Nigeria's Oil Industry Stands at Crossroads Ahead of Elections - OZY | A Modern Media Company

Nigeria's Oil Industry Stands at Crossroads Ahead of Elections

Nigeria's Oil Industry Stands at Crossroads Ahead of Elections

By Neil Munshi

Oil still accounts for as much as 56 percent of Nigeria's revenues.


The outcome of the country’s delayed vote will determine the future of Nigeria’s biggest wealth creator — its oil.

By Neil Munshi

Nigeria’s state-owned refinery in Kaduna, a rusted hulk set on about 1.1 square miles on the parched outskirts of the northern city, has the capacity to process 110,000 barrels of oil a day. Last year it processed virtually nothing. The three other state-owned refineries — in the oil-rich Niger delta region in the south of the country — did not do much better. In the year to October, the refineries operated at barely 11 percent of their capacity of 445,000 barrels a day. In October itself, none of the refineries processed any crude, and they operated at a combined loss of $30 million.

The decrepitude of the refineries in Africa’s largest crude producer is not only a reflection of the sorry state of an oil and gas sector starved of investment but also a reminder of the country’s sluggish crude-driven economy. Oil still accounts for as much as 56 percent of state revenues.

The two main candidates facing off to lead Africa’s most populous nation — the election was meant to take place yesterday but was delayed by a week — offer very different choices for reforming this vital industry, between public– or private sector-led development. It highlights a continuing debate in the country for which the term “kleptocracy” was coined in the 1960s over whether corruption is the price Nigeria must pay for growth. 

He might be a thief, but he never eats alone.

Hadiza Mohammed Sani, an Atiku Abubakar supporter, on the candidate 

For the incumbent, President Muhammadu Buhari, the issue is personal. He built some of the state refineries as oil minister in the 1970s, and his approach reflects his past as a military dictator: His focus is state-led growth and his plan is to form public-private partnerships to revive the refineries.

In stark contrast Atiku Abubakar, his main rival, plans to sell off the refineries. The 72-year-old made his fortune in the oil and gas business before leading the country’s patchy privatization drive as vice president in the 2000s — a push he promises to revive if he wins. His principal target is the Nigerian National Petroleum Corp. (NNPC), the sprawling state-owned oil company, an epicenter of corruption.


Both want to diversify the oil-dependent economy and boost infrastructure spending, but differ on how to achieve it. For perhaps the first time Nigerian voters have a clear choice between the major candidates based on their polar opposite approaches to the economy and business.

“[Buhari] tends to be a bit more state interventionist, in the sense of trying to use the mechanisms of the state to create outcomes,” says Nonso Obikili, director of the Abuja-based Turgot Centre for Economics and Policy Research. “Atiku’s focus seems to be more market-driven … the focus seems to be let’s create the policy environment and let the private individuals do what they want to do.”


Discussions of economic stewardship in Nigeria are inextricable from those about public corruption. For much of the previous decade, Nigeria’s economy roared along at about 7 percent annual growth. But the number of Nigerians living in poverty also grew, suggesting that the growth was superficial and unproductive, partly fueled by stolen money funding the lavish lifestyles of the politically connected.

Buhari has campaigned explicitly against that era. He was elected in 2015 on an anti-corruption pledge and maintains an aura of incorruptibility even as his anti-graft drive has been harshly criticized as partisan, and has yet to result in a single conviction after four years. The president has shared the stage this campaign with a number of politicians suspected by anti-graft campaigners of corruption. And according to a Gallup poll released in February 84 percent of Nigerians believe government corruption is widespread — down just 2 points from 2014.

Abubakar has also vowed to tackle corruption, but he was vice president for some of those high-flying years in the 2000s — and graft allegations have trailed him ever since. A 2010 U.S. Senate report into how named individuals “circumvent U.S. anti–money laundering and anti-corruption safeguards” alleged that Abubakar’s American wife had helped him move $40 million of “suspect” funds from offshore accounts to the U.S. The investigation’s findings “raise a host of questions about the nature and source” of Abubakar’s wealth, according to the report. He denies any wrongdoing, but his reputation is cemented in the eyes of many voters, supporters and opponents.

At Makarfi Plaza in Kaduna, a few miles from the rusting refinery, Odebunmi Nurudeen, a university graduate who repairs mobile phones, argues with friends about politics.

“They say Atiku is an entrepreneur, but do we really need that?” Nurudeen asks. “How did he make that money? He can privatize NNPC — but he should do it for normal people, not the politicians, not for himself or his friends.

“Before we were living on stolen money — people accepted it because they would get some,” he continues, referring to some of the corruption scandals that emerged during the 16 years Abubakar’s People’s Democratic Party (PDP) ran the country. But, he says, Buhari has turned off the tap.

