During his election campaign President Buhari touted his experience in Nigeria’s oil and gas sector as a major reason why he was the perfect leader to clean the corruption plagued state-run Nigerian National Petroleum Corporation (NNPC). But the president’s decision not to end oil subsidies along with allowing the NNPC to internally investigate its own process of oil swaps might have caused his anti-corruption crusade a major setback.
On Monday, President Buhari directed the NNPC to review existing agreements with oil trading companies on the crude oil swap for petroleum products. Under the programme, the Pipelines and Product Marketing Company Ltd (PPMC), an NNPC subsidiary, delivers crude to refiners and trading companies which as payment deliver refined products to PPMC.
Public criticism of the NNPC led Nigeria’s anti-corruption agency, the Economic and Financial Crimes Commission (EFCC) and The Department of State Security (DSS) to begin an investigation on the crude oil swap deals and the Offshore Processing Agreements (OPAs) involving the Nigerian National Petroleum Corporation (NNPC) and some local oil and gas companies in May, to determine whether the government was losing money through opaque contracts in which crude oil worth billions of dollars is given to traders in the exchanges.
The Nigerian Extractive Industries Transparency Initiative (NEITI) said that there was a loss of at least $600 million in revenue as a result of discrepancies between the value of the crude and the products delivered, as shown in its 2009, 2010, 2011, and 2012 audits of the oil and gas industry.
While President Buhari seems to be dragging his feet, his close ally and fellow anticorruption crusader, Kaduna State Governor Nasir el-Rufai, has made strident calls for the immediate disbandment of the NNPC. “Let us firmly resolve that growing our people’s potentials will be a primary goal, and that in the pursuit of that aim, we shall commit to an efficiently and transparently managed oil industry. We can demonstrate this new purpose by slaying three huge dragons: (1) A fixation with public ownership and control of every major oil asset, (2) the corruption and distortion that oil subsidy is inflicting on our economy, and (3) the NNPC in its current form is in our collective national interest,” he said at the 2015 Wole Soyinka Media Lecture Series.
El-Rufai’s clear call for the nation to end the fixation with public ownership of oil assets contrasts greatly with the public perception that the current administration is acting too slowly in dealing with some of the most pressing economic issues of the present moment.
Nigeria EITI’s (NEITI) financial audits for 2009, 2010 and 2011 shed light on a large increase in subsidies claimed by the NNPC. The report shows that these subsidies increased from $1.3 billion in 2009 to $5 billion in 2011, a 380 percent rise over the three years that tracks with the rise in crude oil prices as the world emerged from the global financial crisis. However, there is some speculation about $6 billion in fraudulent subsidy claims, said to have been paid in 2012, that have adversely impacted Nigeria’s finances.
During his time as a military administrator, President Buhari was known to be ruthless in the battle against corruption. Since becoming a democratic leader, both opponents and supporters seem frustrated with a lighter touch that some say borders on inaction. Against the advice of a 19-member transition committee formed from his All Progressives Congress (APC), Buhari says he will not end fuel subsidy because of its potential ripple effect on the economy, particularly the lower classes. He also says he will not disband the NNPC which he started reforming with the sack of the board in June. The NNPC now reports directly to the President and he has also directed that all oil revenues should be paid directly into the federation account.
President Buhari has expressed belief that the only thing the NNPC needs is a cleanup but this may not be enough to repair years of damage to the system. His decision not to remove the costly fuel subsidy may also be a major setback in his bid to rid the oil and gas sector of corruption. His seeming refusal to decisively make tough choices on economic matters means that for some supporters and detractors alike, the president’s performance record just took a big hit.
I think his reputation has taken a hit from the people who expect too much too soon, possibly based on those election promises. But as far as the question – I don’t think there should be any doubt that he is capable of making difficult choices.
And besides, sometimes not acting IS the difficult (and right) choice to make. For example – many people are mad about his decision not to remove the subsidy, so removing it without a second thought is probably the easier choice even if it doesn’t seem like it to his detractors.