Buhari Follows The Money

Nigeria’s attempt to remove profit out of corruption

By removing profit out of corruption, can President Muhammadu Buhari disrupt entrenched cartels in Nigeria? Photo credit: AP

In Brief

  • President Muhammadu Buhari’s administration has began tackling graft in Nigerian National Petroleum Corporation (NNPC) ational. A reported US$150bn is missing from the state-owned company
  • International assistance has been sought to recover the looted monies, but one observer says the path for assets recovery can be thorny
  • Deeply entrenched corrupt networks will likely test Buhari’s anti-corruption stance
  • Private companies are ensnared in Nigeria’s corruption, but the tide has started to turn albeit slowly
  • Nigeria is home to 20 dollar-billionaires, but more than 40% of the population live below the poverty line

Over the past decades Nigeria’s reputation has suffered due to scandals ranging from political coups and corruption to cyber crimes and human rights violations perpetrated by the state and big business.

Of all the country’s real and perceived problems, corruption has had the worst impact. The latest examples of graft are unraveling now as a result of the new government’s ongoing probes aimed at tracking money looted from public coffers in the past 10 years. In the oil sector alone, US$150 billion is reportedly missing, most likely stashed in foreign bank accounts on behalf of former corrupt officials.

Ingrained corruption and bribery could help explain why Africa’s biggest economy still lags behind many smaller developing economies, in Transparency International’s Corruption Perception Index. Nigeria ranks 136th out of 175 countries on the 2014 Ti index – the same ranking as Lebanon, Iran, Russia and Cameroon.

Nigeria’s President Muhammadu Buhari acknowledged the dangerous level of corruption in his acceptance speech in April, saying the fight is going to be unwavering; “We shall strongly battle another form of evil that is even worse than terrorism – the evil of corruption. It creates a class of unjustly enriched people. Corruption … shall no longer be allowed to stand as if it is a respected monument of this nation”.

A former military ruler and petroleum minister, the 72-year-old Buhari is familiar with the corridors of power in Nigeria and knows exactly which doors to knock on to root out the rot. But many observers say as a democratically elected leader, Buhari has a difficult task dismantling deep-rooted cartels. In Nigeria, the fabulous wealth of the ruling class stands in stark contrast to the poverty and struggles faced by ordinary citizens.

Fixing the lucrative oil sector seems to be one of the top priorities for Buhari’s administration that is now battling with a crippling revenue crisis. At the heart of the plan is the infamously mismanaged state-run oil company, the Nigerian National Petroleum Corporation (NNPC).

Established in 1977 to manage the joint ventures between the federal government and foreign oil companies such as Shell, Agip, ExxonMobil and Chevron, the NNPC hasn’t lived up to its mandate as custodian of the petro-wealth on behalf of citizens.

This month the Natural Resources Governance Initiative, a policy think tank, published its investigation into NNPC that detailedmassive financial irregularities and bad governance.

According to the report, the NNPC sells around one million barrels (half of total production) per day, but billions of dollars vanish within the corporation’s labyrinth of dodgy workings.

The NRGI’s report picked up on former Central Bank of Nigeria governor Lamido Sanusi’s alarm in 2014 that about US$20bn in NNPC oil sales’ revenues had gone missing. Most worrying, according to the authors, is the corporation’s “approach to oil sales (that) suffers from high corruption risks and fails to maximize returns for the nation.”

The report recommended government pursues two tracks of reform; first, to “stop the bleeding oil sales” and second, to “cure the patient” through deeper structural reforms to NNPC.

Buhari signaled his plan for the institution when he appointed ex-ExxonMobil Africa executive Emmanuel Kachikwu to head NNPC. He also ordered a review of oil-for-fuel swap contracts and banned 113 oil and gas vessels from Nigerian waters. 38 top NNPC management officers were sacked and four new executive directors appointed to lead a ‘dream team’ that will jump-start a new profit-driven business model.

People who know about Nigeria agree the federal government’s focus on recovering stolen funds is spot on.

Author of ‘Corruption and Human Rights Law in Africa’ and legal adviser at Amnesty International, Dr. Kolawole Olaniyan says allowing corrupt officials to benefit from their crime has a degenerative effect on the institutions of governance, human rights and the rule of the law. “The return of stolen funds can help take the profit out of corruption, thereby reducing the incentive to act corruptly,” he says.

Buhari has enlisted help of the international community, including the US, to help recover looted monies kept in foreign financial institutions.

However, past experience with repatriation efforts and specifically former President Sani Abacha’s loot, should serve as a cautionary tale.

“Although often touted as a ‘success story’, only a small part of the Abacha funds have actually been repatriated by the UK and Switzerland. France even failed to execute a letter of request for mutual assistance on the rather flimsy ground that it was drafted in English!”

Asset recovery rules in the UN Convention Against Corruption (UNCAC), which the US ratified in 2006, can be used to make sure countries cooperate. The convention, for example, makes it obligatory for states to exchange information and take measures to facilitate return of funds to the countries from which they were stolen.

But even the UNCAC can’t guarantee successful recovery. Some countries cannot cooperate if public or economic interests are at risk, and so recovery of stolen funds still largely depends on the goodwill of the countries where the funds are located. 

“Experience has indeed shown that while many countries including the US, the UK and Nigeria have ratified the UNCAC, the convention is rarely effectively implemented by financial centers in Europe and North America,” says Dr Olaniyan.

He mentions various alternative measures for dealing with uncooperative havens of looted funds, for example, the International Court of Justice and the Organisation of Economic Co-operation and Development, which allows non-members like Nigeria to petition its working group on bribery.

