Corruption is widely perceived as a long-standing and influential component of Nigeria's oil sector operations. In a two-part policy brief published by the U4 Anti-Corruption Resource Centre which is based at the Chr. Michelsen Institute, Alexandra Gillies provides an introductory mapping of where this corruption takes place, how it impairs sector operations, and the efforts at its reduction. Gillies is a Fulbright Fellow to Nigeria from the University of Cambridge and co-editor of Smart Aid for African Development.
Part One, "Mapping Corruption Risks in Nigeria's Oil Sector," identifies five loci of corruption in the upstream oil sector: awarding upstream licenses; awarding contracts; bottlenecks and inefficiencies that can lead to bribery; "bunkering," or theft of oil from pipelines and industry facilities; and exporting crude and importing refined products. By describing the practices observed in each area, the report adds some specificity to our understanding of how corruption takes place. Taken together, the corrupt behaviors described, and the incentives they create, often prevent Nigerian government institutions from managing the oil sector in accordance with society's long-term interests. For instance, evidence suggests that large-scale bribery influences the awarding of contracts to oil services companies, advantaging companies with deep pockets and good connections, not those which can most efficiently execute the task.
Part Two, "Progress and Prospects for Reform," describes the ongoing efforts to reduce corrupt practices in the oil sector and the challenges to doing so. To guard against corruption, reform is needed in several areas: the legal and regulatory framework; license and contract award procedures; process and revenue transparency; investigation and prosecution; and oversight and accountability mechanisms. The report briefly assesses the progress made in each of these areas, and finds the results generally uneven, with significant improvements yet to be made.
The report concludes with words of advice for Nigeria's international donors. Generally speaking, donors have limited leverage and few entry points for promoting oil sector reform. The report suggests that their comparative advantage may lie in combating the international elements of corruption (via more robust laws, investigations, etc.), designing and actively promoting international best practices for oil sector governance processes, and supporting in-country accountability institutions.
LEARN MORE
- Part 1: Mapping Corruption Risks in Nigeria's Oil Sector (Christian Michelsen Institute)
- Part 2: Progress and Prospects for Reform (Christian Michelsen Institute)
