Fresh sleaze in Nigerian oil?

Posted by Bayo Okoya - Delta Analytics Lagos


The Nigerian oil sector has been hamstrung by corruption, inefficiency, macroeconomic suppression and self-inflicting uncertainty over the regulatory environment. Legislation has so far done very little to change this. And on the corruption front, there are worrying new claims that – despite making all the right noises – the current administration has as many questions to answer as its predecessors.

The Local Content Act outlines that local firms should be given “first consideration” when it comes to awarding oil and gas contracts and that “exclusive consideration” should be given to Nigerian service companies when it comes to the award of service contracts.

These are the sorts of reforms which take an entire generation for their full effect to take hold – indigenous oil companies cannot simply spring up out of the ground, never mind getting to the stage of being able to compete in free market conditions with the global giants such as Shell, Exxon-Mobil, Chevron and Total. At least not without either outsourcing expertise or filling senior management roles with those teased out of larger, foreign multinationals (therefore defeating the point).

In the meantime, this Act possibly brought more in terms of campaign financing and cash for politicians, than money into the local economy through domestic employment. The truth is that the sector had a lot of growing up to do, not least because of the propensity for corruption by successive oil ministers and, it would seem, almost every appointed and elected official related to the petroleum sector. It gave rise to bloated, unprepared companies set up twith the sole purpose of benefiting from lucrative contracts, without having the expertise, capital or corporate infrastructure to fulfil its payment obligations to the Nigerian National Petroleum Corporation (NNPC). Instead of requisite merit, politicians simply sought out the requisite cash to line their pockets and gave contracts on this basis, it has been alleged.

For many decades, very unfortunately, it seems that well-intentioned Nigerian legislation would inevitably be taken advantage of by the greedy and the short-sighted. With a recent drive to improve the corrupt state of affairs in Nigeria there is hope that domestic petroleum industry will see the need to step up their game and at least turn to means other than bribery to persuade the current government of their worthiness of oil and gas contracts.

But there are signs that the Government is perpetuating the corruption. Forty companies were awarded crude contracts earlier this year by the NNPC. It since emerged that one of these contracts – given to Satana Energy – is allegedly run by the cousin of the Permanent Secretary at the Ministry of Power, Louis Edozien. Even more blatantly corrupt is a contract allegedly given to Cassiva Energy, a firm reportedly run by Buhari's 2011 Campaign Manager Alhaji Nasir Danu. Indeed there is no sign that Cassiva even existed prior to the alleged contract award, which means the question must be asked: are firms being set up purely to ensure the award of contracts to Buhari's allies?

So whilst the Government's anti-graft officials seek scalps, corruption between industry and allies of the government may more prevalent than ever. It may be that is it more subtle and less blatant, but still it is still benefitting the unworthy and possibly entirely unable when it comes to delivering on such contracts.

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