More Troubles for Obat Oil as EFCC Intervenes in Alleged Subsidy Diversion

Obat Oil and Petroleum Limited is facing fresh troubles as the Economic and Financial Crimes Commission ( EFCC) has invited the company for interrogation over an allegation of diversion of N1.2 billion subsidy levelled against the company by Petrocam Trading Nigeria Limited. The two companies had signed service agreement for joint importation of petroleum products financed by Sterling Bank Plc.

By the terms of the agreement, the subsidy proceeds accruing to the transactions, including exchange rate differentials and all other relevant claims paid by the Federal Government must be paid into Obat Oil and Petroleum’s account number 0020560534 in Sterling Bank Plc for the purpose of repaying the loans used to fund the importation.

A total of N1.2 billion subsidy claims was alleged to have accrued to the transactions, involving the importation of N15,000 metric tonnes of Premium Motor Spirit (PMS).

Petrochem has however alleged that instead of remitting the money into Sterling Bank, Obat Oil diverted the money to a different bank, contrary to the agreement.

Obat Oil was said to have claimed initially that the Federal Government had not paid the subsidy claims until both Sterling bank and Petrocam confirmed from the Debt Management Office (DMO) and the Petroleum Products Pricing Regulatory Agency (PPPRA) that the subsidy had been paid. But Obat Oil’s Head of Legal/ Corporate Affairs, Mrs. Seun Bakare, has however denied the allegation, saying that “there was no time Obat Oil diverted any N1.2 billion as claimed by Petrocam.”

She however, admitted that the company has been invited by the EFCC based on a petition by Petrocam.

“It is pertinent to state clearly at this point that there was never a time that our tank farm was shut down as we are fully in operation; we were only invited by the EFCC based on the petition Mr. Patrick Ilo wrote to the commission through his Solicitors,” she added.

The Managing Director of Petrocam Mr. Patrick Ilo, had said in a statement that based on the agreement, his company went ahead to establish six Letters of Credits with its facility at Sterling Bank, bearing the total risk of the transactions.

“It was further agreed that Petrocam will make an advance payment of the sum liable to Obat up front before subsequent transactions after the first two transactions were concluded, an obligation which Petrocam carried out to the letter by making payments in tranches to Obat account details. But because of the devaluation, the government agreed to pay oil marketers affected the Foreign Exchange differential, as well as the accrued interest.

This led us to signing an addendum to the initially executed MoU stating that all accrued interest on these transactions will be paid to the account of Petrocam Trading Nigeria Ltd. We were surprised when we found out that Obat Oil & Petroleum Ltd diverted the funds meant to cushion the effect of the accumulated bank interest on these transactions into their personal account with UBA to the tune of N239, 479,947.85, thereby violating the agreement of the signed MoU and the addendum,” Ilo explained.

Also in a letter addressed to Obat Oil and signed by Sterling Bank Plc’s General Manager in charge of Corporate Banking, Mr. Adegboyega Adegun and Assistant General Manager, Corporate Banking, Mr. Abiodun Odutola, the bank demanded that all subsidy proceeds accruing to the transaction, including exchange rate differentials and other relevant claims from government must be remitted to Obat Oil and Petroleum account in Sterling Bank in line with the agreement.

“We write to advise that we are aware that the Sovereign Debt Note serial number FGN/ 2014/ 01/ Q14/ 1673 and FGN/2014/01/R14/1694 due on the joint venture transactions between Petrocam Trading Oil Limited and Obat Oil and Petroleum Limited, which were financed by Sterling Bank, are part of the subsidy payment approved and paid by government. As banker of these transactions, we write to demand that all subsidy proceeds accruing to the transaction, including exchange rate differentials and other relevant claims from government must be remitted to Obat Oil and Petroleum Limited account number 0020560534 in Sterling Bank Plc for the purpose of liquidating outstanding loan obligations in line with the terms and conditions of the facility under which the transactions were financed,” said Sterling Bank.