Nigerians impatient for oil sector anti-corruption reforms, but it’ll be a long journey
Nigerian President Muhammadu Buhari’s appointment of a Harvard-educated lawyer to run the state oil company demonstrates his anti-corruption resolve — but only marks the start of a long reform journey, analysts say.
Industry observers note the formidable challenge he faces in sanitising a sector that accounts for 70 percent of the country’s revenue, but which is notorious for mismanagement and rampant theft.
Buhari took office May 29 after being elected on an anticorruption ticket, pledging to recover “mind-boggling” amounts of stolen oil money and bring those responsible to book.
In early August he appointed Emmanuel Ibe Kachikwu, a former executive vice-chairman of Exxon-Mobil Africa, to head the Nigerian National Petroleum Corporation (NNPC) after sacking the entire board.
Speaking to journalists in the capital Abuja Thursday, Kachikwu fired an opening salvo, promis- ing to uproot NNPC’s “anything goes” culture and warning underperforming employees will lose their jobs.
“At the end of the day, NNPC isn’t a public service, it is a corporation and it is going to be run like a company, generating money and profit for Nigerians,” Kachikwu vowed.
John Campbell, a senior fellow for Africa policy studies at the Council on Foreign Relations, told AFP success in combating corruption within the oil industry would require “a revolution in governance.”
He welcomed the appointment of Kachikwu, a manager with decades of private sector experience, as a clear signal of the president’s reform agenda which “fits the pattern of Buhari appointing technocrats based on merit.”
But he was less optimistic on the new leader’s chances of cleaning up the industry, asking: “Can a tiger change its stripes?”
Buhari was the oil minister responsible for the launch of the NNPC in 1977, now a joint ven- ture with 24,000 workers between the government and multinational corporations including ExxonMobil, Chevron and Royal Dutch Shell.
The former military ruler reputed for his autocratic stance on corruption and “indiscipline” is two months into his presidency and has yet to appoint a cabinet, let alone an oil minister.
‘Baba Go Slow’
Analysts have complained that he has been vague about achieving his goals, and have voiced frustration at his slow pace.
“Buhari’s critics call him ‘Baba Go Slow’ and argue that the policy inertia was an inevitable development arising from the complexities of a young and ideologically diverse election coalition,” Ronak Golpaldas, a sovereign risk analyst at South Africa’s Rand Merchant Bank told AFP.
“However, his supporters have urged patience, arguing that the delays are indicative of a deep desire to create the foundations for sustained economic growth via credible and technocratic appointments.”
Africa’s largest economy and most prolific oil producer churns out roughly two million barrels of crude per day, but ordinary people have not benefited. Twothirds of the nearly 180 million population live on less than US$1 a day.
Buhari has accused the previous administration of Goodluck Jonathan of leaving the treasury “virtually empty,” and is struggling to reinvigorate an oildependent economy weakened by the halving of crude prices since 2014.
He has ordered a review of oilswap contracts, alleging 250,000 barrels of crude a day were stolen during the previous regime, with the profits going into individual bank accounts.
The Natural Resource Governance Institute (NRGI), a New York-based independent watchdog, said in a report earlier this month Nigeria was failing to recover the full value of oil sold by the NNPC amid poorly structured
deals and unaccountable spending.
“Inside NNPC Oil Sales: A Case for Reform in Nigeria” is described as the first in-depth, independent analysis of the “complicated and shadowy deals” through which NNPC sells Nigeria’s oil.
The report details how the corporation has been increasingly withholding large sums of money from the Nigerian treasury.
It retained an estimated US$12.3 billion from the sale of 110 million barrels of oil over 10 years from a single block controlled by a subsidiary, NRGI claims.
Oil buyers are often unqualified intermediaries who capture margins for themselves while adding little value to deals, it said, while oil-for-fuel swap agreements and other contracts are opaque and contain unbalanced terms.
In 2013, the treasury received only 58 percent from US$16.8 billion worth of oil NNPC had earmarked for its underperforming refineries, NRGI said.
“Oil sales are Nigeria’s biggest revenue stream, but management has worsened in recent years,” said Aaron Sayne, co-author of the report.
Alexandra Gillies, who also worked on the analysis, said the combination of a new government and budgetary shortfalls offered Nigeria “its best chance in years” to overhaul NNPC oil deals.
“Everyone — from trading companies to Nigerian citizens — is waiting to see how the new government will approach these transactions, including the allocation of new export or swap contracts,” she said.
A picture taken on Oct. 21, 2011 shows an illegal oil refinery along the Imo River in Abia State, Nigeria.