Petrodollar spill

THE huge headquarters of the Nigerian National Petroleum Corporation (NNPC) has been a jumpy place since President Muhammadu Buhari took office in May, and with reason. He swept to power promising to root out corruption and bring back stolen oil loot. The NNPC’s towering office is a good place to start.

The state-owned oil company sells almost half the 2m barrels that Africa’s biggest producer churns out each day, making it the government’s single largest source of revenue. It has been dogged by allegations of wrongdoing since Mr Buhari helped create it back in the 1970s. Under the watch of the former president, Goodluck Jonathan, and his petroleum minister, Diezani Alison-Madueke, it ran totally out of control. Even as the price of oil boomed between 2011 and 2014, remittances to the treasury fell (see chart). Now that prices have plummeted, government coffers are empty and the currency has tanked.

There is hope: Mr Buhari has sacked the NNPC’s board and earlier this month named Emmanuel Kachikwu, a Harvard-trained lawyer and former Exxon Mobil bigwig, as chief executive. He has already started axing old-guard executives.

Yet it will take more than a few rolling heads to clean up NNPC. The behemoth, which has 24,000 employees, regulates the oil industry, taxes it and competes in many parts of it. Its inner workings are opaque to outsiders and even to many who work for it: one government probe found it had two sets of accounts detailing its oil sales that differed by $100m.

In a report released in August the Natural Resource Governance Institute (NRGI), a non-profit group based in New York, found huge anomalies in the NNPC’s workings. To begin with, it ostensibly provides four times more oil to its domestic refineries than they need. It also took part in swap agreements that exchange oil for finished petroleum on eye-wateringly profitable terms for its partners. Moreover, it is allowed to collect income from oil and then to spend freely with no oversight before handing over whatever is left to the government. In 2012 it retained $7.9 billion, or close to half of the value of oil in the “domestic-crude allowance” that was set aside for domestic use, the NRGI reckons.

An audit by PricewaterhouseCoopers found that the state oil company owed the central government as much as $4.3 billion for a 19-month period from January 2012. That is probably conservative. Lamido Saunsi, a former central bank governor, reckons that $12.5 billion was “diverted”.

Since the election of Mr Buhari reserves of foreign currency have been edging up, presumably because officials are pocketing less cash. Yet there would be less opportunity for mischief if payments for oil went straight into government accounts instead of through its own.

Another hole could be plugged, the NRGI reckons, by doing away with the “domestic crude allowance”. Shady swap agreements are being reviewed, but future contracts should be put out to tender. Operating licences awarded to cronies of the previous government should be investigated, and failing state-owned refineries and transmission networks privatised. Most important of all may be to start a proper audit of the NNPC’s books.

Reforms such as independent audits ought not to be controversial, but there are reasons to fear that they may not happen, largely because the NNPC is a rich source of patronage. Its employees are already in talks with their powerful unions over steps they may take to protect jobs. The ruling party, meanwhile, is divided over whether to split up the company.

The oil firm’s troubles underline a bigger concern about Mr Buhari, who was elected in March amid jubilation because of his promises to clean up corruption and govern Nigeria better. Two-and-a-half months after his inauguration he has still not appointed a cabinet, and says he will not do so until September. Nor has he outlined any substantial economic policies. Unless there are signs of effective governance from Mr Buhari soon, the surge of confidence that followed his election may disappear as quickly as the NNPC’s oil revenues have traditionally slipped into the capacious pockets of persons unknown.