Tag Archives: corruption Nigeria

OPL 245: an Affair to Remember and Sanction

Nigeria has long ignited interest from oil firms, but it can be a dangerously combustible environment when it comes to the risk of corruption. Two firms caught up in scandals are Royal Dutch Shell and Eni, Italy’s state-backed energy group.

The case centres on the purchase of a big offshore oil field known as OPL 245, and touches the top ranks of both firms. In the dock will be, among others, Eni’s current CEO, Claudio Descalzi, and Shell’s former exploration chief, Malcolm Brinded. Also on trial are the firms themselves, charged with failing to prevent bribery. The individuals face jail if convicted; the companies face fines. All deny wrongdoing.

In 2011 Shell and Eni jointly paid the Nigerian government $1.3bn for OPL 245. Prosecutors allege they knew the government would pass $1.1bn of the funds to a shell company called Malabu, controlled by Dan Etete, a former oil minister. They claim the companies had reason to believe Mr Etete would use much of what he received to pay off officials, including Nigeria’s president at the time, Goodluck Jonathan. They also suspect that more than $50m may have gone to Shell and Eni executives as kickbacks. Mr Jonathan has denied involvement. Mr Etete faces charges in Nigeria; his whereabouts are unknown…

International investors are particularly vexed about the alleged involvement of Shell, a blue-chip oil major. In 2017, after e-mails were leaked, it admitted that executives had known that much of the purchase price would go to Mr Etete, a convicted money-launderer. In the e-mails, they speculated that funds might flow on to Mr Etete’s political friends. One investor says that Shell, by emphasising for so long who the contract was with, not where the money was going, honoured the letter but not the spirit of good governance—“and that’s not good enough anymore”.

Excerpts from The OPL 245 Affair: Drillers in the Dock, Economist, Mar. 3, 2018

Returning Stolen Money: the Nigerian Saga (2002-2018)

Nigeria and Switzerland signed a memorandum of understanding on March 26, 2018 to pave the way for the return of illegally acquired assets…Switzerland said in December 2017 that it would return to Nigeria around $321 million in assets seized from the family of former military ruler Sani Abacha via a deal signed with the World Bank…[T]he memorandum of understanding was ratified between Nigeria, Switzerland and the International Development Association, (IDA), the World Bank’s fund for the world’s poorest countries.

Excerpt from Nigeria and Switzerland sign agreement to return stolen assets, Reuters, Mar. 26, 2018

Cash or CleanUp? life in the oil polluted swampland

Image from http://cas2.umkc.edu/Geosciences/LCAM/NIGER_DELTA/PAGES/N_Sat_vali_Warri.htm

Nearly a decade after two catastrophic oil spills in the Niger Delta, a comprehensive clean-up has been launched in 2017 in the southern Nigerian region.

Earlier this month, crews of young men equipped with high pressure hoses began to attack the crude oil blighting the creeks and mangrove swamps where they live.  Workers from Bodo in Rivers State are beginning a three-year project that claims to mark a new approach to cleaning up the delta, the vast polluted swampland pumping the oil vital to Africa’s largest economy.

Four hundred workers will clear dead foliage and spilled oil before planting new mangroves. Where they are working is small but organisers hope the anti-pollution drive can be repeated elsewhere in the delta.

Unlike clean-up operations run routinely by oil giant Royal Dutch Shell, this one is backed by local communities and teams of scientists who will take samples of water, mud and soil in each area to measure progress and determine the best cleaning method.  Funded by Shell and its joint venture partners, the clean-up is the culmination of years of legal wrangling and international pressure to overcome animosity and mutual suspicion that have divided locals, government and oil companies.

Shell declined to say how much it was spending, while leaders see it as a glimmer of hope in a benighted land where many wells are not safe to drink from and fishing and farming are devastated.

“The Niger Delta is at a crossroads,” said Inemo Samiama, chairman of the Bodo Mediation Initiative (BMI), managing the clean-up. “We have a lot of polluted sites. We need something we can refer to, some shining example.”

The work of BMI covers 10 sq km, a fraction of the 70,000 sq km Delta.  As workers walk through gnarled, dead mangrove roots in protective gear and masks, oil seeps into their footprints – remnants of spills for which Royal Dutch Shell admitted responsibility. Despite the optimism, environmentalists point out at BMI’s work rate, it will take 21,000 years to clean the entire delta and that’s not including the 10 years of legal battles it took to make it happen.  Communities in eight other Delta states are unhappy they have no clean-up plan, fuelling the resentment underpinning militant movements that hit production last year and helped tip Nigeria into its first recession in 25 years.  One group, the Niger Delta Avengers, has threatened a return to violence. They say government is not keeping its promises to clean up the delta and provide more jobs, money and infrastructure.

