Skip to main content
  • News
  • Events
  • Blog
  • Search

Natural Resource Governance Institute

  • Topics
    Beneficial ownership
    Economic diversification
    Mandatory payment disclosure
    Revenue sharing
    Civic space
    Energy transition
    Measurement of environmental and social impacts
    Sovereign wealth funds
    Commodity prices
    Gender
    Measurement of governance
    State-owned enterprises
    Contract transparency and monitoring
    Global initiatives
    Open data
    Subnational governance
    Coronavirus
    Legislation and regulation
    Revenue management
    Tax policy and revenue collection
    Corruption
    Licensing and negotiation
  • Approach
    • Stakeholders
      • Civil society actors
      • Government officials
      • Journalists and media
      • Parliaments and political parties
      • Private sector
    • Natural Resource Charter
    • Regional knowledge hubs
  • Countries
    NRGI Priority Countries
    Colombia
    Guinea
    Nigeria
    Tanzania
    Dem. Rep. of Congo
    Mexico
    Peru
    Tunisia
    Ghana
    Mongolia
    Senegal
    Uganda
    OTHER COUNTRIES
  • Learning
    • Training
      • Residential training courses
        • Executive
        • Anglophone Africa
        • Francophone Africa
        • Asia-Pacific
        • Eurasia
        • Latin America
        • Middle East and North Africa
      • Online training courses
        • Advanced
        • Negotiating Contracts
        • Massive open online course (MOOC)
        • Interactive course: Petronia
      • Trainers' modules
        • (empty)
    • Primers
    • Glossary
  • Analysis & Tools
    • Publications
    • Tools
    • Economic models
  • About Us
    • What we do
      • 2020-2025 Strategy
      • Country prioritization
    • NRGI impact
    • Board of Directors
    • Emeritus Board Members
    • Advisory Council
    • Leadership team
    • Experts and staff
    • Careers and opportunities
    • Grant-making
    • Financials
    • Privacy policy
    • Contact us
  • News
  • Events
  • Blog

You are here

  1. Home
  2. Blog

Tender Moment for Oil Sale Governance in Nigeria

19 October 2016
Author
Aaron Sayne
Topics
Commodity pricesCorruptionLicensing and negotiationState-owned enterprises
Countries
Nigeria
Stakeholders
Civil society actorsGovernment officialsJournalists and mediaPrivate sector
Precepts
P2 P3 P11 What are Natural Resource Charter precepts?
Social Sharing

It’s that time of year again: the Nigerian National Petroleum Corporation (NNPC) is seeking new buyers for the country’s oil. In a tender announcement last week, the state-owned company invited “qualified and credible companies” to vie for contracts to purchase Nigerian crude in 2017; applications are due 24 November.

Even with the current low oil prices, crude oil sales are the Nigerian government’s largest revenue stream. Typically, when not facing major disruptions, the corporation sells up to a million barrels daily; NNPC disclosed at least USD 14 billion in public oil sale revenues for 2015. Since 2014, when former central bank governor Lamido Sanusi raised an alarm that USD 20 billion in NNPC oil sale revenues had gone “missing,” oil sales have also been controversial and closely watched. The August 2015 report Inside NNPC Oil Sales—the first in-depth, independent analysis of how Nigeria’s oil is sold—took the Sanusi story further, showing how the corporation’s approach often suffered from high corruption risks and failed to maximize returns for the country.



President Muhammadu Buhari was elected in March 2015, and promised to tackle corruption—including in the oil sector. NNPC’s first round of oil sale contract awards under Buhari—finalized last December—showed some improvements over what happened during the tenure of his predecessor, Goodluck Jonathan. The winner’s list included more refiners, curtailing Nigeria’s long-standing reliance on oil traders. It also had fewer of the unqualified, passive “middleman” companies that sometimes share the margins they capture with politically exposed persons. It also avoided Nigeria’s historically scandal-prone sales to smaller African governments. New management took some steps to make the award process more transparent, including opening bids on live television.

The results were not totally without blemish. Several of the companies had serious legal and reputational red flags, not least alleged bribery and fuel subsidy fraud. Some were local fuel sellers not known for trading Nigerian crude abroad. NNPC had canceled other sales contracts with two other winners just four months before, saying they were “skewed in favor of the companies.” Inside NNPC Oil Sales estimated that three unbalanced terms in one of the deals cost Nigeria at least USD 381 million (or USD 16 per barrel) in a single year. And despite the early emphasis on openness and due process, NNPC's final published list of 2016 oil buyers—only released earlier this month—showed six more firms that were added later, for reasons unknown.

It would unfair to expect NNPC under President Buhari to solve all of its oil sale governance problems in a single award cycle. Some go back decades, to times of military rule. Meanwhile Nigeria’s local content law puts pressure on the corporation to sell to Nigerian firms, even if these companies have weaker oil trading credentials. Hopefully NNPC will publish the full list of winners in a timely fashion. It should also consider disclosing the beneficial owners of the winning companies, to avoid rumors of political favoritism, as well as regular per-cargo sales data showing what the winning companies actually buy. Right now this information only appears years later in Nigerian Extractive Industries Transparency Initiative reports.

Inside NNPC Oil Sales noted that the governments of Presidents Olusegun Obasanjo and Umaru Yar’adua also tightened up NNPC’s roster of oil buyers during their first years in office. But then questionable deals mushroomed as patronage demands grew—especially closer to election seasons. These next awards will signal whether the gains seen so far show a fundamental shift in the management of Nigerian oil sales or a more typical inaugural housecleaning exercise.

Aaron Sayne is a senior governance officer with the Natural Resource Governance Institute.

Related content

Natural Resource Charter Benchmarking Framework: 170 Crucial Questions for Resource-Rich Countries

Robert PitmanDavid Manley
17 October 2016

NRGI’s Top 10 Blog Posts in 2016

13 December 2016

May 2015 Letter from the President

14 May 2015

The Proof is in the Politics: Fossil Fuel Interests and Domestic Energy Transitions

Aaron Sayne
21 May 2020

En un futuro bajo en carbono, una mejor gobernanza de los minerales podría impulsar el desarrollo

Alex TilleyDavid Manley
27 September 2017

Recent Tweets

Helping people to realize the benefits of their countries’ endowments of oil, gas and minerals.
Follow on Facebook Follow on Twitter Subscribe to Updates
  • Topics
    Beneficial ownership
    Civic space
    Commodity prices
    Contract transparency and monitoring
    Coronavirus
    Corruption
    Economic diversification
    Energy transition
    Gender
    Global initiatives
    Legislation and regulation
    Licensing and negotiation
    Mandatory payment disclosure
    Measurement of environmental and social impacts
    Measurement of governance
    Open data
    Revenue management
    Revenue sharing
    Sovereign wealth funds
    State-owned enterprises
    Subnational governance
    Tax policy and revenue collection
  • Approach
    • Stakeholders
    • Natural Resource Charter
    • Regional knowledge hubs
  • Priority
    Countries
    • Colombia
    • Dem. Rep. of Congo
    • Ghana
    • Guinea
    • Mexico
    • Mongolia
    • Nigeria
    • Peru
    • Senegal
    • Tanzania
    • Tunisia
    • Uganda
  • Learning
    • Training
    • Primers
  • Analysis & Tools
    • Publications
    • Tools
    • Economic models
  • About Us
    • What we do
    • NRGI impact
    • Board of Directors
    • Emeritus Board Members
    • Advisory Council
    • Leadership team
    • Experts and staff
    • Careers and opportunities
    • Grant-making
    • Financials
    • Privacy policy
    • Contact us
  • News
  • Blog
  • Events
  • Search