“The whole thing about privatizing NNPC, you have to look at it with some trepidation when it comes to Atiku,” says Ola Bello, Lagos-based executive director of Good Governance Africa. “The broad consensus is what he oversaw [when he led privatization efforts as vice president] was more consistent with the making of Russian oligarchs than [listing on] Wall Street or the London Stock Exchange.”


Of the 73 candidates in the race to lead Africa’s largest economy only two have a chance of winning the election: Buhari and Abubakar, both backed by powerful political machines.

The All Progressives Congress, which backs Buhari, and Abubakar’s PDP don’t operate on a traditional ideological left-right continuum. Instead, the parties appear to function largely as vehicles for state capture, through which the country’s resources can be used to fund vast patronage networks. Their policy positions have tended to be broad and similar, centered on state-driven development. So fluid are the parties that Abubakar has switched back and forth multiple times — in the last election, he part funded the Buhari campaign, allowing the former general to use his private jet.

But in January Abubakar outlined the difference between him and the president. “He is anti-business, anti-private sector,” he said. “I am pro-business, pro-private sector.” Many executives in Lagos, Nigeria’s commercial center, broadly agree with his blunt assessment.

A senior politician close to Buhari does not dispute the characterization, adding ruefully that private business goes hand in hand with public corruption in Nigeria.

Abubakar wants to privatize state assets, lower corporate taxes and attract foreign direct investment. He also says he wants to float the naira, which the central bank has spent billions of dollars propping up at what critics call an artificially strong rate of N360 to the dollar for more than a year. He says one of his top priorities will be passing decades-in-the-making oil sector reforms that are widely seen as essential to spurring investment in the moribund industry. Buhari has refused to sign a section of the reforms into law in part, critics say, because it would dilute the power of the executive branch.

The president is sticking to his state-led, bottom-up approach to development, focusing on agriculture, small business and infrastructure. He is campaigning as the candidate of the masses, in keeping with his almost cultlike following in the country’s populous north.

While their campaign promises differ widely, it’s not clear whether a victory for either side will produce markedly different economic outcomes given the country’s immense structural challenges, says Adriaan du Toit, sub-Saharan Africa economist for AllianceBernstein. “The significant dependence on oil means that the next president’s [ability to enact] reforms will be very much aligned with what happens to oil prices in the next couple of years,” he adds.


Even critics concede Buhari was dealt a bad hand, taking office just as the oil price crashed. But many economists believe he exacerbated the recession that followed. At a meeting of businesspeople in Lagos last weekend, he said his government had come into power in 2015 focused on three priorities: national security, tackling “rampant corruption” and improving the economy. He seemed to concede that progress had been slow.

‘‘These three priorities, if addressed, will completely transform Nigeria to a diversified, inclusive and competitive economy,” he was quoted as saying in local media. “But this is not an overnight transition. We are not only transforming systems and processes but we are also changing hearts and minds.”

Hearts and minds are hard to measure. But a host of economic indicators paint a dismal picture of Buhari’s stewardship.

During his tenure: Unemployment has soared from 8.3 percent to more than 23 percent with another fifth of Nigerians underemployed; the stock market is the world’s worst performing, falling by more than half in dollar terms; and the country became home to the most people living in extreme poverty — defined as living on less than $1.90 per day — 87 million, surpassing India, a country with six times its population.

Buhari’s economic woes have allowed his rival to argue that his success in business makes him perfectly qualified to, as his campaign slogan says, “get Nigeria working again.” But it is precisely his success that raises the suspicions of many Nigerians — and at times on the campaign trail, he has fed that mistrust.

At a business conference in Lagos in January, Abubakar was pressed about allegations of crony capitalism during his time as vice president raised in a recent Eurasia Group report.

“They didn’t say I will enrich myself, or the members of my family,” he said, to laughter and applause. “But my friends, are my friends not entitled to be enriched? As long as there’s no element of corruption in there.”

It was a sentiment that confirmed some Nigerians’ worst suspicions about Abubakar, and his plans for the economy. It hinted at something broader, says Amaka Anku, Africa director for the Eurasia Group. “APC has a ton of corrupt people. They’re all hiding under Buhari’s halo, but the difference is the message they’re sending is [that] it’s not OK,” she says. “What I find fascinating is that Atiku and PDP are flirting with just saying it’s OK, [corruption is] OK as long as the economy is growing.”

Defending his comments Abubakar said: “I am saying corruption is not OK, but neither is it OK to make the nation poorer via a partisan fight against it. My administration will grow the economy and fight corruption.”

At an Abubakar rally in Kaduna, Hadiza Mohammed Sani describes Nigeria as being “in a coma,” blaming Buhari for the economic downturn.

She says that although Abubakar, like many politicians, has benefited from his political position — taking his share of what Nigerians call “the national cake” — he has also used it to employ thousands and would use his business acumen to benefit all Nigerians. “He might be a thief, but he never eats alone,” she adds.

By Neil Munshi

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