Let’s talk about Nigeria and its oil.
Nigeria is Africa’s top oil producer
and oil is the government’s biggest source of revenue.
But the economy has been struggling
and poverty levels are on the rise.
“The poverty of those living around the source
of Nigeria’s wealth is bare to see.”
So why can’t Nigerians depend on their country’s oil wealth?
What happens to all that money?
They call Nigeria the African Giant for a reason.
It’s home to Africa’s biggest population and largest economy
powered by a growing services industry
and agricultural exports like cocoa and palm oil.
It has Nollywood, Africa’s biggest film industry
fashion houses, a booming music business
and a very wealthy elite, including
the richest man in Africa, Aliko Dangote.
Nigeria also has a lot of natural resources.
Minerals, gold and oil.
Lots of oil.
It’s got the second largest proven
reserves on the African continent
and is the 12th largest producer worldwide.
And yet many Nigerians have it hard.
World Poverty Clock says 90 million people
live not just in poverty
but extreme poverty.
That’s 48% of the population.
Compare that to 24% in Ethiopia and 16% in Kenya
and they don’t even have oil.
“Despite Nigeria’s vast oil wealth
half its population lives on less than $2 a day.”
Now, you’d think a resource-rich country like Nigeria
could rely on some of that oil wealth.
The thing is, the Nigerian government does
but that’s part of the problem.
Nigeria’s government depends on oil
for as much as 75% of its revenue.
So when global oil prices bottomed down in 2014
Nigeria went into recession
and it’s still struggling to get out.
But even when oil prices are good, Nigerian experts say
not a huge slice of that revenue gets to the people.
They’re still using some of that oil revenue to pay off debts
and the rest to pay salaries to the lawmakers.
So things like schools, hospitals, infrastructure
much-needed infrastructure does not get built.
Okay, so where does that revenue go?
Let’s follow the money and the oil.
Nigerian crude is found right here
under the waterways of the Niger Delta.
A few Nigerian companies operate there
but the ones doing most of the exploring and extracting
are international companies.
Shell is one of the big ones.
It provides 40% of Nigeria’s oil production.
But because Nigeria doesn’t have the infrastructure
to refine its own crude oil
these foreign companies sell it abroad
and in the end, Nigeria has to import
billions of dollars worth of refined oil back in.
Now, what Nigeria does have
is a central body called
the Nigerian National Petroleum Corporation.
The NNPC is both an oil industry regulator
and a massive commercial corporation.
The corporation arm signs contracts
with all those international companies
and the companies pay for all the initial costs
plus things like oil licences, royalties
and a tax on their profits to the NNPC.
So, the NNPC takes all that money
and pays it into Nigeria’s national treasury.
But the regulator that’s supposed to police that flow of money
is part of the NNPC.
It means that there is a huge lack of transparency.
That a lot of transactions are happening under a cloak of obscurity.
You cannot be both a regulator and a player.
You can’t be a referee and a player as well.
It just doesn’t make any sense.
That lack of transparency has led to corruption in the oil sector.
Billions of dollars in oil money have gone missing over the years.
One of the most infamous cases was back in 2016.
It was reported that $16 billion in oil revenue had just gone missing.
And this money was supposed to be given from NNPC
and sent to the national treasury.
But the money was not sent over.
So every few years in Nigerian headlines
you see things like $16 billion missing, $30 billion missing.
There’s another type of missing oil money, and that’s taxes.
As we mentioned earlier, international oil companies are supposed
to pay taxes on their oil profits to the NNPC.
But companies are accused of reporting lower profits
in order to pay fewer taxes.
So a company can: (1) sell Nigerian oil at a lower price to its own
subsidiary in a tax haven and then sell that oil to other buyers at full price
(2) they can inflate the cost of their Nigerian operations or
(3) underreport the volume of oil they produce to begin with.
So, public oil money gets lost
in a swamp of tax havens and murky accounting.
And then there's theft.
Yes, straight-up stealing.
“Tucked in the forest, we find these men cooking oil.”
There are hundreds of illegal refineries in the Niger Delta
where criminal gangs, like the Delta Avengers, tap into pipelines.
In early 2019, 22 million barrels of oil
were stolen and sold on the black market.
The barges then take it to larger tankers in the Atlantic Ocean
and from there, to buyers in West Africa
Europe, Latin America and as far as Asia.
There’s even language in Nigeria that conveys
and captures the sentiment that the oil is here to steal.
For example, you’ll hear a phrase in Nigeria
called the “national cake”
and that just means the oil money.
Oil companies like Shell blame these attacks
for massive oil spills and fires.
But human rights group Amnesty International says
oil companies are also responsible for the spills, and accuse them
of misleading and neglecting local communities.
So sabotage, theft, tax evasion, corruption. Lots to tackle.
But Nigeria’s government has been:
(1) releasing annual audit reports on its energy industry
(2) demanding unpaid taxes and compensation from international
oil companies and, after 17 years of delays
(3) is ready to implement the Petroleum Industries Bill.
The bill has its critics but many in Nigeria
hope it will clean up the oil sector
by doing things like splitting
the NNPC’s commercial business from its regulator.
Nigeria also says it wants to diversify its economy away from oil
and there are signs it wants to develop its own industry
to cut back on all the foreign involvement.
Remember Aliko Dangote, Africa’s richest man?
He’s building a new refinery near Lagos.
Now none of that will single-handedly fix Nigeria’s oil industry
its economy or poverty levels.
But the hope is it'll go some way
to getting Nigerians a bigger slice of that “national cake”.