Bodo received support from British law firm Leigh Day, which negotiated a 55 million pound pollution settlement with Shell in 2015. Leigh Day said it agreed to freeze a separate case to force a clean-up via British courts in order to give the BMI a chance.  Ogoni, the wider area in which Bodo sits, was the subject of a 2011 UN Environment Programme report warning of catastrophic pollution in the soil and water.

King Emere Godwin Bebe Okpabi of the Ogale community is on the board of a wider Ogoni clean-up effort and is optimistic its own clean-up, due to start next year, will work. But he fears it will not be replicated elsewhere without another marathon battle in the London courts.“The only place you get legal success is the international courts,” he said.

Under Nigerian law, oil companies must begin cleaning up any spill within 24 hours. But the remoteness of spills and lax enforcement mean this rarely happens.  Ferdinand Giadom, a lecturer at the University of Port Harcourt and technical advisor to the Bodo cleanup, said communities often block clean-ups in the hopes of cash settlements. Even in Bodo, works were delayed by two years due to local infighting.

Shell said most oil spilled last year was due to sabotage or theft for illegal refining. It also said communities block access to sites, making cleaning more difficult.

Excerpts from Anger on the margins of historic clean-up in Nigeria’s Delta, Reuters, Nov. 9,  2017

Stolen Money, Europe’s Tax Havens and Nigeria’s Stolen Cash

Authorities in Switzerland are in talks to arrange the return to Nigeria of $300 million confiscated from the family of its former military ruler, Sani Abacha, Nigeria’s foreign minister said.  The corruption watchdog Transparency International has accused Abacha of stealing up to $5 billion of public money during his five years running the oil-rich nation, from 1993 until his death in 1998.  Foreign Minister Geoffrey Onyeama said $700 million had already been repatriated from Switzerland, adding that he met Swiss representatives last week for further talks.  “They have also now recovered, in the same context, another $300 million of which there is ongoing discussion to have that repatriated as well,” he told journalists on Monday.

In 2014, Nigeria and the Abacha family reached an agreement for the West African country to get back the funds, which had been frozen, in return for dropping a complaint against Abba Abacha, the son of the former military ruler.  He was charged by a Swiss court with money-laundering, fraud and forgery in April 2005, after being extradited from Germany, and subsequently spent 561 days in custody. In 2006, Luxembourg ordered that funds held by the younger Abacha be frozen….He has asked the Britain and the United States for help recovering money stolen from Africa’s biggest economy by some of the country’s elite over several years.

Switzerland and Nigeria discuss return of $300 million stolen by Abacha, Reuters, Jan. 13, 2016

Privatization of the Army: Nigeria

Nigerian troops in Somalia 1997

Private security is big business in Nigeria. The country suffers bombings in the north, sectarian violence in the centre and simmering insecurity in the oil-producing south-east. Red24, a Scottish security firm, says more than 600 people are kidnapped in the country every year, putting it among the five worst for that sort of crime…  [There are] 1,500 and 2,000 private security companies in Nigeria. Because they cannot legally carry weapons, armed units must be hired from national forces….Private companies pay the security forces handsomely. But that also encourages commanders to hire out their men. The result is a privatisation of public security, reckons Rita Abrahamsen, a professor at the University of Ottawa. In 2011 a retired deputy inspector-general estimated that up to 100,000 police officers (about a third of the country’s total) were working for “a few fortunate individuals”, and questioned what that meant for regular Nigerians. Martin Ewence, a British naval commander turned consultant, reckons that the navy in effect has “given over its maritime security responsibilities”.

In the worst cases, the private-security culture fuels conflict. Oil companies in the Niger delta have been criticised for arming Nigeria’s Joint Task Force in a bid to secure their assets. The task-force’s combination of police, army and naval personnel, whose houseboats are moored in the delta’s greasy creeks to “tax” passing barges, are accused of human-rights abuses and involvement in the theft of oil.

Private security in Nigeria: Rent-a-cop, Economist, Oct. 17, 2015, at 54

How to Squander a Country: Nigeria

Gates of Oil reifnery in Port Harcourt, Nigeria. Image from wikipedia

Dead fish wash up on the once-fertile shores of creeks around Bodo, a town in the Niger delta, that are covered with crude oil more than six years after two massive spills. Locals have only now received compensation from Shell, the oil firm responsible for the leaks. For the first time in half a decade, fishermen have cash to start businesses, repair their houses and send children to school… “Look,” says the chief of a tiny town called B-Dere, just a few miles from Bodo. He gestures to the deathly-black banks still bearing the marks of the slicks. “There is nothing to drink, nowhere to fish. What good has come from it?”

