Nigeria's Oil Sales Critically Flawed
FOR IMMEDIATE RELEASE
New research identifies leakages, proposes NNPC reforms
NEW YORK, 4 August 2015— Nigeria fails to recover full value for the oil sold by its national oil company due to poorly structured deals and unaccountable spending, new details of which were revealed in a report released today.
The Nigerian National Petroleum Corporation (NNPC) sells approximately one million barrels of oil a day. Inside NNPC Oil Sales: A Case for Reform in Nigeria, a new report from the independent Natural Resource Governance Institute, indicates that some buyers of this oil are unqualified intermediaries who capture margins for themselves while adding little or no value to deals. Several contracts, including oil-for-fuel swap agreements, are opaque and contain unbalanced terms, researchers found.
The report details how NNPC is increasingly withholding large sums of money from the Nigerian treasury. Records indicate that NNPC retained an estimated $12.3 billion from the sale of 110 million barrels of oil over ten years from a single block controlled by a subsidiary.
In 2013, the treasury received only 58 percent of the value of the $16.8 billion worth of oil NNPC had earmarked for its underperforming refineries. Soon after, Nigeria’s central bank governor Lamido Sanusi made international headlines when he claimed that $20 billion in NNPC oil sale revenues had gone missing.
NRGI’s report offers the first in-depth, independent analysis of the complicated and shadowy deals through which NNPC sells the Nigerian state’s oil. Through painstaking research, the authors reveal serious problems with NNPC’s management of the domestic crude allocation (DCA), its oil-for-refined-product swaps, and its transactions with foreign governments. The report outlines the complicated flows of currency, oil and fuel, and highlights junctures at which value is lost and funds are unaccounted for.
Inside NNPC Oil Sales suggests measures to stop revenue leakage, including eliminating the DCA, selecting buyers through competitive rather than political processes, and changing the type of swap agreement NNPC uses.
“Oil sales are Nigeria’s biggest revenue stream, but management has worsened in recent years,” said Aaron Sayne, co-author of the report with Alexandra Gillies and Christina Katsouris. “By our estimate, just three of the problematic provisions in a single swap contract may have cost the government $381 million, or $16.09 per barrel of oil, in a single year.”
“The combination of a new government and the current budgetary shortfalls offers Nigeria its best chance in years for overhauling NNPC’s oil sales. The status quo is unaffordable,” said Gillies. “Everyone from trading companies to Nigerian citizens is waiting to see how the new government will approach these transactions, including the allocation of new export or swap contracts. Our research maps the current state of play, and we suggest what issues reformers in Nigeria ought to urgently address.”
Inside NNPC Oil Sales: A Case for Reform in Nigeria is available at http://www.resourcegovernance.org/publications/inside-nnpc-oil-sales.
For more information contact:
Lee Bailey
Director of Communications
Natural Resource Governance Institute
+44 7823 442 954
+1 646 361 1563
lbailey@resourcegovernance.org
About the Natural Resource Governance Institute (NRGI):
The Natural Resource Governance Institute, an independent, non-profit organization, helps people to realize the benefits of their countries’ oil, gas and mineral wealth through applied research, and innovative approaches to capacity development, technical advice and advocacy. We work with government ministries, civil society organizations, journalists, legislatures, private sector actors, and international institutions to promote accountable and effective governance in the extractive industries.
Learn more at www.resourcegovernance.org.