How IOCs, US swindled Nigeria of $69.8bn through oil exports mis-invoicing within 18 years
Between 1996 and 2014, under-invoicing of oil exports from Nigeria to the United States hit $69.8 billion, a 24.9 per cent worth of all oil exports to the United States. Adeola Yusuf reports
Nigeria was yet to overcome the shock arising from the on-going probe of corruption in its oil industry when the United Nations Conference on Trade and Development (UNCTAD) divulged the massive fraud arising from under-invoicing of crude oil exports from Nigeria to the United States.
In just 18 years, Nigeria, the UNCTAD said in a report released last week, has lost $69.8 billion of its common resources to United States through illicit financial flows arising from under invoicing from oil export by International Oil Companies (IOCs), whose production are done through Joint Ventures (JV) or Production Sharing Contracts (PSC) with the Nigerian National Petroleum Corporation (NNPC).
Nigeria has attracted billions of dollars of investments from the world’s top oil companies. Yet poverty in Africa’s biggest economy is rising, with almost 100 million people living on less than $1 a day, data released by the United Nation (UN) showed.
“The percentage of Nigerians living in absolute poverty – those who can afford only the bare essentials of food, shelter and clothing – has risen to around 60 per cent,” the report added. An audit of the oil industry however, showed billions of dollars in irregularities despite years of the government promises to clean it up.
This has prompted the ongoing probe of the industry that generates proceeds that the country uses to service over 85 per cent of its budget. Corruption has left oil-dependent Nigeria unable to cater for its basic health, infrastructure or education needs.
The Nigeria Extractive Industries Transparency Initiative (NEITI) – a government-funded watchdog – released its latest report of investigation into the oil industry, in which it listed discrepancies and showed billions of dollars missing from Nigeria’s oil revenues.
The missing billions
Getting a clear picture of how much money Nigeria has lost to corruption over the years is almost impossible. The system is hemorrhaging cash in so many places that accountants often struggle to make sense of it all. The NNPC does not, according to NEITI, measure its output.
The government estimates that average output is 2 million to 2.6 million barrels of oil a day, making Nigeria Africa’s biggest producer. “Right now, no one can tell you exactly how much of our crude is extracted from our soil,” said Orji Ogbonnaya Orji, who sits on the board of directors of NEITI.
“We depend on records from the oil companies. That clearly has to change.” The NEITI audit shows some startling gaps: $540 million missing from $1.675 billion in signature bonuses – these are advance payments to develop fields, a standard producer country demand.
Then there’s 3.1 million barrels of oil missing from NNPC declarations about its joint ventures compared with the figures released by NNPC’s international partners. That equates to 0.25 per cent of the output. NNPC also received $3.789. IOCs The NEITI report of 2008, which is corroborated by the latest report, says that foreign firms also seemed to have underpaid petroleum profit tax by over $1 billion.
The report recommended a review of the tax returns of Chevron and Exxon Mobil. Exxon officials were not immediately available to comment. A Chevron spokesman said the firm “complies with all laws and regulations in the locations where we operate, as a matter of long-standing policy Chevron does not release specific financial details.”
But NEITI insisted that foreign oil majors might have also underpaid royalties “of $2.33 billion arising from subjective interpretation of volume, pricing,” and grading variables. “We are questioning the basis of those calculations,” Orji explained. “They are not calculated on the basis of empirical fact. And meathere is connivance by officials,” he alleged.
The federal government was yet to unravel the massive corruption at the local stage of the oil industry when the UNCTAD released a report that showed that the internal stealing of oil wealth in the country was a child’s play.
Between 1996 and 2014, the report noted under-invoicing of oil exports from Nigeria to the U.S. was worth $69.8 billion, or 24.9 per cent of all oil exports to the United States. Secretary-General of UNCTAD, Mukhisa Kituyi, who unveiled the report, said that over and underinvoicing of trade transactions facilitated billions of U.S. dollars in illicit financial flows into or out of some developing nations.
Trade mis-invoicing is thought to be one of the largest drivers of illicit financial flows from developing countries, so that the countries lose precious foreign exchange earnings, tax, and income that might otherwise have been spent on development.
Findings of the report showed that between 2000 and 2014, underinvoicing of gold exports from South Africa amounted to $78.2 billion, or 67 per cent of total gold exports. Trade with the leading partners exhibited the highest amounts: India ($40 billion), Germany ($18.4 billion), Italy ($15.5 billion), and the UK ($13.7 billion).”
Like Nigeria, like others in Africa
In what appears as a crawl back to colonisation, other third world Africa countries suffered the same fate as Nigeria in the trades and exports of their natural resources with the developed countries.
For instance, the report entitled: “Trade Mis-invoicing in Primary Commodities in Developing Countries: The cases of Chile, Côte d’Ivoire, Nigeria, South Africa and Zambia,” explained that some commodity dependent developing countries were losing as much as 67 per cent of their exports worth billions of dollars to countries such as China, Germany, Hong Kong, India, Italy, Japan, the Netherlands, Spain, Switzerland, Britain and Northern Ireland and the U.S. Some countries according to the report were losing up to 67 per cent of commodity exports to misinvoicing.
The report, which was released by the UN agency in Nairobi, the Kenyan capital, also discovered that trade mis-invoicing was thought to be one of the largest drivers of illicit financial flows from developing countries.
The report, which was released during the UNCTAD Global Commodities Forum, uses up to two decades’ worth of data covering exports of commodities such as cocoa, copper, gold and oil from Chile, Côte d’Ivoire, Nigeria, South Africa and Zambia It stressed that between 1995 and 2014, Zambia recorded $28.9 billion in copper exports to Switzerland, more than half of all its copper exports, yet these exports did not appear in Switzerland’s books.
It noted: “Between 1990 and 2014, Chile recorded $16.0 billion in copper exports to the Netherlands, but these exports did not appear in the Netherlands’ books. “Between 1995 and 2014, Côte d’Ivoire recorded $17.2 billion in cocoa exports to the Netherlands, of which $5.0 billion (31.3 per cent) did not appear in the Netherlands’ books.” According to the report, fraudulent mis-invoicing of trade had hampered economic growth and potentially resulting in billions of U.S. dollars in lost tax revenue in some developing countries.
“Between 1996 and 2014, under- invoicing of oil exports from Nigeria to the U.S. was worth $69.8 billion, or 24.9 per cent of all oil exports to the United States,” the report read. Some commodity dependent developing countries are losing as much as 67% of their exports worth billions of dollars to trade misinvoicing, according to a fresh study by UNCTAD, which for the first time analyses this issue for specific commodities and countries.
“This research provides new detail on the magnitude of this issue, made even worse by the fact that some developing countries depend on just a handful of commodities for their health and education budgets,” Kituyi said.
The secretary general said that the commodity exports may account for up to 90 per cent of a developing country’s total export earnings, adding that the study generated fresh lines of inquiry to understand the problem of illicit trade flows.
Nigerians must demand for a probe of the oil export underinvoicing, which had gulped over $69.8 billion that could have been used to better the lots of many that are battling with abject poverty.
The Federal Government should as a matter of urgency probe the trade mis-invoicing with a view to ending the illicit financial flows that have cost Nigeria million of dollars that could be used to develop the country. Government needs the collaboration of the United States (US) government to get to the root of the matter while apportioning appropriate sanction to any company of individual found culpable of this scandal.