The Ongoing Song and Dance of Corruption in Nigeria’s Oil and Gas Industry

The Ongoing Song and Dance of Corruption in Nigeria’s Oil and Gas Industry

In this article, Frederick Festus Ntido of Threshing Fields Law talks (and walks) us through the continuing saga of the struggle against historic corruption and theft in Nigeria’s energy and natural resources sector – plus a few plot twists in the pipeline that point towards a better future for the country’s crude oil production.

The Screaming of the Lambs

As long as humans walk the face of the earth – or any other planet we may visit in the future – there is a certain likelihood of corruption. People possess a primitive urge to gain an edge or advantage over others – and to do so through unscrupulous means.

There are some jurisdictions, however, where the problem of corruption defies all common sense. This reflects a deep-rooted cultural and systemic tolerance of graft and a weakness when it comes to tackling the malaise. Nigeria is one such jurisdiction and its oil and gas industry a key example.

In 1991’s The Silence of the Lambs, the film’s anti-hero Hannibal Lecter whispers these famous words to FBI agent Clarice Starling: “You still wake up sometimes, don’t you? You wake up in the dark and hear the screaming of the lambs.”

Nigeria earned zero dollars from crude oil experts in July 2022.

It could be said that recent events related to the unparalleled persistent theft of crude oil from trunks, pipelines and crude oil export terminals were the point at which the lambs started screaming. In its report to the Federal Accounts Allocation Committee on 24 August 2022, Nigeria’s former state-owned oil corporation – now the Nigerian National Petroleum Company Limited – said that the country earned zero dollars from crude oil exports in the month of July 2022.

Dancing with Wolves

Few countries can boast as many statutes or legislations dealing with corruption as Nigeria. If the problem of corruption could be resolved through the number of enacted laws then the anti-corruption trophy would easily belong to Nigeria.

The following examples of such legislation should suffice:

  • Economic and Financial Crimes Commission (EFCC) Establishment Act 2004;
  • Independent Corrupt Practices and Other Related Offences Act 2000;
  • Advance Fee Fraud and Other Related Offences Act 2006;
  • Money Laundering (Prohibition) (Amendment) Act 2012;
  • Miscellaneous Offences Act;
  • Code of Conduct Act;
  • Nigerian Extractive Industries Transparency Initiative Act;
  • Freedom of Information Act 2011;
  • Fiscal Responsibilities Act 2010;
  • Penal Code Laws of the Federation of Nigeria 2004;
  • Criminal Code Laws of the Federation of Nigeria 2004;
  • Banks and Other Financial Institutions (Amendment) Act 1991; and
  • Failed Banks (Recovery of Debts) and Financial Malpractices in Banks (Amendment) Act 1994.

However, when it comes to the crucial matter of enforcing these laws, there are more often than not some vicious dances with wolves. This is down to the powerful network of highly organised and well-funded individuals and organisations promoting corruption.

Heads You Win, Tails You Lose

The Nigerian anti-corruption landscape is one that frequently turns logic on its head. One would assume that, owing to the enormous investments in the sector both by international and indigenous players, more effort would be made to confront the massive issue of corruption. Sadly, this is not the case.

Indigenous companies are lamenting the large-scale theft of their products.

While international oil companies are divesting and planning to divest from their onshore acreages in response to global commitments to energy transition, the indigenous companies are lamenting the large-scale theft of their products.

A decision by the Nigerian government to award a contract for the protection of oil pipelines in the Niger Delta region to a non-state actor in the monthly sum of USD9.5 million mystified a number of stakeholders. It raised serious concerns as to the inability of state-controlled security outfits – who, ordinarily, should be better equipped than a non-state actor – to secure these vital infrastructures. Prevalent corruption within state-owned structures has been identified in some quarters as the reason for awarding the contract.

The decision still set off a firestorm of criticisms, with one non-state actor alleging that the individual who won the contract would not be supported by his own group because – in local parlance – “he wanted to chop alone” or was unwilling to share the monthly payments with others.

It Never Rains, But It Pours

Further dramatic developments have swiftly followed Nigeria’s historic failures to meet the Organization of Petroleum Exporting Countries’ daily production quota on the back of the unprecedented pillage of the country’s crude oil resources.

The soaring international price of crude oil as a result of the ongoing Ukraine and Russia conflict, which should have swelled Nigeria’s foreign reserves and beefed up its excess crude oil account, have had the opposite effect. This is basically down to corruption in the system.

The high price of crude oil meant an equally high cost for the importation of refined petroleum products in a country where the four state-owned refineries have been moribund for years, even though hundreds of millions of dollars are budgeted each year for the turnaround maintenance of the facilities.

A thriving ring of syndicates is smuggling petroleum products across international borders.

The federal government often draws from its foreign reserves to subsidise the high cost of petroleum products for the local market. Although the subsidy regime appears a laudable social scheme, the problem is that nobody knows how much petrol is imported into the Nigerian market or what quantity is actually consumed. This has created room for further corruption, with a thriving ring of syndicates smuggling petroleum products across international borders.

The Same Old Song

It is often said in government circles that they know the identity of those behind the massive theft of oil in the country. The government also knows who is profiting from the corruption-riddled fuel subsidy regime. They know, too, those responsible for the refineries not functioning and have made a solemn promise to expose all these individuals.

Merely declaring you know who the corrupt individuals are is not enough to address the problem.

As ever, it goes no further than that – as though merely declaring you know who the corrupt individuals are is enough to address the problem.

Walk the Talk

Ultimately, not all is bleak or doom and gloom, however. Along with the monitoring of the oil pipelines, the coming on-stream of the Dangote Refinery – with its refining capacity of 650,000 barrels a day – in mid-2023, and the revamping of the refineries set to begin with Port Harcourt in December 2022, suggest that the good times are not too far away.

With the elections scheduled for February 2023 already bristling with promises of a direct approach to dealing with institutional and other forms of corruption, the world should finally expect to witness the talk being walked.