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 Report: Tax evasion, Stealing, Pillars of Corruption in Nigeria’s Oil Industry

Report: Tax evasion, Stealing, Pillars of Corruption in Nigeria’s Oil Industry


In a report anchored by Sandra Gathmann, Ajazeera probed into the causes of institutional corruption in the nation’s hydrocarbon industry.
Africa’s largest oil producer, oil remains Nigeria’s top revenue source. Her economy continues to struggle as poverty maintains an upward climb.

Meanwhile, the people living around the resource in the Niger Delta are the world poster natives living in abject penury in the midst of oil wealth.
The question is why can’t Nigeria use her oil wealth to improve the lives of its people? What happening to all that money?

Home to Africa’s largest population and biggest economy, Nigeria’s blessed growing non-oil resources in services industry and agricultural exports such as cocoa and palm oil. The Nollywood, Africa’s biggest film industry, fashion houses, a booming music business and a very wealthy elite. All these factors make Nigeria earn its title as the giant of Africa. With lots of natural resources such as minerals, gold and especially oil, Nigeria has the continent’s second-largest proven reserves. It is the largest producer worldwide.
Yet, over 90 million Nigerians live in extreme poverty, according to World Bank.

Compared to Ethiopia and Kenya that have under 24%and 16% of their people living in poverty, respectively; the population of Nigeria’s poor is the highest across the African region. Kenya and Ethiopia do not have oil.

Despite all that oil, over 50% of Nigerians live on less than $2 a day. Nigerian government look to oil for over 75% of the nation’s revenue and that is a greater of the challenge her resource-rich economy is facing.
That was why when global oil price hit rock bottom in 2014, Nigeria’s economy went into a recession. The nation was still struggling to exit it, when COVID-19 virtually dug a grave for it.

Even when the prices of oil were favourable, the Nigerian people never felt it. According to experts, most of that money is used to service rising debts, some of it used to fund the budget, while the rest goes into private pockets.

A substantial slice of the oil money goes into paying salaries of the lawmakers, to the neglect of much-needed infrastructure for housing, education and health among others.
Again, where does the Nigeria’s oil revenue go?

In a viral video, produced Aljazeera followed the money.
Crude oil is found under the waterways of the Niger Delta, where few Nigeria oil companies operate, with international oil companies (IOCs) such as Shell, Chevron running the major exploration and extraction in the region.

Shell, alone, runs over 40% of Nigeria’s oil production.
Since Nigeria lacks the refineries to refine her oil, these foreign companies sell the oil outside the country. In the end, Nigeria then imports billions of dollar worth of petrochemical products back to the country.

So, according to Aljazeera, the multinational oil companies believe refining the oil in Switzerland or the United States lowers the cost of refining since Nigeria lacks the infrastructure to refine her own crude.

Nigerian National Petroleum Corporation(NNPC), which is the nation’s national oil company(NOC), plays the role of both industry regulator and a big commercial corporation. The corporation arm signs contracts with the IOC’s on behalf of the federal government. The companies pay for the initial cost including oil licenses, royalties and pay tax on their profits to the NNPC.The NOC then pays the money into the federation account.

According to Aljazeera, the regulator that is supposed to police the flow of that money is part of the NNPC.
This explains why most of the moneys made and deals signed lack transparency as lots of these transactions happen under the cloak of obscurity.

For Aljazeera, “you cannot be both a regulator and a player as well…”
As have been reported severally in the media, in Nigeria and globally, that lack of transparency is what has led to alleged corruption in the oil sector.
“Billions of dollars have gone missing over the years.
One of the most celebrated cases was back in 2016, when it was reported that $16 billion in oil revenue had just gone missing…,” the reporter said.

It was money NNPC was supposed to have paid into the national treasury.
In its 15th March 2016 publication, BBC reported that “the Nigeria’s state-owned oil company has failed to pay the government $16bn (£11bn) in a suspected fraud, according to an official audit. The Nigerian National Petroleum Corporation (NNPC) provided no explanation for the missing funds, the auditor general told MPs.

Oil revenue accounts for two-thirds of the government’s funding.
President Muhammadu Buhari has reiterated its promise to crack down on corruption. Reminiscent of similar headlines that attracted attention to the massive corruption in the nation’s oil company, no one was prosecuted and none was held liable.

Nigerians, indeed, the world is now used to headlines of missing money in NNPC every few years.
Aljazeera also discovered another type of missing money; and that is taxes.
The oil companies that pay taxes on their profits to the NNPC, according to the report, “are accused of declaring fewer profit in order to pay lower taxes.”

Aljazeera investigation revealed that the companies sell Nigerian oil at a lower cost to their own subsidiary in a tax haven “and then sell that oil to other buyers at full price. They can inflate the cost of their Nigerian operations. Or under report the volume of oil they produce to begin with.”
What that means is that public oil money gets lost in a swamp of tax havens and murky accounting.
The next level of corruption is more direct; and that is theft, which the reporter described as “straight-up stealing.”

In the video showing young men pouring raw crude oil they tapped from sabotaged pipelines, the focus of the report shifts to the illegal refineries operations going in in the creeks of the Niger Delta region.
“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,” the report revealed.
In early 2019, 22 million barrels of oil were stolen and sold on the black market.

The foreign television station disclosed that “the barges then take the oil to larger tankers in the Atlantic Ocean and from there, to buyers in West Africa, Europe, Latin America and as far as Asia.”
There is even a language in the country that conveys and captures the sentiment that the oil is here to steal. Which is part of what the phrase ‘national cake’ refers to.

Oil companies like Shell, according to the report, blames these massive attacks on oil spills and fires. However, Aljazeera reports that “human rights group, Amnesty International says oil companies are also responsible for the spills and accuse them of misleading and neglecting local communities.”
In the final analysis, sabotage, theft, tax evasion and corruption are at the bottom of the opaque operations in the Nigerian oil and gas industry.

Under the President Muhammadu Buhari administration, Nigerian government has been releasing audit reports of its operations in a move to illustrate its commitment to accountability. It has also gone as far as going after the foreign companies “ demanding unpaid taxes and compensation from the IOCs…”
In order to harmonise and create some level of transparency, accountability and enabled the environment for shared prosperity, from the resource, across the stakeholder spectrum, the federal government has increased its efforts to pass the Petroleum Industry Bill (PIB).

After almost two decades of delay and so many versions, many hope the bill will clean up the industry, unbundle the NNPC and set the industry on a normal course of operation, by global best practice.

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