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| Nigeria: how to lose $35bn | Nigeria: how to lose $35bn |
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| In Nigeria, Nuhu Ribadu is considered an island of principle and moral backbone in a great sea of corruption, waste and dysfunction. Trusted in a way that other politicians and public figures can only dream of. | In Nigeria, Nuhu Ribadu is considered an island of principle and moral backbone in a great sea of corruption, waste and dysfunction. Trusted in a way that other politicians and public figures can only dream of. |
| Ribadu earned his reputation as head of Nigeria's Economic and Financial Crimes Commission, where he claimed some big scalps – including his former boss, police inspector-General Tafa Balogun, convicted of corruption. During his tenure, Nigeria quietly cleaned up its act, getting itself removed from a global blacklist of high-risk, non-cooperative countries and earning the withdrawal of a US advisory warning financial institutions to steer clear of operating in the country. This cemented his image as an anti-corruption crusader, an image which he used to good – but not good enough – effect in mounting a presidential campaign last year (his party took a creditable 5% of the vote). | Ribadu earned his reputation as head of Nigeria's Economic and Financial Crimes Commission, where he claimed some big scalps – including his former boss, police inspector-General Tafa Balogun, convicted of corruption. During his tenure, Nigeria quietly cleaned up its act, getting itself removed from a global blacklist of high-risk, non-cooperative countries and earning the withdrawal of a US advisory warning financial institutions to steer clear of operating in the country. This cemented his image as an anti-corruption crusader, an image which he used to good – but not good enough – effect in mounting a presidential campaign last year (his party took a creditable 5% of the vote). |
| The winner of that presidential election, Goodluck Jonathan, appointed Ribadu to head a special task force to look into the rot in the Nigerian oil industry, which has long been a byword for gross inefficiency and corruption. There was plenty of rot to be found. Ribadu's report, leaked to Reuters, implicated ministers, parastatals and oil majors in mismanagement and dodgy practices that are conservatively estimated to have cost Nigeria $35-billion over the last 10 years, or more than an entire year's government spending. Put another way, at least 10% of Nigeria's annual budget has been squandered into private bank accounts and fat corporate profit margins over the last decade. | The winner of that presidential election, Goodluck Jonathan, appointed Ribadu to head a special task force to look into the rot in the Nigerian oil industry, which has long been a byword for gross inefficiency and corruption. There was plenty of rot to be found. Ribadu's report, leaked to Reuters, implicated ministers, parastatals and oil majors in mismanagement and dodgy practices that are conservatively estimated to have cost Nigeria $35-billion over the last 10 years, or more than an entire year's government spending. Put another way, at least 10% of Nigeria's annual budget has been squandered into private bank accounts and fat corporate profit margins over the last decade. |
| None of this is a huge surprise. There have been other reports making equally massive claims. The oil industry in Nigeria has long been tinged with the stench of corruption. But Ribadu's report is different, for two reasons: First, his involvement gives it moral credibility; and second, the report was commissioned by Nigeria's government itself. This is not the work of some NGO or rights organisation with a mandate for activism and a shrill PR operation; this is an official government finding produced by a widely-respected Nigerian, which makes its devastating conclusions all the more damning. | None of this is a huge surprise. There have been other reports making equally massive claims. The oil industry in Nigeria has long been tinged with the stench of corruption. But Ribadu's report is different, for two reasons: First, his involvement gives it moral credibility; and second, the report was commissioned by Nigeria's government itself. This is not the work of some NGO or rights organisation with a mandate for activism and a shrill PR operation; this is an official government finding produced by a widely-respected Nigerian, which makes its devastating conclusions all the more damning. |
| It reads like a handbook for how to mismanage public resources. Countries just coming into great resource wealth – like Ghana, or Kenya – take note: this is how not to do it. | It reads like a handbook for how to mismanage public resources. Countries just coming into great resource wealth – like Ghana, or Kenya – take note: this is how not to do it. |