Additionally, most financial institutions, if not all, are private and being identified as safe havens for looted funds in US legal tender could subject them to American probes under the Foreign Corrupt Practices Acts.

President Buhari has an established track record of adhering to the rule of law and also intolerance of corruption. The ongoing sweep in the NNPC is the start of a total waron corruption in federal and state governments, and the private sector.

So, can Nigerians now hope to see the end of corruption? Abdulhameed Abubakar, director of Strategy and Engagement at Africa Practice, says Nigerians are optimistic. “People are certain of his commitment to fight against corruption. However, this is not a one-person fight. Buhari needs to create activists within and outside of the political system. It is the only way.”

According to the consulting firm’s latest paper on Nigeria, the administration’s plans to tackle corruption and reprioritise government spending are expected to have positive ripple effects throughout the economy. “Plugging leakages could save the government three trillion naira (about $19 billion) in otherwise lost revenue, freeing up much-needed revenue for capital projects,” opined Africa Practice analyst, Dawn Dimowo.

Nigeria has always been in the radar of international companies searching for new, attractive growth markets. Despite its struggles with poverty, terrorism and corruption, the country has seen consistent growth since 2000 and has diversified the economy from oil. Agriculture and trade sectors are now larger and faster growing than the petroleum sector.

Over the years many international companies have scrambled to invest in Nigeria, looking to emulate the success of firms such as South African telecoms company, MTN. Also, local businesses such as cement maker Dangote Group are thriving and expanding operations across Africa. But, the cost of doing business is high in this country where things fall apart sometimes. Take the power and infrastructure shortages, red tape and corruption.

South African law firm ENSafrica recently said Nigeria is among the top ten countries where corruption and bribery is rife in Africa.

The bribery case of US oilfield contractor Halliburton in 2009 opened a window into the way companies are ensnared and perpetrate corruption and bribery in the country. Halliburton, which was accused of paying bribes to secure US$6 billion worth of contracts for a liquefied natural gas project in the Niger Delta, agreed to pay US$35 million to settle the bribery claim.

Last year the African Development Bank fined Snamprogetti Netherlands B.V US$5.7 million due to corrupt practices by the company’s affiliates associated in an AfDB-financed gas plant project in Bonny Island.

Director of forensics at ENSafrica, Steven Powell, says the culture of bribery is inevitable and seen as simply a cost of doing business in countries such as Nigeria where enforcement of anti-corruption regulations is lax.

The involvement of the US in prosecuting Hulliburton shows the seriousness of western countries in enforcing their extra-territorial anti-corruption laws.

“The United Kingdom Bribery Act (UKBA) goes further than the US Foreign Corruption Practices Act (FCPA), as it targets private bribery as well as the bribery of government officials. The most radical innovation introduced by this legislation is the introduction of corporate liability for companies that fail to prevent bribery.

“This means organisations operating or associated with the UK are forced to proactively take steps to manage the corruption risk by way of policies, controls, due diligence procedures and monitoring,” says Powell.

Critics of Nigeria’s anti-corruption laws say they are terribly ineffective. The national anti-corruption agency, the Economic and Financial Crimes Commission of Nigeria (EFCC), has had its fair share of woes, including allegations of bribery and political patronage.

This month the EFCC called for judicial reforms that would facilitateeffective prosecution of corruption cases, and creation of a ‘special court’ that would only focus on corruption cases. Chairman Ibrahim Lamorde said the EFCC Act as it is clashes with the Constitution.

Other key anti-corruption agencies include the Financial Intelligence Unit and the Independent Corrupt Practices and Other Related Offenses Commission. 

“The agencies inability to successfully prosecute people alleged to have committed acts of impropriety has led to dramatic loss of confidence by the general public. It is believed that Buhari’s administration may try to merge the agencies to reduce duplication and issues of jurisdiction. This move would save costs and create an institution strong enough and armed with the tools to go about its business,” says Abubakar.

A quiet anti-corruption and compliance revolution has been happening in corporate Nigeria in the past two years. Driving the change in attitude is awareness of global legislations and activism in social media - citizens demanding more accountability and transparency.

Experts led by executives of Control Risks said during a live Webcast from Lagos in March that companies are realising they need to change their operating models in order to successfully work in Nigeria.

It is now easier to verify data, access audit and forensic reports, implement effective control systems and find competent staff to run them. Yet in many business circles, the perception of the Nigeria of 10-15 years ago still persists and influences how business in Nigeria is approached.

According to the Webcast panelists, pressure for change is coming from international regulation, a groundswell in change of public perceptions and opinion, and the realisation that ethical business practice can build thriving and sustainable enterprises.

Concurring that pressure from the global stage is helping to bring change in corporate behavior, Abubakar says he believes that a lot of progress made lately has been due to ordinary business people refusing to be part of the rent seeking system.

“Nigerian business aspires to operate and compete outside of Nigeria, and as such the will to change has come from within – internal aspiration as opposed to some magical carrot and stick from the outside. Compliance is a necessary investment for those seeking to do business at the same level as their Western and Far East counterparts.”

As Dimowo of Africa Practice observes, Buhari’s anti-corruption path will be challenging. “With so many highly placed officials currently benefiting, efforts to challenge existing corrupt networks will be met with resistance and could even threaten stability and affect economic growth in the short-term.”

There’s groundswell of support for Buhari’s anti-corruption campaign. And its success would only mean prosperity for the majority of Nigerians and increased investor confidence in a proven lucrative market.