Teaching Comparative Government and Politics

Monday, October 29, 2012

Reform? How?

The Economist offers some details about the extent of corruption in Nigeria's oil industry and reasons why reform is doubtful.

A desperate need for reform

IN AUGUST Nigeria announced that oil production had reached a record 2.7m barrels a day but few experts believed it. Oil is also being stolen at a record rate and traders’ figures show output at well below the government’s figures. Information about Africa’s biggest oil industry is an opaque myriad of numbers. No one knows which ones are accurate; no one knows how much oil Nigeria actually produces. If there were an authoritative figure, the truly horrifying scope of corruption would be exposed.

Okonjo-Iweala

The finance minister, Ngozi Okonjo-Iweala, a genuine reformer, has estimated that 400,000 barrels of oil a day were stolen in April. But different government ministries give conflicting figures on how much oil Nigeria is producing, suggesting that they cannot agree or they just do not know. Nigeria could measure how much it produces, say experts: it has some of the most advanced technology in the world to do so, but chooses not to.

A former senior World Banker, Oby Ezekwesili, reckons that $400 billion of Nigeria’s oil revenue has been stolen or misspent since the country’s independence in 1960…

A report in May exposed a fraud amounting to $6.8 billion over a subsidy for petrol imports. Since then, Mrs Okonjo-Iweala has brought to book several fuel marketers for overcharging the government for refined products they never delivered. Naming and shaming them has worked: some are now paying up. But so far the crackdowns have not affected fraudulent politicians…

Regulatory uncertainty, among other things, has helped make Nigeria’s oil industry stagnant… A Petroleum Industry Bill has been in the works for 15 years, intended to overhaul the industry, make it more transparent, improve regulatory institutions and fiscal policies, and bring everything up to global standards. But the law has been stuck between government and parliament for five years, holding back many billions of dollars in investment…

The bill, signed and sealed by Mr Jonathan and his cabinet, is back in parliament; the president wants it speedily passed, though its original aims have been watered down, and many oil companies say its monetary terms will deter investment…

Meanwhile, the environmental devastation in Nigeria’s oil-producing delta persists unchecked. Pipeline sabotage now accounts for more than half of the spills in the region…

Worst of all, the oil wealth that should have benefited the people has barely trickled down. More than half the country’s 160m souls still have less than $2 a day. Can Mr Jonathan or Mrs Okonjo-Iweala make a difference?…