Background of the
The oil and gas sector is one of the biggest
sector in the world and it is the most important and valuable sector to Nigeria
especially its economy and political destiny because it is where most of our
revenues are generated. Oil was discovered in Nigeria on 15 January, 1956 at
Oloibiri (Bayelsa state) in the Niger Delta after half a century of
exploitation by Shell-BP, oil has remained a major source of energy and income
in Nigeria. Oil was founded at the beginning of the century but after the civil
war (1967-1970) oil became prominent to the economy of Nigeria.
According to Nigeria Extractive Industries
Transparency Initiative (NEITI), Nigeria is one of the largest oil and gas
producers in Africa and among the top ten globally. In 2017, according to Nigerian
National Petroleum Corporation (NNPC), Nigeria ranks has Africa’s largest
producer of oil and the sixth largest oil and producing country in the world.
According to Organisation of Petroleum Exporting Countries (OPEC), Nigeria is
the second biggest oil and gas exporter. Nigeria ranks the ninth position in
gas production in the world (OPEC).
Corruption is a broad term which has been
defined in various ways by different people but despite the difference in words
used in defining corruption, it is seen as any conduct, action, or behaviour
that departs from legitimately established laws, procedures and practice.
Corruption in the oil and gas sector as a hindrance to revenue generation in
Nigeria simply means the fraudulent or dishonest conduct by entrusted officials
or public powers in the oil and gas sector which in turn affects the revenue
generation in Nigeria. Corruption to every nation is one of the biggest threats
to economic and political development. The revenue generated from oil and gas
sector in Nigeria is supposed to be used for the economic growth and
development of the country. Corruption has been identified as a major obstacle
militating against rapid growth and development of the Nigerian economy
(Nagari, Umar & Abdul 2013). Corruption undermines good government,
fundamentally distorts public policy, leads to misappropriation of resources,
harms private and public sectors development and it affects the poor ( Ajao,
Dada & olaoye, 2013). Corruption affects the political, cultural and economic
growth of any country and destroys the functioning of various organs of
government. Corruption is a great danger to the security of any nation.
Due to the discovery of
oil and gas in Nigeria, corruption became the order of the day. Nigeria depends
highly on this sector, any corrupt practice carried out from this sector
automatically affects all other sector of the economy. Although corruption is
found in every phase and sector of the Nigerian socio-political economy but it
is more pronounced in the oil and gas sector in the country.
The oil and gas sector is a very strategic
sector to Nigeria’s economy because this is where much of its revenues are
generated. The country’s major balance of payment, 35 per cent of gross
domestic product, petroleum exports revenue and exchange rate policy, monetary
and fiscal policies are dependent on revenue from oil and gas. Revenue from oil
and gas has played a vital role in the execution of various national
development plans and still does so.
It has been made
obvious that eighty percent of the corruption in Nigeria is either happening in
or out of the proceeds of the oil or gas sector due to the fact that a lot of
money is generated from this sector. Revenue from oil and gas amount to 70%
-90% of the total foreign earning from export activities annually (NNPC 2016).
Nigeria cannot manage the activities in the oil and gas sector (acquisition,
exploration, production and development) on its own because of the lack of huge
capital expenditure, high technological expertise and the ability to manage
investment risks. Due to this, the foreign oil companies with sufficient
capital, expertise, technology and investment risks capabilities are granted
license to explore and develop oil in the oil-rich developing countries (e.g. Nigeria).
Nigeria oil and gas industry have experienced high amount of capital inflow
from Foreign Direct Investment (FDI). The foreign direct investment has little
effect on the economic growth of Nigeria because of the lack of accountability,
transparency and high spread of corruption in the Nigeria economy.
In the oil and gas sector, a huge sum of money
is acquired, the dollar (naira) volume in the industry is a lot but the very
small fractions of transaction values in the sector can equate to very large sums
of money, which will definitely lead to temptation to corruption. Although the
fractions are small but they are a lot of money and they are difficult to
detect if they go missing and so this encourages corrupt practices.
Despite the efforts of anti-corruption
agencies in Nigeria (EFCC, ICPC, CCB, CCT, ACEP, EOCO, etc.), the level of
corruption still prevailing in Nigeria is still high. According to Adomako
(2008), there is an historical symbiotic relationship that exists oil and gas
and corruption in Nigeria. The income made from oil and gas ends up in the
pockets of the leaders and this directly affects revenue generation that is
supposed to be used for the growth of the country.
However the focus of
this project is on corruption in the oil and gas sectors in Nigeria and its
effects on the revenue generation in the country which in turn affects the
growth of the country and also to proffer solution to the problem of corruption
in the sector.
Statement of the problem
Despite the increase in
the effort of anti-corruption agencies in Nigeria especially in the oil and gas
sector, it is obvious that corruption is still at an increase pace in Nigeria
especially in the oil and gas sector. The revenue from oil and gas has been
largely mismanaged by successive governments as the level of economic and
social infrastructural development/ facilities on ground (e.g. health,
education services) does not reflect the revenue derived from the petroleum
Nigeria depends a lot on
the revenue generated from the oil and gas sector and the revenue derived from
this sector, due to the fact that it is a lot, it is shared amongst states for
the economic and socio-political development/growth of the country. It is noted
that the large proceeds obtained from the oil and gas sector acts as
multipliers to other sector of the economy through government expenditure.
