A Review of the Nigerian Energy Industry

Libyan oil exportsOSCARLINE ONWUEMENYI 18 August 2014, Sweetcrude, Abuja – Swiss traders are short-changing Nigeria and other African oil producers through shadowy oil deals, according to indications by a recent study of the top ten African oil producers.

National Oil Companies, NOCs, in sub-Saharan Africa are selling their oil to international traders in shadowy deals, a report by Natural Resource Governance Institute, NRGI, the Berne Declaration and SWISSAID, said.

The top ten sub-Saharan African countries covered in the report included Nigeria, Ghana, Cameroon, and Angola.

Swiss traders, including Glencore, Arcadia, Mercuria, Gunvor, Trafigura, Vitol and Socar Trading, bought oil worth approximately $55 billion from NOCs in the top ten sub-Saharan oil-producing countries from 2011 to 2013.

The sum, according to the report, is equal to over 10 percent of the combined government revenues of the countries considered, and double what they received in foreign aid. Oil worth $37 billion was bought from Nigeria by Swiss companies over the three years considered in the report. The amount is equal to over 18 percent of the country’s revenues.

 “A handful of companies are buying public oil that’s worth 10, 15 or 20 percent of government revenue and only a very small circle of insiders know about the transactions,” said Alexandra Gillies, head of governance programmes at NRGI and one of the authors of Big Spenders: Swiss Traders, African Oil and the Risks of Opacity.

The report further noted that the Swiss traders are involved in broader poor governance and corruption. One of the Swiss companies, Gunvor, is currently being investigated for money laundering in relation to its purchase of crude worth $2 billion from the Republic of Congo’s NOC at a discounted price of $4 per barrel.

In Nigeria, Africa’s largest economy, government and independent reports suggest that the Nigeria National Petroleum Corporation, NNPC, the state-run operator, has sold crude below market value to its subsidiary based in Bermuda, Calson, where Swiss firm Vitol holds 49 percent stake.

According to the report, NNPC also sells to some entities referred to as “briefcase traders,” some of which are controlled by politically exposed individuals. Other Swiss traders listed in the research have also been indicted in one ‘shady’ deal or the other.

Stressing “Africa’s producers’ lack of many of the checks and balances needed to safeguard the public interest”, the authors of the research cited the 2013 Resource Governance Index, which ranks Nigeria, Cameroon, Angola, Equatorial Guinea and South Sudan in the bottom third of the 58 resource-rich countries assessed.

While the report recommends that oil-producing governments and NOCs should shun favouritism in the selection of buyers and determination of the selling price, and also disclose how the state’s share of production is allocated and sold, it maintains that the transactions between African governments and Swiss companies deserve attention “because they are vulnerable to governance risks.”

A development that however cast a shadow of doubt on a stop to the opaque deals anytime soon is that the Swiss government last month indicated that trading activities that dominate the Swiss commodities sector would be exempted in its forthcoming legislation on transparency.

“The Swiss government has acknowledged the risks that the sector poses for Switzerland’s reputation and the importance of transparency,” said co-author of the report, Marc Guéniat, Berne Declaration senior researcher.

Guéniat laments that instead of working to stop the opaque dealings, Switzerland is proposing a bill that does little to guard against its trading companies’ contribution to the ‘resource curse’.

The researcher stressed that Africans need to know about how much of their resources is being sold by the government and how much the government earns in return.

Another co-author of the report, Lorenz Kummer, who is a policy advisor with SWISSAID, therefore urged Switzerland to as a matter of urgency take steps to ensure all trading-related payments to governments by Swiss traders are disclosed.

“This should include, among other aspects, the volume, grade, date and amount paid for each individual purchase. Otherwise, huge revenue flows like the ones discussed in our report will remain secret,” said Kummer.


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