Nigeria’s new president should overhaul how Africa’s biggest oil producer sells its state oil company’s share of crude oil output to save billions of dollars in wasted and lost revenues, a report by an international governance watchdog said on Tuesday.
About half of Nigeria’s 2 million barrel per day (bpd) crude output goes to NNPC, the state-owned oil company. NNPC sells half that oil to its subsidiary Pipelines and Product Marketing Co for the country’s refineries.
The poorly maintained plants are however unable to process the bulk of the oil and over the years this allocation has devolved into a “nexus of waste and revenue loss,” according to the report by Natural Resource Governance Institutes (NRGI), a non-profit.
The other half of NNPC’s oil share is mostly sold to “unqualified intermediaries,” earning significant margins for little or no added value, rather than directly to the end-users, NRGI said.
A spokesman for NNPC declined to comment on the report.
Reducing losses in crude oil sales has become even more crucial with the slump in global oil prices that has crushed Nigeria’s currency and forced the government to borrow just to cover salaries. Oil sales account for about 70 percent of government revenues.
President Muhammadu Buhari won the end-March election in large part to his tough stance on corruption that is rife in Africa’s biggest oil producer.
Since his May inauguration, Buhari has revealed little about how he will restructure Nigeria’s oil industry but he is bent on recovering “mind-boggling” sums of stolen oil money.
The mismanagement and corruption surrounding NNPC’s sales lie at the heart of the problem and former central bank governor Lamido Sanusi was sacked after pointing out that $20 billion had not been remitted between January 2012 and July 2013.
Constitutionally, NNPC is meant to remit all revenues to the country’s treasury but the act establishing the state firm allows it to keep what it needs to cover costs with little oversight.
The result is a legal grey area that has been open for abuse for decades.
