For more than a generation technocrats, politicians and oil men have
wrestled over whether and how to go about strengthening oversight of
Nigeria’s notoriously opaque oil industry. One conclusion that can be
drawn from the official confusion this month over the proportion of oil
revenues going missing is that little progress has been made in bringing
greater transparency to the sector. Africa’s leading oil producer still
hosts an industry subject to billions of dollars in abuse, in obvious
need of more stringent monitoring.
The latest debate around the issue was sparked by a leaked letter to
Goodluck Jonathan, the president. In it the central bank governor warned
that the state oil company had failed between January 2012 and July
2013 to account for nearly $50bn in revenues from oil sales. Somewhat
inured though many Nigerians are to big-ticket scandals, the scale of
this revelation elicited a sharp national intake of breath.
Opponents of the president have been quick to take advantage amid a
general rise in the political temperature ahead of the 2015 elections.
Last week 37 members of the national assembly crossed the floor to
opposition, causing the ruling People’s Democratic party to lose its
majority for the first time since the return of civilian rule in 1999.
Mr Jonathan’s presidency is deeply wounded.
As it turns out, the central bank’s calculations contained big
omissions. After poring over the data, officials have whittled the
figure for related shortfalls down to more like $11bn. There are big
questions still left to answer, however. The first is how the state oil
company justifies withholding the $11bn identified. This in turn is part
of a bigger puzzle over falling oil revenues that drove the central
bank governor to raise the alarm in the first place.
Part of the answer lies in industrial-scale theft direct from
pipelines. Another may lie in regulatory uncertainty. Far-reaching
legislation designed to clean up the mess in the sector has been
languishing for five years. As a result there has been a marked drop in
investment in fresh production by the international oil companies.
Yet the shortfalls on the books are not fully explained by production
losses and fluctuations in price. Oil earnings this year are down by
about a third in dollar terms compared with 2011, while the fall in
exports is on average 10 per cent. Swap contracts, when crude oil
allocated for domestic consumption is exchanged for refined product
imports without money changing hands, may be hiding further substantial
losses.
To fill gaps in the budget this year the finance ministry has had to
draw down on the rainy-day savings fund that is financed by windfall
earnings above the budgeted price of oil. This has left Nigeria
unnecessarily vulnerable to shocks.
Heading into the 100th anniversary year of its creation, Africa’s
most populous nation should be in a better position. Investor interest
in the country’s potential as a market and a motor for regional growth
has rarely been higher. The oil price is high and the economy is growing
at about 7 per cent. Not for he first time, Nigerians are being let
down by poor stewardship of the oil industry, on which their country
still depends for more than 90 per cent of export earnings.
Mr Jonathan should order a forensic, external audit of the oil
accounts to clear up the confusion. This could go two ways. It could
expose the real extent of losses owing to gross mismanagement and knock a
further dent in public confidence. However, it could also show that
government is serious about plugging the holes, while adding urgency to
the passage of legislation meant to restore the industry back to health
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