The cash that the oil industry provides has greased Nigerian politics for decades. Gross mismanagement and corruption in the industry are the causes of much of the inequality and discontent with the ruling party in an economy that is not just Africa’s largest but that ought to also be one of its wealthiest…

Nigeria pumps something like 2m barrels of oil a day. These account for most of its exports and about 70% of government revenues. But official figures are as murky as its polluted creeks. Volumes are recorded only at export terminals rather than at the wellhead, says Celestine AkpoBari of the Port Harcourt-based advocacy group, Social Action. Were a proper tally kept, he says, corruption would be exposed on a scale that would shock even the most cynical Nigerian.

It seems likely that more than 100,000 barrels of crude are stolen (or “bunkered” in the local parlance) every day, at a cost to the state and investors of billions of dollars a year. Politicians, oil workers and security forces are said to be behind the complex cartels that steal, illegally refine and sell crude oil. They have amassed almost unimaginable wealth in a country where poverty is still rife.

Oil’s taint has seeped into almost all levels of government and business. Yet the central problem is found in the petroleum ministry, which wields vast unaccountable power. The Nigerian National Petroleum Corporation (NNPC), a state-owned behemoth, is responsible for all aspects of the industry, from exploration to production and regulation. It is among the most secretive oil groups in the world, and is “accountable to no one”, says Inemo Samiama, country head of the Stakeholder Democracy Network, a non-profit group.

In 2013 the former governor of the central bank, Lamido Sanusi, alleged that $20 billion in oil revenues was missing from state coffers. He was fired for his troubles soon after. …

Even where cash has not been nicked, it has often been squandered. Take the Excess Crude Account (ECA), a sovereign-wealth fund intended to cushion Nigeria’s budget against falling oil prices. Most of it was spent over the past two years, despite oil prices being relatively high for most of that period.

The industry itself is in as sorry a state as the government’s finances. Although oil practically gushes from the ground in parts of the delta, oil output has been stagnant for years and billions of dollars of investment are stalled because of uncertainty over a new law for the industry.  This is holding back Nigeria’s economy almost across the board. Because the industry has failed to build the infrastructure to pipe gas to domestic consumers such as power plants, much of it is simply flared and burned: Britain reckons that some $800m worth of Nigeria’s gas a year goes up in smoke. The country is also chronically short of fuel even though it has four state-owned oil refineries. Because of poor maintenance and ageing equipment they operate at well below capacity, forcing Nigeria to import about 70% of the fuel it needs. There is little incentive for reform since the government pays hefty subsidies to NNPC to keep on importing…

But a starting point should be to halt subsidies for fuel imports. At a stroke that would undercut a major source of corruption and crime (both on land and at sea) that spills into neighbouring countries, the destination for smuggled consignments of cheap Nigerian fuel. It should also take a close look at NNPC, which should not be allowed both to participate in the market and regulate it. Some of its assets could be privatised. The ruling party and opposition are considering both….

For communities in Ogoniland, the most pressing problem is cleaning up. Shell has promised to mop up the mess around Bodo, though the process has yet to start. Compensation is one thing, Bodo residents say, but what they really want is their livelihood back.

Nigeria’s oil: Crude politics, Economist,  Mar. 28, 2015, at 54

From Switzerland: Stolen Money Trickles back to Nigeria

sani abacha. image from wikipedia

Geneva’s public prosecutor will send $380 million confiscated from the family of Nigeria’s former military ruler Sani Abacha to Nigeria and closed a 16-year investigation into his funds, the prosecutor’s office said.   Abacha stole as much as $5 billion of public money during his five years running Africa’s top oil producing country from 1993 until his death in 1998, according to the corruption watchdog Transparency International.

The return of the $380 million follows an agreement between Nigeria and the Abacha family in July 2014, the prosecutor’s statement said. The agreement provides for Nigeria to receive the frozen funds in return for dropping a complaint against Abba Abacha, Sani’s son.He was charged by a Swiss court with money-laundering, fraud and forgery in April 2005, after being extradited from Germany, and subsequently spent 561 days in custody. In 2006 Switzerland ordered funds held by him in Luxembourg to be confiscated.  The return of the funds is conditional on effective monitoring by the World Bank of how the funds are used.

Switzerland to return $380 million of Abacha’s loot to Nigeria, Reuters, Mar. 19, 2015