Three factors keep corruption risk elevated in Nigeria’s oil sector
For over 10 years, the Nigerian National Petroleum Corporation (NNPC)’s opaque contracts to trade crude for refined fuel have been the subject of corruption investigations in Nigeria and have prompted calls for industry reform. US court records published in July alleging an ex-Glencore trader and others bribed Nigerian public officials and middlemen for oil contracts awarded between 2007 and 2018 are indicative of those dynamics. Whilst the US prosecution is progressing, the government here in Nigeria is preparing to enact sweeping legislative changes, designed to reform the legal and regulatory framework for the industry as well as the NNPC’s corporate structure. See: Nigeria’s oil reform bill PIB near enactment despite stakeholder concerns. However, even with the new legislation, corruption risk for the sector will remain elevated due to the following factors.
1. Governance
The PIB reassigns NNPC’s gatekeeper roles to new regulators and converts the parastatal to a limited liability company on a potential path to privatisation, but it fundamentally preserves the existing structure of governance that undermines independence, promotes patronage and aids political interference. The federal government will continue to fully own NNPC, and the president of the country remains solely empowered to appoint and remove the NNPC board (including the CEO) despite the firm’s new corporate status.
Meanwhile, the new Nigerian Upstream Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Authority will also effectively be at the president’s behest. The principals for these regulators will be picked by the president, while they will have no stated mandate and little incentive to act independently. This type of structure has in the past allowed the president and other top political figures to purportedly play an illicit role in license and contract awards. One example is the Malabu scandal involving the award of a production license for an oilfield in the country. Nigeria’s Economic and Financial Crimes Commission (EFCC) is currently prosecuting a former justice minister Mohammed Adoke in connection with Malabu.
2. Law enforcement
The EFCC is mainly responsible for enforcing domestic anti-corruption legislation here, but it has had unstable leadership since it was established in 2003. Three of the past EFCC chairs were sacked by incoming presidents (including the current one) and the rest were caretakers. The present chair Abdulrasheed Bawa took office in 2020 after his predecessor Ibrahim Magu was removed for alleged corruption. Magu had been locked in a turf war with the justice minister Abubakar Malami. In that context, the EFCC has not successfully prosecuted any major corruption case relating to the oil industry.
To illustrate, the EFCC’s founding chair Nuhu Ribadu was sacked in 2008 two weeks after the EFCC arrested a former state governor James Ibori for graft and money laundering. Ribadu then fled the country after he was demoted and sacked from the police force. The dismissed chair later testified in a UK court that Ibori, who governed the oil-rich Delta state, had tried to bribe him to close the case. Ibori was acquitted in a Nigerian high court in 2009 but was convicted in the UK in 2012.
3. Judiciary
Delta’s ex-governor Ibori managed to foil his prosecution in Nigeria by arranging the transfer of his case to a high court division in his own state, exploiting his relationship with Umar Yar’adua who was president at the time.[1] The Nigerian high court previously did not have a division in Delta, but one was created to hear Ibori’s trial under a new judge. Ibori himself later fled the country after his foe Goodluck Jonathan became president and Yar’adua died in office.
The case typifies how Nigeria’s judiciary is vulnerable to political abuse and how corruption cases may pass through the justice system depending on an accused’s ties with the government of the day. This year, all of Nigeria’s courts were shut in May and June because staff went on a strike to demand the independence of the judiciary. The judiciary staff union said state governors are capable of subverting the system given they determine how courts are funded and judges are paid.
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[1] Corrupt Nigerian governor gets 13-year UK jail term (2012, 17 April). Reuters.
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