPA's ongoing 
contract with Sahara and the fact that the pipeline for the 
power plant was never finished.  He said his intervention led 
to an investigation that ultimately resulted in the 
cancellation of NEPA's contract with Sahara. 
 
8. (C N/F) COMMENT:  The allegation that international 
traders bilked NNPC of hundreds of millions of dollars is yet 
another example of the poor management of Nigeria's energy 
sector, and highlights the complex links between crude sales, 
fuel importation, refinery maintenance, and energy production 
here.  Otedola is probably right in suggesting that 
long-standing sweetheart deals between the NNPC and a variety 
of fuel traders is keeping the system inefficient.  That may 
also explain why the GON just can't seem to get its 
refineries running even after spending a billion dollars or 
more on maintenance contracts over the last four years. 
Otedola said he initially bid to purchase the Port Harcourt 
refinery offered for privatization, but he recently told 
President Obasanjo he will not invest in the refinery so long 
as NNPC purchases fuel from traders instead of negotiating 
directly with refineries in other countries and leasing ships 
itself to deliver fuel to Nigeria.  It is not clear if 
Otedola's assumption that the international traders' stake in 
Nigeria's current fuel market is the main driver behind the 
country's refinery woes.  But it is clear that the 
fundamentals of infrastructure security, interim supply 
stability, and transactional transparency must still be 
addressed if the GON is to be taken seriously about its 
efforts to deregulate and largely privatize Nigeria's 
downstream petroleum sector.  END COMMENT. 
HINSON-JONES

Author: Radek "Mrkva" Pilar, Twitter, Mail/XMPP: mrkva twistedThing mrkva.eu

>via: http://cables.mrkva.eu/cable.php?id=15817

 

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FRIDAY, JANUARY 13, 2012


Voices from #OccupyNigeria

ChopCassava Voices from the LagosNigeria:

>via: http://africaunchained.blogspot.com/2012/01/voices-from-occupynigeria.html

 

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Subsidize Me

Posted on Monday, January 9th, 2012 at 1:52 PM

By Glory Edozien

Yesterday, my friend got pulled over by the police for having tinted windows. As she negotiated the appropriate bribe to pay the police for her ‘crime’, a convoy of Land Rovers with government licence plates followed closely by police vans whizzed by in jet like speed, all with tinted windows. My friend ‘paid’ for her crime, entered her car and continued with her journey.

There has been so much said about the fuel subsidy crisis. The truth is the economic reasons for the fuel subsidy removal are cogent. The government cannot continue to fund the inadequacies and efficiencies present in the current system. The removal of fuel subsidy will allow for scarce resources to be mainstreamed into the provision of desperately needed infrastructure. It will open up the market and create confidence for investors, which will drive competition within the market, creating various benefits for the masses. The economic principles which anchor these arguments are clear.

However, as with all principles one has to be sensitive to the context in which they are applied. When I was younger, my father and I would drive to the petrol station closest to our house, in his blue arch back Toyota. After filling his tank he would pay the fuel attendant with a Twenty Naira note, and the attendant would give him Ten Naira change. My father would then give me this change to buy a packet of Twix, which cost Five Naira, from the petrol station mart.

The first time I remember the subsidy being removed, my dad no longer filled his tank with Ten Naira and a packet of Twix cost four times more. The same arguments being given now, for the subsidy removal were the same given then. Yet, no new roads have been built, our health care system is in shambles, our education system is defunct and our power system is non existent.

Nevertheless, Nigerians have remained resilient. We have paid up at the petrol stations, watched our government offer empty promises and provided our basic amenities ourselves. We buy imported generators, send our children abroad to school, ship millions of naira to foreign countries for our health care needs and even pay exorbitant tolls for the new roads built. We have found ways to suffer and smile while our government enriched themselves from the resources that were meant for the common good. With each decision made, they have used our common wealth to subsidise their own life styles while the common Nigerian has been left to fend for themselves. We grumbled but did nothing.

Then they offered us the olive branch of democracy. Free and fair elections, transparent systems for the electorate to chose a government for the people and by the people. We grasped it with every limb. But even that was fraught with difficulties. The lives of innocent youth corpers were mortgaged as casualties of democracy. Innocent because they were serving their country, and yet till this day their deaths remained unattoned for. But we in the south did not ‘occupy’ the north. We made angry statements on twitter and shouted with loud words in various articles but did nothing and our government did even less.

