Buhari's battle to clean up Nigeria's oil industry

The revelation by Nigeria's auditor general that
$16bn (£11bn) of oil revenue went missing in 2014
has emphasised the scale of the task facing
President Muhammadu Buhari in his efforts to clean
up the oil sector. Neil Ford, an expert on oil, crime
and security in Nigeria, outlines some of the ways
in which huge amounts of money are stolen and
assesses the president's chance of success.
The influence of oil on Nigeria is well known. From
the soils of the Niger Delta to government revenues,
it permeates the country's economy, politics and
environment like nothing else.
It also encourages corruption and organised crime to
such an extent that other African governments warn
of the need to avoid becoming "another Nigeria".
There are many ways of illegally tapping oil
revenues, and crime in the oil sector is easily the
second biggest industry in the country after oil
production.
President Buhari was elected last March on a
platform to tackle this crime but similar promises by
his predecessors have had virtually no impact.
The man, who some called Baba Go-Slow, has
taken swift action on one of the biggest problems:
Corruption and inefficiency within the Nigerian
National Petroleum Corporation (NNPC).
Opaque oil company
The state oil company is involved in oil production
but also regulates the sector and handles government
oil revenues, creating conflicts of interest and
opportunities for theft.
Last May, Mr Buhari chose Emmanuel Kachikwu
as the man to sort it out. As former executive vice-
chairman at ExxonMobil Africa, he is well aware of
the Nigerian oil industry's shortcomings.
Now as NNPC group managing director and junior
oil minister he has replaced the heads of all eight of
the firm's divisions and said the corporation's
monthly losses have been reduced to $15m (£11m).
On 3 March, the government announced that it
would break the NNPC up into different companies
to be run on commercial lines whilst remaining
state owned. However, the country's powerful trade
union movement opposes the plans.
Ensuring good governance has become even more
important as oil prices have tumbled and are now
between $30-40 (£21-28) a barrel.
Nigerian oil exports were worth $78.3bn in 2014,
followed by gas at $12.9bn. The next biggest
exports were coffee, tea, cocoa and spices at just
$1.2bn.
Oil theft
The theft of oil in the Niger Delta will be an even
tougher nut to crack.
Oil theft - or bunkering as it is known in Nigeria -
grew out of protests against the lack of benefit that
people form the Delta were getting from oil
production. They saw little investment and received
few skilled jobs but experienced water, soil and land
pollution.
Estimates vary, but bunkerers now take about
200,000 barrels of crude oil a day and even more
production is kept out of use by attacks on pipelines
and other infrastructure.
As a president from the north, Mr Buhari will find
calming the southern Delta region almost impossible
in this divided country, particularly as some security
and political officials have been accused of being
involved in bunkering.
A more recent spin-off of bunkering has been piracy
in the waters off Nigeria and neighbouring states.
Pirates have attacked tankers to either rob crew
members or take the crude or fuel products for sale
elsewhere in the region.
Subsidy fraud
Some of the least reported but most lucrative forms
of crime in the oil industry revolve around fuel
imports.
Although Nigeria is an important crude oil exporter,
it imports most of its refined petroleum products
and there are many ways to exploit the subsidies
paid on these shipments.
One of the most popular is called round tripping,
where fuel that has already been imported and a
subsidy paid is taken just outside Nigerian territorial
waters and back in again to double the subsidy.
The government has long paid subsidies on more
fuel than Nigeria actually consumes.
Recovering stolen money
Mr Buhari's government is also seeking to recover as
much oil money as possible that was spirited out of
the country by corrupt officials and relatives of
former rulers.
Top of the list are the billions of dollars reputed to
be held by relatives of former military leader Sani
Abacha but banking sector secrecy does not make its
recovery easy.
Measuring success
The entire fuel distribution and refining sector will
have to be rebuilt from the ground up, if Mr Buhari
is to end the corruption and theft.
A good method of judging his success will be if the
NNPC's four refineries are brought back into full use
or replaced.
Most fuel imports are only necessary because all four
have been out of use or operated intermittently for
many years, generating a lot of money for those
behind the scams.
The enormity of the task makes it unlikely that the
president will manage to tackle all forms of crime in
the oil sector, even if he serves two four-year terms
of office.
Given Nigeria's track record, he would do well to
win the battle on even one front.
But his tough reputation on corruption means the
chances of success are greater than they have been
for many years.