'Millions missing' in Nigeria's oil accounts

[Richard Akindele]

An unprecedented audit of Nigeria's oil industry shows a $324m (€268m, £185m) gap over six years between what oil companies say they paid the government and receipts acknowledged by the country's central bank.

The government-commissioned audit covers the period from 1999, when civilian government was restored, to 2004. A further update is planned.

The audit, led by the British accountancy firm Hart Nurse, and released in three thick volumes this week, was welcomed by anti-corruption campaigners as opening a window into the opaque finances of Africa's leading oil producer, but they say it will mean little if authorities do not investigate what happened to the money.

Other African nations - such as Angola and Congo-Brazzaville - have had their oil sectors audited in recent years, but the final reports gave far less detail than the Nigerian audit, which gives breakdowns of payments by company for the first time.

Critics say the audit, which studiously avoids the word corruption, does not go far enough. Auditors did not have the mandate to look into what happens to oil funds after they enter the central bank and the reports do not touch on controversial oil block licensing rounds.

Graft, particularly around the oil sector, is blamed for keeping the most populous nation in Africa mired in poverty and for fuelling political violence. In the Niger delta, insurgents have this year shut down a fifth of the country's 2.4m barrels-per-day crude output, blaming corrupt politicians for the area's poverty.

"For a long time there has been a very strong perception that the accounting system in the oil industry has not been telling us the truth," said Lilian Ekeanyanwu, a campaigner with Nigeria's Zero Corruption Coalition. "Now that the issue is out on the table we expect the government to deal with the issues and identify the causes of the discrepancies."

The auditors did not have access to company accounts, but relied on them to volunteer information on their payments to government. The government-led Nigerian Extractive Industries Transparency Initiative, part of a global initiative spearheaded by Tony Blair, British prime minister, commissioned the audit last year, as President Olusegun Obasanjo tried to clean up Nigeria's image in his push for massive debt relief.

The campaign was successful, with Nigeria being granted $18bn debt relief by international creditors. However, Nigeria is still rated sixth bottom in a corruption league table compiled by fraud watchdog Transparency International.

Asked whether graft could be to blame for the unaccounted for millions, Charles Soludo, central bank governor, said he had no basis to reach that conclusion, adding that all discrepancies would be fully investigated. "I believe that they are essentially accounting discrepancies and the reconciliation will show this," he said.

Oil exports, $26bn in 2004, account for 90 per cent of Nigeria's export revenues and most government revenue.

The audit calls for an overhaul of the financial reporting system, along with the establishment of a single oversight body for the petroleum industry. Figures for 1999-2004 show a confusing picture. In two years (2000 and 2004), the central bank said it received hundreds of millions of dollars more than oil companies said they paid.

For the other years, the central bank's figures are well below those recorded by the oil companies. In balance, over the five years oil companies paid $324m more in taxes, royalties, signature bonuses and environmental penalties than is acknowledged by the central bank.

Significant as the figure is, it represents just 1 per cent of the $30.8bn that oil companies say they paid the government.

Source: Africa Business Daily