Oil fraud raises head in Nigeria US banks prepare to submit liquidation scenarios

GENEVA: Little-known firms claiming to have privileged access to prized sweet crude oil from Nigeria are offering to sell it at such deep discounts that traders say the deals are too good to be genuine.

Documents show spot cargoes of several hundred thousand barrels of crude can be picked up at discounts of up to $10 million (R84m).

But the documents are suspiciously flawed, suggesting the financial scams for which Nigeria, Africa’s most populous nation, is notorious have spread to its oil sector.

State oil company Nigerian National Petroleum Corp has placed a “Scam Alert” on its website warning of “unsavoury characters purporting to be staff of the NNPC or contractors to NNPC”.

The sellers include one UKregistered firm purporting to be near the top of a sales chain in which oil cargoes can change hands up to half a dozen times before being refined. Two of the firms said they were able to sell oil cheaply because of special access to NNPC contracts.

The documents point to the difficulty faced by Nigerian President Goodluck Jonathan in making reforms when there is considerable doubt over who is responsible for selling the oil.

But Nigeria has pledged to take measures to fight corruption in the oil sector after a hike in state-subsidised petrol prices sparked mass protests in January. On Tuesday, Jonathan sacked the managing director of the NNPC and three other senior directors.

Alexandra Gillies, governance adviser at Revenue Watch Institute, said the proliferation of middlemen involved in selling Nigeria’s oil since Jonathan’s election last year had resulted in considerable uncertainty over ownership.

“If NNPC only issued term contracts to companies with the capacity to lift crude, then nobody would be able to pose as a company flipping (reselling) a cargo. The confusion is a symptom of Nigeria’s sub-optimal system for selling its oil,” she said.

A report that governmentfunded watchdog, the Nigeria Extractive Industries Transparency Initiative, sent to the authorities in January showed billions of dollars missing from Nigeria’s oil revenues.

Nigeria’s oil is sold by equity holders including oil majors Total and Royal Dutch Shell, which have a stake in production, and via term contracts handed mostly to oil trading firms.

The large number of companies involved in selling oil via term contracts means it can be tough for even experienced traders to tell the difference between real and fake offers. – Reuters NEW YORK: Five of the biggest banks in the US are putting finishing touches on plans for going out of business as part of government-mandated contingency planning that could push them to untangle their complex operations.

The plans, known as living wills, are due to regulators no later than July 1 under provisions of the Dodd-Frank financial reform law designed to end A DROP in the producer price of milk announced by one of SA’s purchasers could threaten the future of dairy farmers, warns the Milk Producers’ Organisation.

“Our milk producers are just coming out of a very difficult time, where prices were particularly low for nearly four years,” said the organisation’s chairman, Dean Kleynhans, yesterday. too-big-to-fail bailouts by the government.

Since the law allows regulators to go so far as to order a bank to divest subsidiaries if it cannot plan an orderly resolution in bankruptcy, the deadline is pushing even healthy institutions to start a multi-year process to untangle their complex global operations, according to industry consultants.

“The resolution process is now going to be part of the costbenefit analysis on where banks will do business,” said Dan Ryan, leader of the financial services regulatory practice at PricewaterhouseCoopers in New York. “The complexity of the organisations will shrink.”

JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley are among those submitting the first liquidation scenarios to regulators at the Federal Reserve and the Federal Deposit Insurance Corporation, say informed sources.

Britain and other major countries are imposing similar requirements for “resolution” plans on their big banks, too.

The liquidation plans are coming amid renewed questions about the safety of big banks. – Reuters