With N30tn Losses to Petrol Subsidy and Oil Theft, NEITI Calls for Tracking of Nigeria’s Crude Swap Deals

As Nigeria continues to count losses to its controversial petrol subsidy policy, oil theft and non-functional refineries to the tune of over N30 trillion, the Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday called for a transparent tracking of the country’s crude swap policy, currently overseen by the Nigerian National Petroleum Company Limited (NNPC).

Speaking during the ‘Policy Dialogue on Utilisation of Beneficial Ownership Information on Crude Oil Swap Deals in Nigeria’, held in collaboration with ‘Policy Alert,’ the Executive Secretary, NEITI, Dr. Ogbonnaya Orji, stressed that the ‘resource curse’ could be addressed through regular disclosures of extractive information in the sector.

The event which held in Abuja was designed to bring together officials from relevant government agencies, oil and gas industry regulators, civil society and the media as well as to share data and analytical insights on Nigeria’s crude oil swaps to close identified gaps.
Orji recalled that oil swap dates back to the period when the NNPC received daily crude allocation of 445,000 bpd from the government to refine for domestic consumption.

He stated that the near-total collapse of the country’s four refineries meant that the NNPC could not refine the 445,000 bpd Domestic Crude Allocation (DCA), but exported most of the crude and then depended on imported refined products for local consumption.
This, he noted, led the country into huge debts and did not guarantee sustained imports of refined products to meet domestic demand. According to him, the debts got so heavy while refined products were scarce with long queues at petrol stations nationwide.

Orji stressed that the government had to find innovative and less expensive ways of making refined petroleum products available for the citizens and thus, in 2010, the NNPC introduced oil-for-product swaps as a solution to this problem.

Describing oil-for-product swaps as complex barter transactions in which NNPC and private traders swap crude oil for refined petroleum products, rather than for money, he explained that the two kinds of swaps could not be sustained as there were major operational changes within the NNPC on the management of domestic crude allocation in 2016.

“I wish to use this platform to draw attention to four major issues that civil society should target urgently in their advocacies and set an agenda for the incoming administration.

“The first is the urgent need to make decision on the agitation for the removal of fuel subsidies. The full deregulation of the petroleum sector will permanently lay to rest the conversation around oil swaps.

“NEITI’s latest policy brief titled: ‘The cost of fuel subsidy: A case for policy review revealed that Nigeria expended over N13 trillion ($74 billion) on fuel subsidies between 2005 and 2021.

“The figure in relative terms is equivalent to Nigeria’s entire budget for health, education, agriculture, and defence in the last five years, and almost the capital expenditure for 10 years between 2011‑2020,” he said.

He listed the other economic opportunity costs of fuel subsidy to include among others, slashing allocations for the health, education, and technology infrastructure sectors and deterioration of the downstream sector with the declining performance of Nigeria’s refineries and recording zero production in 2020.
In addition, he stated that it has disincentivised private sector investment in the down and midstream petroleum sector, led to low employment generation since the refining process is done outside the shores of Nigeria and worsening national debt.

According to the executive secretary, the policy has further resulted in declining balance of payment, forex pressures and depreciation of the naira, product losses, inefficient supply arrangements-scarcity and its attendant queues.

Quoting from the policy brief on crude oil theft, he recalled that between 2009 and 2020 (12-year period), Nigeria lost 619.7 million barrels of crude oil valued at $46.16 billion or N16.25 trillion. The volume of crude oil losses, he reiterated, represents a loss of more than 140,000 barrels per day.
“Between 2009 and 2018, Nigeria also lost 4.2 billion litres of petroleum products from refineries valued at $1.84 billion.  These findings and recommendations on tackling crude oil theft have been submitted to the president through the Presidential Committee on Crude Oil Theft in which NEITI also served as a member,” he added.
On the status of the implementation of the Petroleum Industry Act (PIA), Orji said not much had been heard of the Presidential Steering Committee on the implementation of the PIA set up in 2021 to coordinate the implementation of the Act.
“Not much is in the public domain on the progress of the committee’s work. Civil society should step up advocacies for the conclusion of the committee’s work and submission of its report to the president before the expiration of this administration with clear recommendations to the next administration on what has been done and outstanding work,” he stated.
Orji also noted that the global Extractive Industries Transparency Initiative (EITI), which NEITI implements, requires implementing countries, including Nigeria to disclose any contract(s) and licenses that are granted, entered, or amended that sets out the terms and conditions for the exploration and exploitation of oil, gas, or minerals from January 2021.
The PIA 2021, he added, also mandates the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) to publish the texts of any new license, lease or contract, or amendment immediately following the granting or signing of such texts.
He drew the attention of civil society and other stakeholders to the Glencore bribery scandal, noting that while some culprits had been jailed in some countries, the issue was not taking the front burner in Nigeria.
“The disclosure by the United States Department of Justice that Glencore (One of Nigeria’s oil traders) had paid bribes in various sums, spanning over a decade to some Nigerian government officials at the NNPC to secure crude oil contracts and other business advantages was in the news.
“Through our mandate and our commitment, NEITI drew the attention of the federal government to the Glencore bribery scandal through the Office of the Secretary to the Government of the Federation.
“NEITI also while engaging on the issue, drew the attention of civil society and the NNPC to their roles and demanded investigations into the Glencore bribery allegations and if confirmed prosecute offenders.
“This will send strong signals to Nigerian partners, especially the international community that such acts of brazen corruption will not be condoned, shall be dealt with and sanctions enforced.
“Update on the issue showed that the case is before the EFCC for further investigations and action. I, therefore, call on the EFCC to conclude investigations and prosecute culprits where they are found culpable,” he stated.
Also speaking, Executive Director, Policy Alert, Tijah Bolton-Akpan, said with the entering into force of the PIA, additional obligations in the areas of contract openness and beneficial ownership transparency have now been imposed on the NNPC and the NUPRC.
“How can we leverage these provisions to ensure that hidden company ownership is not exploited to shield corrupt industry players and their collaborators in government from accountability while they continue to bleed our country dry?
“How can the NNPC get back on track on some of the impressive strides it had begun making on mainstreaming proactive disclosure, but which have recently been rolled back, almost creating a dent on its credentials as an EITI supporting company?

“With the beneficial ownership reforms under the CAMA 2020, how can the CAC increase the quality of beneficial ownership disclosures to ensure that such data becomes more useful for accountability actors such as civil society, law enforcement and the legislature in tracking transactions such as the crude swap deals?

“How can this conversation improve the scope and quality of NEITI’s subsequent audits but even beyond that the progress on remediation issues? How do we situate this whole conversation within the context of a rapidly unfolding energy transition which appears to be leaving Nigeria behind with a huge governance baggage from the fossil fuel era? We hope that this dialogue takes us forward in addressing these and several other questions,” he added.

Emmanuel Addeh in Abuja

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