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
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.