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Nigeria's Corrupt Oil Industry Misplaced $20 Billion

Meaningful change to the oil industry, the type that would benefit Nigeria's 130 million citizens, remains elusive.
Oil spill at Goi Creek, Nigeria in 2010. Image: Friends of the Earth Netherlands

Nigeria is the largest oil producer in Africa, and petroleum products make up nearly all of the country's exports. So when the governor of Nigeria's central bank alleged that some $20 billion of state oil revenues were missing from the national energy company, citizens weren't happy.

The uproar was met by a promise from President Goodluck Jonathan to audit the Nigeria National Petroleum Corporation (NNPC). But along with official misconduct comes private theft: Last week, Royal Dutch Shell, the largest foreign oil operator in Nigeria, reported some $1 billion worth of oil and natural gas were stolen in 2013. In response, the Nigerian navy announced that it shut down some 260 illegal oil refineries and burned 100,000 tons of stolen oil.

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In 2012, Nigeria had the second-largest GDP in sub-Saharan Africa. That year, nearly 96 percent of its exports came from the oil sector. But that oil wealth, which led to its joining OPEC in the 1970s, has "failed to raise Nigerian incomes and done little to reduce poverty," as UCLA's Michael Ross wrote in 2003. Or as National Geographic's Tom O'Neill wrote in 2007, "Nigeria has been subverted by the very thing that gave it promise—oil." Nigeria was dead last in GDP per capita among OPEC nations in 2012.

Central Bank Governor Lamido Sanusi's accusation that NNPC is keeping billions out of state coffers—revised from an earlier accusation that the theft amounted to $50 billion—is thus a major event for Africa's most populous country. As Reuters put it, Nigeria has had "a reputation for corruption but the scale of the alleged oil graft is unprecedented and Sanusi is the most high-profile figure to raise issues directly to the president."

Nevertheless, President Jonathan suspended Sanusi for "unrelated 'financial recklessness' and 'gross misconduct' at the central bank," per Reuters, which also reported that the general sentiment in Nigeria is that the suspension is politically motivated.

In its annual report published earlier this month, Shell also blamed politics for poor management of the Nigerian oil industry. At issue is Nigeria's Petroleum Industry Bill (PIB), a piece of legislation years in the making that proponents say will help clean up the unregulated oil industry. Foreign oil companies say PIB will make business harder to conduct in the country, while the bill is supported by transparency organizations, which say it will help ensure Nigeria's oil wealth will benefit its citizens.

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Whether or not PIB is the answer, lack of oversight has left an environmental disaster in the industry's wake. Remember two years ago when a Chevron gas rig burned for three weeks straight? Or when the country tried to ban an Occupy video about the industry that went viral? Or how about Shell's point about oil theft: As our VICE colleagues saw last year, many Nigerians looking to profit off of the oil sector have turned to stealing oil, refining it in illegal, highly toxic refineries, and selling it to brokers for a pittance.

VICE cofounder Suroosh Alvi visited the Niger Delta for the last season of VICE on HBO.

According to an Associated Press report about the Nigerian navy's crackdown on illegal refineries, many anti-theft NGOs blame official corruption for fueling the industry. "The whole idea of selling oil illegally was sponsored and maintained by our political leaders" to fund election campaigns," Patrick Dele Cole, director of an advocacy group called Stop The Theft, told the AP. Meanwhile, the report explained that:

Niger Delta residents have told The Associated Press that they feel entitled to steal oil because they have received little reparation for decades of oil spills and gas flaring that have corrupted their environment, killing fishing and agricultural fields.

The end result is a rather convoluted mess of corruption and theft that's left the Niger Delta heavily polluted with little economic payoff. As AP reporters Hilary Uguru and Michelle Faul dryly put it, "Corruption at the highest levels is endemic in Nigeria. The oil thefts are unrelated to some 20 billion petrodollars allegedly missing from the country's treasury, from oil sold between January 2012 and July 2013."

In other words, the dueling accusations of $20 billion in official theft from Sanusi and $1 billion in oil theft from Shell have been met with the promise of a government audit and a military crackdown on illegal refineries that netted a total of five arrests. Meanwhile, meaningful change to the oil industry, the type that would actually benefit Nigeria's 130 million citizens, remains elusive.