| Some of the highlights include: the state oil firm selling oil to itself at ridiculously low prices, short-changing the treasury to the tune of $5-billion; failing to collect royalties from the likes of Shell and Sinopec, creating a $3-billion black hole in accounts; "losing" hundreds of millions of dollars owed to the government as signatures bonuses on new deals; and allowing oil ministers to award contracts at their own discretion, without even an attempt at a tender process. | Some of the highlights include: the state oil firm selling oil to itself at ridiculously low prices, short-changing the treasury to the tune of $5-billion; failing to collect royalties from the likes of Shell and Sinopec, creating a $3-billion black hole in accounts; "losing" hundreds of millions of dollars owed to the government as signatures bonuses on new deals; and allowing oil ministers to award contracts at their own discretion, without even an attempt at a tender process. |
| The most damaging allegation involved the state oil firm and oil companies Shell, Total and Eni, which together owned a subsidiary company called Nigeria LNG. This company acted as a middle man, buying oil on the cheap from the government and selling it on to international markets at a vastly inflated price. Ribadu's report estimates that if the government had just sold the oil at market price, they would have made an additional $29-billion. | The most damaging allegation involved the state oil firm and oil companies Shell, Total and Eni, which together owned a subsidiary company called Nigeria LNG. This company acted as a middle man, buying oil on the cheap from the government and selling it on to international markets at a vastly inflated price. Ribadu's report estimates that if the government had just sold the oil at market price, they would have made an additional $29-billion. |
| Predictably, Ribadu's report was not exactly met with enthusiasm by other officials in the Nigerian government. Particularly harsh criticism has come from two members of the committee that helped draft it. They say the report is based on incomplete, unverified data and that Ribadu makes claims that cannot be sustained by evidence. Unfortunately for the credibility of these two critics – Steve Oronsaye and Bernard Otti, both senior government officials – they were both offered and accepted lucrative positions on the board of the state oil firm while continuing to sit on the committee investigating it. Nigerian media has largely dismissed their criticisms as a failed attempt at damage control. | Predictably, Ribadu's report was not exactly met with enthusiasm by other officials in the Nigerian government. Particularly harsh criticism has come from two members of the committee that helped draft it. They say the report is based on incomplete, unverified data and that Ribadu makes claims that cannot be sustained by evidence. Unfortunately for the credibility of these two critics – Steve Oronsaye and Bernard Otti, both senior government officials – they were both offered and accepted lucrative positions on the board of the state oil firm while continuing to sit on the committee investigating it. Nigerian media has largely dismissed their criticisms as a failed attempt at damage control. |
| "The reservations of some members of the Task Force must not be allowed to cast any shadow over the urgent need for the security agencies to bring all those indicted to justice," wrote the influential Leadership newspaper. "We thank the Ribadu committee for showing the nation some of the reasons why Nigeria is a rich nation with poor people." | "The reservations of some members of the Task Force must not be allowed to cast any shadow over the urgent need for the security agencies to bring all those indicted to justice," wrote the influential Leadership newspaper. "We thank the Ribadu committee for showing the nation some of the reasons why Nigeria is a rich nation with poor people." |
| Having received the report, Jonathan is now under increasing pressure to act on its findings. Whether he can do so – and whether he can in turn make a Nigeria a rich nation with moderately less poor people – will be the ultimate test of his administration. | Having received the report, Jonathan is now under increasing pressure to act on its findings. Whether he can do so – and whether he can in turn make a Nigeria a rich nation with moderately less poor people – will be the ultimate test of his administration. |
| Editor's note: There was no suggestion that the oil companies had done anything illegal, but the report highlighted a lack of transparency in the deals. Shell refused to comment on the allegations: "We have not seen this report and are, therefore, unable to comment on the content, but we will study it if and when it is published," a spokesman told Reuters. Total and Eni declined to comment because they invest in but do not operate Nigeria LNG. | Editor's note: There was no suggestion that the oil companies had done anything illegal, but the report highlighted a lack of transparency in the deals. Shell refused to comment on the allegations: "We have not seen this report and are, therefore, unable to comment on the content, but we will study it if and when it is published," a spokesman told Reuters. Total and Eni declined to comment because they invest in but do not operate Nigeria LNG. |
| An unverified draft of the report is available here | An unverified draft of the report is available here |
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