Crude politics A broken oil industry is the source of many woes

DEAD fish wash up on the once-fertile shores of creeks around
Bodo, a town in the Niger delta, that are covered with crude oil
more than six years after two massive spills. Locals have only
now received compensation from Shell, the oil firm responsible for
the leaks. For the first time in half a decade, fishermen have cash
to start businesses, repair their houses and send children to
school. But most other villagers in this Ogoniland region of the
delta wish Nigeria had never struck oil at all. “Look,” says the
chief of a tiny town called B-Dere, just a few miles from Bodo. He
gestures to the deathly-black banks still bearing the marks of the
slicks. “There is nothing to drink, nowhere to fish. What good has
come from it?”
As Nigerians head to the polls in presidential elections on March
28th the oil industry—Africa’s largest—will permeate the vote. The
cash it provides has greased Nigerian politics for decades. Gross
mismanagement and corruption in the industry are the causes of
much of the inequality and discontent with the ruling party in an
economy that is not just Africa’s largest but that ought to also be
one of its wealthiest. Fixing Nigeria’s oil industry will have to be
the main priority of whoever wins the election, whether that is the
current president, Goodluck Jonathan, or his main rival,
Muhammadu Buhari.
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Nigeria pumps something like 2m barrels of oil a day. These
account for most of its exports and about 70% of government
revenues. But official figures are as murky as its polluted creeks.
Volumes are recorded only at export terminals rather than at the
wellhead, says Celestine AkpoBari of the Port Harcourt-based
advocacy group, Social Action. Were a proper tally kept, he says,
corruption would be exposed on a scale that would shock even the
most cynical Nigerian.
It seems likely that more than 100,000 barrels of crude are stolen
(or “bunkered” in the local parlance) every day, at a cost to the
state and investors of billions of dollars a year. Politicians, oil
workers and security forces are said to be behind the complex
cartels that steal, illegally refine and sell crude oil. They have
amassed almost unimaginable wealth in a country where poverty
is still rife.
Oil’s taint has seeped into almost all levels of government and
business. Yet the central problem is found in the petroleum
ministry, which wields vast unaccountable power. The Nigerian
National Petroleum Corporation (NNPC), a state-owned behemoth,
is responsible for all aspects of the industry, from exploration to
production and regulation. It is among the most secretive oil
groups in the world, and is “accountable to no one”, says Inemo
Samiama, country head of the Stakeholder Democracy Network, a
non-profit group.
In 2013 the former governor of the central bank, Lamido Sanusi,
alleged that $20 billion in oil revenues was missing from state
coffers. He was fired for his troubles soon after. The government
has since commissioned an investigation by PWC, an auditing
firm. But officials have only released a few pages of the extensive
report and have claimed they show that a mere $1.5 billion was
missing.
Even where cash has not been nicked, it has often been
squandered. Take the Excess Crude Account (ECA), a sovereign-
wealth fund intended to cushion Nigeria’s budget against falling
oil prices. Most of it was spent over the past two years, despite oil
prices being relatively high for most of that period.
The industry itself is in as sorry a state as the government’s
finances. Although oil practically gushes from the ground in parts
of the delta, oil output has been stagnant for years and billions of
dollars of investment are stalled because of uncertainty over a
new law for the industry.
This is holding back Nigeria’s economy almost across the board.
Because the industry has failed to build the infrastructure to pipe
gas to domestic consumers such as power plants, much of it is
simply flared and burned: Britain reckons that some $800m worth
of Nigeria’s gas a year goes up in smoke. The country is also
chronically short of fuel even though it has four state-owned oil
refineries. Because of poor maintenance and ageing equipment
they operate at well below capacity, forcing Nigeria to import
about 70% of the fuel it needs. There is little incentive for reform
since the government pays hefty subsidies to NNPC to keep on
importing.
A new government, whatever its stripes, will have its work cut out
reforming the industry and preventing a revival of militancy in the
delta. But a starting point should be to halt subsidies for fuel
imports. At a stroke that would undercut a major source of
corruption and crime (both on land and at sea) that spills into
neighbouring countries, the destination for smuggled
consignments of cheap Nigerian fuel. It should also take a close
look at NNPC, which should not be allowed both to participate in
the market and regulate it. Some of its assets could be privatised.
The ruling party and opposition are considering both.
With regulatory certainty, local refining would be ready to take off
—it has already attracted investment from Aliko Dangote, a
Nigerian businessman with interests from cement to sugar.
Another business waiting to boom, given the right regulations and
infrastructure, is power generation, which is stymied by a lack of
gas.
For communities in Ogoniland, the most pressing problem is
cleaning up. Shell has promised to mop up the mess around Bodo,
though the process has yet to start. Compensation is one thing,
Bodo residents say, but what they really want is their livelihood