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Nigeria tackles the albatross of corruption

Nigeria tackles the albatross of corruption Ian Fraser

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A spat between the Nigerian central bank and the country’s state-owned oil and gas company Nigerian National Petroleum Corporation (NNPC) over nearly $50 billion of missing revenues has highlighted the risks presented by corruption in the West African republic and the determination of its central bank governor to root it out.

The Abuja-based Central Bank of Nigeria (CBN), founded in the dying days of British colonial rule in 1958, alleges that the NNPC has misappropriated $50bn of revenue from the sale of crude oil which by law ought to have been paid to the government.

In a letter to Nigerian President Goodluck Jonathan dated 25 September, central bank governor Malam Sanusi Lamido Sanusi said the NNPC earned $65.3bn from crude oil sales between January 2012 and July 2013, but had remitted just 24% of this to the federal government. Sanusi said $49.8bn was unaccounted for.

A senior source in the Abuja administration confirmed to Reuters that president Jonathan had received the letter and had demanded an explanation from NNPC. Sanusi, whose five-year term ends next year, said the missing $49.8 billion was from the value of oil NNPC sold and said the figure was unrelated to taxes. NNPC has denied Sanusi's claims, saying:

"The allegation is borne out of misunderstanding of the workings of the oil and gas industry and the modality for remitting crude oil sales revenue into the Federation Account.”

The oil firm insisted that the proceeds of oil sales had been paid in full to the federal government, but that the missing funds may be tied up in other government departments that administer petroleum tax and royalties, while other funds had been spent on oilfield development.

Last year, a probe by the ex-head of Nigeria's anti-corruption body, Nuhu Ribadu, said NNPC needed an overhaul because of a lack of transparency, was over-powerful and was being used as a vehicle for corruption. NNPC was ranked last for transparency of 44 energy companies in a 2011 report from Transparency International and Revenue Watch.

Sanusi has history where tackling entrenched positions and opacity in Nigeria’s business and financial sectors. Soon after becoming CBN governor on 3 June 2009, he embarked on a process of “Sanusitization”, which saw the summary dismissal of the chief executives and boards of six Nigerian banks, and the nationalization of three. He also pushed through a dramatic recapitalization of the banking sector. His most famous quote is:

"It is not a crime to make a loss, but it’s criminal to lie about it".

According to a November 27 article in the Nigerian newspaper Leadership, the CBN’s bold move:

“Saved the Nigerian financial sector from impending disaster as the depth of the rot within the system revealed by the special audit of the banks, if left unattended, had far-reaching implications for the economy.”

On Monday 10 December, finance minister Dr Ngozi Okonjo-Iweala called on the Nigeria's private sector to support the federal government in its war on graft. The minister said bribery and corruption remain an albatross around the country's neck, impeding its development.

"We can't have infrastructure and development with these level of corruption [...] It begins with you [private sector companies] to say I would not pay bribe, not only will I not pay, I will report to authorities, also by supporting those trying to fight corruption, not castigating those trying to fight it."

Even with this albatross, Nigeria appears to be doing all right economically. Annualized GDP growth in the third quarter was 6.8%. Inflation fell to 7.8% at the end of October, having fallen consistently from 12.3% in December 2012. It is poised to transplant South Africa as Africa's largest economy this year. However other problems Nigeria faces include vulnerability to the oil price, weak penetration of credit, a wholly inadequate electricity supply sector and high unemployment which is believed to be between 25% and 30%.

Author's Note: Since this article was published, the New York-based Revenue Watch Institute (RWI) has provided an interesting analysis of where Nigeria's missing $49.8 billion of oil revenues might have gone. RWI's article, written by Alexandra Gillies, also advocates greater accounting transparency from NNPC to avoid this sort of thing happening in future.

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Tags: Africa , big oil , bribery , Central Bank of Nigeria , corruption , Goodluck Jonathan , Ngozi Okonjo-Iweala , Nigeria , NNPC , oil , oil and gas , South Africa , transparency
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