UPDATE 1-Nigeria fuel subsidy graft cost $6.8 bln-parliament
* State oil firm owes oil traders some $3.5 billion
* NNPC's indebtedness, mismanagement danger to economy
* Nigeria needs two oil ministers - parliament (Adds details, quotes throughout)
By Joe Brock and Camillus Eboh
ABUJA, April 19 (Reuters) - Mismanagement and theft by top Nigerian officials involved in a corrupt fuel subsidy scheme cost the country $6.8 billion in three years, a parliamentary probe found, calling on President Goodluck Jonathan to overhaul the state oil firm and ministry.
Nigeria tried in vain to end gasoline subsidies on Jan. 1, but a week of public protests forced the government to partially re-instate the payments, seen as a massive drain on its budget.
The report filed late on Wednesday said the state oil firm, private marketers and the regulator owe a combined 1.07 trillion naira ($6.8 billion) in unpaid debts to the government and that the state oil firm owes oil trading companies some $3.5 billion for fuel, including to independent oil trader Trafigura.
It recommended the state oil firm be overhauled.
Nigeria's oil industry has been criticised for being corrupt for years but audits and reports have never resulted in high level officials being charged. This is parliament's strongest report yet into high level oil graft and its probe was prompted by the public protests in January.
The missing $6.8 billion equals roughly a quarter of Nigeria's annual budget for a country in which more than half of inhabitants live below the poverty line with no electricity.
After January's protests, a wave of audits and probes were ordered to uncover why Nigeria was spending billions of dollars more on fuel subsidies than was in the budget, and buying billions of litres more than Nigerians were actually consuming.
The parliamentary probe covering 2009 to 2011 found that petrol marketers, including state-owned NNPC, were taking subsidy payments for fuel that didn't exist or was sold abroad.
"The committee believes that if the fuel subsidy scheme was properly managed, the sum of 1.070 trillion naira, or $6.8 billion, would have been available to the three tiers of government," it said.
"We found that the subsidy regime, as operated between the period 2009-2011, were fraught with endemic corruption and entrenched inefficiency," said a report submitted to parliament and seen by Reuters on Thursday.
SLEAZE AND INCOMPETENCE
Africa's largest crude exporter pumps more than 2 million barrels per day (bpd) but could be producing 4 million bpd with an efficient state-oil firm, less graft and stronger regulation, foreign oil company executives and industry experts say.
"Government officials made nonsense of the subsidy guidelines due mainly to sleaze and, in some other cases, incompetence," the report said.
The 200-page paper advises that the board of NNPC, which is headed by Oil Minister Diezani Alison-Madueke and includes NNPC chief executive Austen Oniwon, should be "completely overhauled" and the anti-corruption agency should investigate its members for prosecution.
The lawmakers said the minister's job should be split in two. "Given the large and complex nature of the Ministry of Petroleum Resources, the committee recommends that two ministers should be appointed to take charge of the upstream and downstream," the report said.
Fuel regulator PPPRA answers to Alison-Madueke but she is also head of the board of NNPC, an oil company which buys and sells crude oil and products.
This process is clear conflict of interest for the oil minister and "negates principles of checks and balances and international best practices," the report said.
NNPC is a huge organisation, which is at the heart of every deal done in Nigeria but has little operational capacity to drill, ship or refine oil. Foreign oil companies and government officials regularly complain about it not paying its debts.
"The committee recommends that the house do a direct audit of the NNPC to determine its solvency. This was as a result of plethora of claims of indebtedness and demands for payments by NNPC's debtors which, if not handled well, will ... affect the entire economy of Nigeria," the report said.
Fuel regulator PPPRA came under some of the strongest criticism in parliament's investigation but Jonathan can point to his sacking the head of the regulator in November last year, although he was replaced by an executive at NNPC.
The uncontrollable nature of the fuel subsidy may continue.
Nigeria's 2012 budget allocation to pay fuel subsidies is 888 billion naira but this will be spent well before the end of the year, risking Africa's second biggest economy being burdened by more debt, the central bank governor told Reuters on Thursday. (Editing by Tim Cocks and James Jukwey)
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