Then came Boko Haram. A menace sure to unleash the wrath of the Nigerian government. After all, has the Nigerian army not been deployed to various war torn African countries? Was our army not instrumental in peace keeping missions in Liberia? But our government offered insensitive comments instead, and preferred to watch the lifeless bodies of Christians pile up on the streets of northern Nigeria, while they chased the naked shadows of homosexuals. But maybe that is being unfair, after all they did allocate a significant portion of the 2012 budget to security. An estimated 922 Billion Naira, yet we do not have any detailed plans on exactly how this money will be spent. We have no security systems in place to avert the threats of Boko Haram, only the ‘stop and search’ tactics offered at various police check points. If a significant portion of this allocated security budget will be spent on more police check points with skinny men in black uniforms armed with flashlights, and celoptaped riffles is anyone’s guess. Still Nigerians remained silent. We grumbled loudly, but made no attempts at ‘occupation’ to make our voices heard.

We had barely recovered from the Boko Haram Christmas Day bombings when our government gave us an explosion of their own. Over a hundred percent increase in the price of fuel, a resource which is intricately linked to the fabric of every Nigerians daily life. The petrol stations responded with swift action, almost like they had been poised at the pumps, waiting for this very announcement. Our grumblings got louder. We calculated the costs of our livelihoods and compared it with the exorbitant budget allocated to maintain our government’s lifestyle. Refurbishments to the presidential villa, purchase of brand new bullet proof vehicles and new crockery for the lavish state dinners, and the almost 1 Billion Naira allocated to feed the President and Vice President, while we the populace are left insecure, unable to fend for ourselves and our families hungry.

So who can blame us for refusing to listen to these so called economic arguments which support the subsidy removal when most Nigerians are facing issues which far outweigh their merits. Mothers have buried their children, innocent lives have been lost, and the blood of fellow Nigerians in the north continues to be spilt. The issue here is not that we are unreasonable, or that we do not understand market principles. Rather it is that our resilience has been shattered in the face of much apathy from our leaders. We have taken too much for too long and our government has taken us for granted. They have asked us to trust them when they have done nothing to deserve that trust. They have done nothing to protect us, nothing to gain our confidence, nothing to ease our suffering but have done everything to ensure that their own lifestyles remain subsidized. This is the issue, and until an economic principle can be created to solve this, one wonders if there can be any tangible merit to the fuel subsidy removal?

>via: http://www.bellanaija.com/2012/01/09/subsidize-me/

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BN Hot Topic:

How Will the

‘Occupation’ End?

 

Posted on Friday, January 13th, 2012 at 9:35 AM

By Glory Edozien

It’s officially Day 5 of #OccupyNigeria, the country wide protests over the government’s removal of fuel subsidy, a move which effectively increased the price of fuel inNigeria by over 100%.

The Nigerian Labour Congress (NLC), backed by the Nigerian people, have stood their ground in the face of much government opposition and many Nigerian’s have shown solidarity by taking to the streets in relatively peaceful protests for what they see as a continuous disregard for the wellbeing of the people by those elected to govern them.

The events over the last five days show that the President has been backed into a corner, as the resilience of the people remains unfettered by the hardline he has taken. At the start of the strike, the NLC negotiated for a return to N65/ litre as opposed to the newly implemented N141/litre. However unconfirmed reports from yesterday, revealed that NLC maybe negotiating for a new long term price of N90/ litre or N65 until April with further negotiations after. These unconfirmed reports have resulted in various responses, with some arguing that a return to the N141/litre in April may result in stock piling and artificial scarcities. Others also point out that a return to N141/litre at any point would be totally unacceptable given the already low standard of living faced by many Nigerians and advocate for a complete reversal to N65/litre price. However some have argued that a return to N65/litre is unreasonable, given the potential economic benefits of the subsidy.

Furthermore, it is clear that the #OccupyNigeria movement has brought to the fore many issues facing the country, corruption, dwindling industrial base, lack of power, roads, education and other basic amenities, Boko Haram. These issues are not new, but the fuel subsidy crisis has definitely been the final straw for Nigerians.

No matter our opinions of the strike, one thing is clear, #OccupyNigeria movement has brought Nigeria’s issues centre stage, the people are united against her government and are demanding answers but how will this end? Will the government listen to the voice of the people? Or will they stand their ground? Will a compromise position be reached? If so, what is an acceptable compromise position N65, N90, N120? What about other issues which have plagued Nigerians for decades? Do we start new ‘occupy’ movements for those?

Nigeria, Lets Decide!

 

 

>via: http://www.bellanaija.com/2012/01/13/bn-hot-topic-how-will-the-occupation-end/