Nigeria’s state-run oil firm used its unique trading position to make profits at the expense of the government between 2006 and 2008, according to an independent audit of Nigeria’s oil sale payments. The report, released this week, said the Nigerian National Petroleum Corporation (NNPC) waited to analyse oil market movements before choosing the most favourable pricing option to buy Nigeria’s crude oil, while all other oil companies picked the pricing option in advance.
“NNPC is taking advantage of its position as both buyer and agent for the seller (the government) to make profit at the expense of the Federation,” the report by British accountants Hart Group and Nigerian firm S.S. Afemikhe & Co said.
“Restructuring of NNPC should ensure arm’s length dealing between the Federation and NNPC in relation to the sale of crude,” the report commissioned by the Nigeria Extractive Industries Transparency Initiative (NEITI) said.
Nigeria, which produces more than 2 million barrels per day (bpd) of crude oil, is ranked by transparency watchdogs as one of the most corrupt countries in the world. Analysts say mismanagement at NNPC has made it one of the major blackholes in the country’s public finances.
The NEITI report highlighted discrepancies in dividend payments made by NNPC to the government, noted unresolved oil sale revenues and discovered large gaps between how much oil NNPC and energy companies said was being produced.
NNPC figures showed 2.6 million barrels less oil was pumped in 2007 than oil firm accounts. The missing oil would have had a value at the time of more than $150 million. NNPC officials were not available for comment. NEITI is a unit of a project launched in a number of countries by former British Prime Minister Tony Blair in 2002, aimed at improving transparency by getting companies to publish what they pay and governments to disclose what they receive.
Oil reforms
Problems of inefficiencies and conflicts of interests within NNPC have been acknowledged by Nigeria’s government, which has ordered a comprehensive audit. Many of the issues are supposed to be addressed by wide-ranging reforms contained within the Petroleum Industry Bill (PIB) currently before parliament. But the PIB has been repeatedly delayed and although President Goodluck Jonathan pledged the law will be passed by May, frequent amendments have left question marks over what the final version will include and successfully achieve. Delays have put billions of dollars of potential investment on hold and while many stakeholders are concerned it could increase the cost of operating in Africa’s largest oil industry, there is growing appetite for closure on the reform process.
“There is no certainty as to how a new system might improve transparency,” said Antony Goldman, head of London-based PM Consulting.
“But more and more people seem to be saying that any law would be better than no law at all. The many stakeholders may not like all elements of new legislation in whatever final form it emerges, but they like the current uncertainty even less.” The president’s commitment to a May deadline combined with NEITI’s report could put more pressure on parliament to pass the bill which some feared may never become law.
REUTERS