* Some firms receiving cash while inquiries are pending
* Minister says she believes companies have been cleared
* Attempt to end subsidy provoked strikes and protests
* Fuel subsidies soaked up 20 percent of budget last year
By Joe Brock and Tim Cocks
ABUJA/LAGOS, Dec 5 (Reuters) - Nigeria's drive to clean up a gasoline subsidy scheme that soaks up a fifth of federal spending is mired in confusion, with the government, anti-graft investigators and fuel importers at odds over attempts to root out massive fraud.
President Goodluck Jonathan has promised that importers will be prosecuted if either of Nigeria's two anti-corruption bodies finds evidence they are defrauding the scheme, the total cost of which was 1 trillion naira ($6.3 billion) last year.
Yet some firms under investigation by anti-graft officials are still receiving cash, even though Finance Minister Ngozi Okonjo-Iweala has said that only those whose subsidy claims are proven legitimate will be paid. A parliamentary inquiry said last year that it had found evidence of huge fraudulent payments in the fuel subsidies, provoking a public outcry.
Under the scheme, importers apply to the government for subsidy payments. If successful they buy gasoline on the international market which is then sold in filling stations at the heavily subsidised price of about 60 U.S. cents a litre.
Last year's inquiry by the lower house of parliament found that dozens of importers had claimed up to $6.8 billion between 2009-11 for fuel that was never delivered or diverted to neighbouring countries where prices are unregulated.
Subsidies were being claimed for almost twice as much gasoline than Nigeria consumed, it reported. A separate presidential inquiry produced similar findings.
Okonjo-Iweala has since tried to bring transparency to the scheme by withholding payments for claims until they are verified, and periodically publishing what Nigeria pays to fuel importers. She acknowledged that some firms felt unfairly treated but said they had to prove their claims genuine.
"Some people thought they were being witch hunted and the government said: 'no, if you produce evidence to exonerate yourself, you'll be cleared and can claim'," she told Reuters.
Yet late last month the finance ministry announced subsidy payments to three importers that anti-graft officials are investigating for fraud. While such payments don't break any rules, they are contrary to the ministry's own policy of not paying firms under suspicion.
Estimates show the gap between subsidy claims and likely actual consumption is shrinking, but discrepancies remain.
Nigeria plans to import 3.5 million tonnes of gasoline in the fourth quarter of this year from nearly 50 companies, up from 30 used last year, say industry sources.
UK-based consultancy CITAC estimates Nigeria's gasoline demand at 30,000 tonnes a day, or only 2.7 million a quarter, and industry sources were unable to explain the discrepancy. The petroleum regulator did not respond to a request for comment.
Buying more gasoline than the country needs from a large number of small companies was partly what enabled fraud in 2009-2011.
Nigeria is the biggest African importer of motor fuel even though it is also the continent's top crude oil producer. This is because its refineries, which are decrepit if they are operating at all, meet only about a fifth of gasoline demand.
The subsidies which are supposed to protect Nigerians from global market prices have become a huge drain on the economy, consuming 20 percent of the 2012 federal budget.
Jonathan and Okonjo-Iweala tried to scrap them in January 2012 but a jump in pump prices to market rates provoked strikes and protests. These forced the government to back down, although it managed to raise the regulated fuel price by half.
Reuters has reviewed details of inquiries into importers being conducted by the Economic and Financial Crimes Commission (EFCC), an independent anti-corruption agency, and the police Special Fraud Unit (SFU).
Attempts by Reuters to get to the bottom of payments under the scheme led anti-graft officials, Okonjo-Iweala and importers to contradict each other over who is under criminal investigation and who has been cleared.
The firms that agreed to speak to Reuters all denied wrongdoing. Some said they had been cleared, contradicting the investigating authorities. Others declined to comment.
In an announcement published in newspapers on Nov. 26, the finance ministry said it had approved subsidy payments totalling 5.5 billion naira to importers Pinnacle Contractor, Somerset Energy Services and Top Oil & Gas.
EFCC spokesman Wilson Uwujaren told Reuters in an email that the anti-graft agency is investigating Pinnacle and Somerset. He gave no details, but last year the presidential inquiry referred Pinnacle to the EFCC over claims amounting to 8.7 billion naira and Somerset over 2.7 billion of claims, in both cases for fuel it suspected may not have been delivered.
Pinnacle told Reuters the transactions had been cleared by the EFCC, contradicting what Uwujaren said, while Somerset did not respond to repeated requests for comment.
CONFUSION OVER PROBES
The third company, Top Oil, is being investigated by the police's SFU for suspected fraudulent transactions, two senior police investigators told Reuters.
Top Oil said its transactions had been cleared as non-fraudulent, but did not provide any proof.
Okonjo-Iweala told Reuters that to her knowledge the three companies were not under investigation. She said by telephone that she had received a letter from the SFU clearing Top Oil. She did not respond to an emailed request to see that letter.
She added that she had had no communication from the separate EFCC agency on the other firms.
"How I'm I supposed to know? I have nothing from the EFCC saying that these people are being investigated ... I have nothing from SFU saying they (Top Oil) have been investigated on another charge," she said by telephone.
Reuters later tried to contact the EFCC to ask whether it had communicated the Pinnacle and Somerset cases to the finance ministry, but officials were not available for comment.
The finance ministry has tightened the scheme with 359 billion naira paid out so far this year, little more than a third of the 2012 total. However, this reflects delayed payments which may be made eventually as back pay.
DEBT OFFICE REQUEST
Reuters has also reviewed a letter from Nigeria's Debt Management Office (DMO) requesting that the finance ministry make subsidy payments to a number of importers.
In the letter dated Nov. 6, DMO chief Abraham Nwankwo asked the ministry to pay firms including three that are subject to criminal prosecution cases brought by the EFCC - Downstream Energy, Fargo Petroleum and Ontario Oil & Gas - with total claims of 4.3 billion naira between them.
He gave as a reason in the letter that the police SFU was not investigating them, making no mention of the EFCC. Fargo declined to comment. Ontario did not respond to requests for comment. Downstream could not be contacted for comment.
Nwankwo told Reuters that the firms in the letter were either not being investigated by the SFU or had been cleared.
"We have no communication from EFCC that they are investigating any oil marketers based on the report," he said, adding that he had requested a list from the agency. He also noted that the three firms had not been paid.
The EFCC did not respond to a request for further comment.
The police declared Fargo director Seun Ogunbambo a wanted man on Nov. 27 in a criminal case brought by the EFCC, which accused Fargo of fraudulently claiming 976 million naira.
"We went to immigration to put him on a watch list," SFU lead investigator Martin Nwogoh told Reuters in Lagos.
Ogunbambo was not available for comment and it was not possible to track down his lawyer.
A senior police source said the SFU was investigating potentially fraudulent subsidy claims by another company, Imad Oil and Gas, which has been given a licence to import gasoline in the fourth quarter, according to an unpublished allocation list reviewed by Reuters. Imad said it has been cleared of all wrongdoing, contradicting the police. ($1 = 158.65 naira) (Additional reporting by Emma Farge in Dakar; editing by David Stamp)
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