Nigeria Needs Strong Legislation To Rid Oil Industry Of Fraud- Experts

Public analysts have pointed a US bribery investigation into a former Glencore employee which has revived long-standing questions over corruption in Nigeria’s oil sector.

Though the Nigerian National Petroleum Corporation, NNPC, claims fraud has been “eliminated”, in the system, experts believe ambitious legislative reform is still needed.

Details of an alleged bribery racket were revealed last week when Anthony Stimler, a UK-based trader who worked on Glencore’s West Africa desk until 2019, pleaded guilty to charges of money laundering and corruption.

As shown in New York District Court documents, Stimler was arrested for his part in an alleged bribery scheme to pay “millions of dollars” in bribes to officials in multiple countries, including Nigeria, in a bid to win lucrative contracts and more favourable delivery terms for his company.

Swiss-headquartered Glencore is not named in the documents, which only refer to a commodity trading and mining company with global operations, as well as two unnamed subsidiaries based in the UK.

But the trading giant has acknowledged Stimler’s plea in a response statement and says it has cooperated fully with the Department of Justice and other authorities in their investigations – “and continues to do so”.

“The conduct described in the plea is unacceptable and has no place in Glencore,” the trader adds.

The exact timeframe for when the bribes took place is unclear, but US authorities say that the scheme was in operation from at least 2007 to 2018.

In one instance, prosecutors say that Stimler and a co-conspirator – one of the seven referred to in the documents – worked to secure oil from Nigeria’s state-owned company, the Nigerian National Petroleum Corporation (NNPC), fully aware that bribes could be used for potential political gain by Nigerian authorities.

Court documents say that in September 2014, a co-conspirator sent an email to Stimler advising him that a “high-ranking Nigerian government official” had stated that “all the customers of NNPC are giving in advance [US$300,000] each month/cargo plus a certain amount which varies at the moment” in connection with a then-upcoming political election.

The papers outline that in October that year, Stimler initiated a wire transfer from Switzerland to an intermediary firm’s account in Cyprus, with the money routed via a bank in New York.

Stimler wrote to two co-conspirators around that time: “please please make sure on your side, NNPC perform[s]”.

In another incident in 2015, US authorities say that a co-conspirator messaged Stimler offering to bribe a Nigerian official for four cargoes of NNPC oil to be delivered in May and June.

After Stimler expressed an interest in the June cargoes, court papers allege that he then enabled a wire payment of roughly US$50,000 to an intermediary company’s bank account in Cyprus.

An NNPC spokesperson told Bloomberg the claims are historic and that “Glencore is no longer our partner”.

It adds the company’s current leadership “has eliminated such practices”.

Though the oil trading sector is no stranger to bribery cases the NNPC has been dogged by serious corruption allegations in the past decade, according to a piece by Felix Thompson.

In 2012, for instance, a US$6.8bn fuel subsidy scandal involving top Nigerian officials erupted into public view. A parliamentary probe claimed importing companies were paid hundreds of millions of dollars to buy fuel that did not actually exist.

In recent years, however, there have been signs that the NNPC is working to strengthen its transparency procedures.

Last June, the NNPC publicly released accounts of its 20 subsidiaries for the first time in its 43-year history, and in August the company announced it would back the Extractive Industries Transparency Initiative (EITI), a global standards setting entity for oil, gas and mineral producing countries requiring them to disclose information such as how extraction rights are awarded.

 

A regulatory overhaul?

Despite these efforts, critics say more work needs to be done to bring NNPC’s business dealings out of the shadows, and question whether a slated new landmark Petroleum Industry Bill (PIB) will suffice in doing so.

In early July, after more than a decade of false dawns and multiple attempts to pass the PIB into law, the country’s Senate and House of Representatives each passed different versions of the PIB.

Outstanding issues remain, and will need to be resolved before the bill makes its way to Nigerian President Muhammadu Buhari for signing. Yet, there is momentum behind the legislation and analysts say it could be passed before the end of the year.

The PIB aims to boost international investment and oil production by putting in place an entirely new regulatory and fiscal framework, a key strand of which would be greater oversight of the NNPC.

The Columbia Center on Sustainable Investment (CCSI) argues in a January blog post that the PIB proposes some “much-needed reform” around governance.

Such reforms include the state-owned firm becoming a limited liability company within six months of the PIB being passed, a move which would reportedly require it to publish annual reports and audited accounts.

The Minister of Petroleum Resources would also see their power to grant, amend, revoke or renew licenses taken away – along with their seat on the board of NNPC Limited.

The CCSI says that new regulatory bodies would be created, with the Nigerian Upstream Regulatory Commission and the Midstream and Downstream Petroleum Regulatory Authority replacing the “multitude of regulating bodies” currently in existence.

“Such structural reforms create a clear separation between NNPC Limited’s operations as a commercial entity and the regulatory roles to be exercised by the regulatory authorities, allowing for more transparent oversight,” the CCSI says.

However, doubts remain in some quarters over the ability of the PIB to entirely stamp out the risk of corruption and fraud within Nigeria’s oil sector.

Africa-focused intelligence consultancy firm Songhai Advisory says in commentary released this week that the PIB would fundamentally preserve “the existing structure of governance that undermines independence, promotes patronage and aids political interference”.

According to its analysis, the president would remain solely empowered to appoint and remove the NNPC board – including the CEO – and would be able to pick the principles of the new Commission and Authority.

“This type of structure has in the past allowed the president and other top political figures to purportedly play an illicit role in license and contract awards,” the firm says.

Adedayo Ademuwagun, a consultant at Songhai Advisory, tells GTR that there are also questions over the effectiveness of the main body charged with enforcing domestic anti-corruption legislation – the Economic and Financial Crimes Commission.

He notes that the entity has been in an unstable state since it was established in 2003 and has never successfully prosecuted a major corruption case in the oil sector.

High turnover at the top is one major issue, with incoming chairs generally removed by incoming presidents.

Meanwhile, the person Buhari chose to head the agency in 2015 was suspended from the role last year, and has since been replaced, following allegations that he mismanaged funds recovered by the agency.

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