Corruption is highly endemic in the oil and gas sector and it has been wiping
away all the generated money and this leaves the country with little money
which affects the development of the country.
However this study will investigate the level
of corruption in the oil and gas sector and its effects on Nigeria.
Objective of the Study
The main objective of
the study is to examine the rate of corruption in the oil and gas sector in
Nigeria and how it has reduced/affected the revenue which purpose is for the
growth/development of the country. Hence the following are the sub-objectives:
The operations of the oil and gas sector
in Nigeria , giving a detailed explanation on how the revenue is generated and
Significance of the oil and gas sector
and how it affects the socio-political economy of Nigeria
To proffer/suggest solution to
corruption in the oil and gas sector in Nigeria.
In light of the above, the following
form the research questions which will be answered in the study.
are the operations of the oil and gas sector in Nigeria and how are the revenue
generated and shared?
are the significance of the oil and gas sector and how does it affect the
socio-political economy of Nigeria?
are the solutions to corruption in the oil and gas sector in Nigeria?
Scope of the study
study examines corruption in the oil and gas sector and how it affects the
revenue generated which is supposed to be used for the growth/development of
Nigeria. The scope of the study will not limited to the Nigerian society alone
but when necessary it will include other countries involved in oil and gas. The research will be periodize to
begin from 1999, a year which is significant in Nigerian history as it ushered
in the Fourth Republic under the democratically elected government of President
Olusegun Obasanjo till date.
This study will
comprise of five chapters, chapter one is basically for the introduction of the
study, chapter two reviews various related literature, chapter three discusses
the methodology, chapter four presents the data analysis and interpretation of
findings and chapter five provides conclusion and recommendation.
Limitation of the study
The limitation is that
although it is widely known that corruption is endemic in the oil and gas
sector, the extent of the corruption, and the quantum of money involved is
difficult to ascertain. This is because very few people in the sector have been
put on trial for corruption and hardly has anybody been convicted and sentenced
accordingly. Rather, there is a lot of denials and rationalisation of the money
stolen. For instance, the former minister of petroleum, Mrs Diezani Allison
Madueke who has been accused of embezzling billions of naira and dollars from
the oil and gas sector, is still in the United Kingdom, and has not been
prosecuted. All these make it difficult to know the exact amount lost to
corruption from the oil and gas sector.
Another limitation is that most of the
operations of the oil and gas sector are done through joint ventures between
Nigeria and multinational oil companies such as Shell, Chevron, Total etc. the
corruption deals are done in secrecy among the top officials of the partners. A
lot of the corrupt deals therefore are shielded from public glare and may never
be revealed in the open. However, the problem that might confront the researcher is not the
scarcity of materials but its availability and also time might serve as limitation
to this research. Nevertheless, these limitation factors will greatly be
managed to make the research work more objective in its presentation.
Significance of the
The main focus of this study is to examine corruption in the
oil and gas sector and also to suggest ways in which corruption can be
minimized in the sector. This research will help the country understand what
corruption means, those who are involved in corruption in this sector, its
effects on the social political economy of the country and also to bring to
awareness the responsibilities of anti-corruption bodies in Nigeria.
Corruption is a global problem and it has been existing for
a very long time. Corruption has had terrible effects on the world, for
instance, it leads to poverty in so many countries e.g. Nigeria. Corruption has
been and is still a major problem in Nigeria. It’s obvious that Nigeria depends
majorly on the revenue generated from the oil and gas sector for all forms of
development in the country and it’s also obvious that corruption is high in
this sector. However. The Nigerian government and anti-corruption agencies
needs to work together in order to block the loopholes of corruption in this
sector for the sake of progressive development. The continual existence of corruption
will definitely cause unprogressiveess or under development in Nigeria. Nigeria
definitely earn/generate a lot from the oil and gas sector but the current
state of the country shows that revenue generated from the sector is not used
for the development of the country.
the outcome of the study will enrich/enlighten youths about the operations in
the oil and gas sector in Nigeria. This study might be of importance to
political scientists, economists, engineering students and international
relations experts, the study will be of significance to the decision maker and
the citizens in Nigeria society etc. who are conducting research in related
fields, the political class will learn, through this study.
design/methodology aims at arriving at the main result of the research
objectives in as few steps as possible.
Historical research method will be
used in carrying out this study; sources from both primary and secondary. The
primary sources include written documents such as government publications,
correspondence, documentaries and newspapers. Moreover, this study will also
depend on secondary sources such as books, journals, conference proceedings and
Corruption; Corruption is
any conduct, action, or behavior that departs from legitimately established
laws, procedures and practice.
Revenue generation; revenue
generation is a complete amount of money generated during a specific period of
NNPC; Nigerian National Petroleum
OPEC; Organization of Petroleum
EFCC; Economic and Financial Crimes
NEITI; Nigeria Extractive Industries