November 27, 2012 9:11 pm

Ribadu report: Inquiry shines light on murky mechanics of the oil industry

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Nuhu Ribadu, former anti-corruption chief©Reuters

Nuhu Ribadu: findings put pressure on president

No one in Nigeria is in much doubt about how badly the oil industry has been managed. But, until recently, there has been little clarity about the extent of the rot or at what stage and how, billions of dollars have been going missing.

An investigation headed by Nuhu Ribadu, the former anti-corruption chief, has gone some way to shining a light. The findings of the Petroleum Revenue Special Task Force he was appointed to head this year, aim an arrow at the system that lubricates Nigerian politics and pile pressure on President Goodluck Jonathan’s administration to clean it up.

Between 2002 and 2011, the state has been short-changed at almost every stage of accounting for oil revenues, the task force found. Signature bonuses and royalties amounting to billions of dollars have gone unpaid.

Discretionary decision-making in awarding oil blocks, and crude lifting contracts – centrepieces of the patronage system – have together caused huge losses.

Gas – which has been developed as an export in just over a decade – has also been sold, the report argues, at cut price by Nigeria Liquefied Natural Gas, the joint venture owned by the Nigerian National Petroleum Corporation, as well as Shell, Eni and Total.

“The estimated cumulative of the deficit between value obtainable on the international market and what is currently being obtained from NLNG, over the 10-year period, amounts to approximately $29bn,” it says.

Both NLNG and the NNPC are up in arms and have printed detailed rebuttals to the Ribadu findings in national newspapers. Almost as soon as the report was out of the bag – leaked to Reuters this month after languishing for several months – officials in the presidency were also sending mixed signals, some rubbishing the report, others suggesting it will be studied carefully.

Steve Oronsaye, deputy head of the task force, came out publicly in opposition, citing procedural flaws in the investigation which, he told the Financial Times, undermined the usefulness of the final report as a legal document.

It was quickly noted that he and another member had both recently been appointed to the board of the NNPC at the centre of many of the allegations.

Diezani Alison-Maduekwe, the oil minister who commissioned the investigation at the outset has herself offered only lukewarm support. “A lot of the facts and figures and assumptions were inaccurate,” she told the FT.

“Having said that, it does not mean that the report is not usable. As we speak, the government has gone ahead to set up white paper committees,” she says. These will make recommendations to the government.

“We took a major risk. We brought in opposition leaders to head up various committees,” she adds, referring among others to Mr Ribadu, who won public respect in his former guise as anti-corruption chief, and stood and lost against Goodluck Jonathan in last year’s presidential polls.

The investigation was launched by the government after protests at an attempt to withdraw the subsidy on fuel brought Nigeria to a standstill in January. The bill had reached N2.1tn ($7.6bn) in 2011 and became another source of billions of dollars in ill-gotten gains.

The subsidy has become unaffordable. It has also distorted the market by providing incentives for smuggling and fraud while deterring investment in the infrastructure and maintenance needed to refine Nigeria’s oil at home.

But the protests were not so much against the economic logic of removing it – which many Nigerians have begun to accept. It was the ineptly-handled decision to go ahead with it before persuading the public the government can deliver improved services and better livelihoods.

Nigerians were thus galvanised into taking issue with a far broader range of wasteful government habits. Facing mounting chaos, the government restored half the subsidy and pledged a clean-up, to be preceded by Mr Ribadu’s investigation and others into abuse of the subsidy.

It was always likely these would expose business people, officials and politicians closely associated with the government, some of them contributors to the ruling People’s Democratic party election campaigns last year.

Mr Jonathan now finds himself caught between conflicting interests – of his party and associates who have benefited from the opaque way in which the oil industry has been run, and an increasingly angry public.

Nigerians are not buying objections to the report. Broadly, they know the oil industry is rotten and are inclined to believe Mr Ribadu’s numbers are close to the mark.

Ahmed Makarfi, chairman of the Senate committee on finance, says: “We are looking willingly into the oil industry. In the past, no one dared look at what is going on. The cat is out of the bag.”

He adds that it would be difficult now to suppress public impatience for reform.

The task force has a host of recommendations, some of them involving relatively straightforward ways of monitoring the flow of production.

But a senior western official following the process closely concludes: “Without wholesale reform of the architecture of the NNPC it doesn’t matter who is in charge. It will still be a mess.”

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