President Muhammadu Buhari on 10 August inaugurated a committee to advise him on tackling corruption. The committee largely comprises academics and significantly lacks any representation from the judiciary. Meanwhile, Buhari at a press briefing last week in Washington (DC) announced four key measures for tackling corruption: a reorganisation of anti-corruption bodies into a single powerful agency; the removal from ministers of political control over awarding contracts; the introduction of a plea bargain system that will allow corrupt officials to return stolen funds to avoid prosecution; and a crucial structural reform programme for the oil and gas sector, the focus of many of the largest corruption investigations.

Anti-corruption campaign to complicate business environment

  • The government’s anti-corruption drive will create direct and indirect integrity risks for certain businesses investing or operating in the energy and power sectors. Investigations are initially likely to focus on Nigerian National Petroleum Corporation (NNPC) accounts and fuel trader activities in the downstream oil sector, which are closely tied to NNPC abuses. Investigations into the NNPC will be accompanied by major structural reform as the government seeks to reduce losses and leakages from the state-owned oil company. These reforms will include offloading regulatory duties to a newly created independent regulator, improving account management and transparency, and seeking to commercialise key operational units so that they can better support sector activities.
  • The government is unlikely to reverse the power-sector privatisation process or business-to-business deals in the oil and gas sector relating to onshore divestments. However, oil trading activities and certain government licence awards or strategic public-private partnerships are likely to be scrutinised – and, in the most extreme cases, sanctioned – in the coming months. This reflects a focus on investigating the state’s role in corrupt activities to facilitate fund recovery, while also drawing political benefit by curtailing the political and financial standing of the previous administration and its business beneficiaries.

Downstream oil sector in sights

The downstream oil sector is likely to bear the brunt of sanctions. Recent probes into trading activities have exposed major discrepancies amid widespread allegations of corruption. This is particularly the case in relation to controversial ‘swap contracts’, under which the NNPC allocates crude directly to traders in exchange for refined products because of a lack of local refining capacity. The government is likely to refuse to deal with some traders under investigation, fuelling tensions over outstanding debts and possible prosecutions.

Licence cancellations relating to recent divestments in the upstream oil sector are unlikely. However, certain strategic alliance partnerships are likely to undergo scrutiny. Meanwhile, in the power sector, a comprehensive review of the privatisation process is unlikely despite some union and political pressures in this respect. The vast majority of privatised licences will remain stable. However, in isolated instances where distribution companies are seen to have used political influence to secure their licence, and have since become mired in financial and operational problems, the government may seek to review the arrangement.

What to watch

In the coming three months, investigations are likely to be largely channelled through the Economic and Financial Crimes Commission (EFCC), which has seen unprecedented activity since Buhari took office in May. Conscious of the inefficiencies and corruption in the national judiciary, the authorities are likely to pressure for individuals under investigation to seek plea bargains, and will either seek to renegotiate terms or cancel licences with commercial entities found to have engaged in corrupt activities or significantly breached contracts. The process will fuel considerable tensions, with many accusing Buhari of leading a politicised witch hunt to further personal and ruling party political interests.

Outlook

In the longer term, the focus for reform will centre on concentrating anti-corruption agencies into one powerful body. This is likely to draw strong presidential backing under Buhari but face significant resistance from his political opponents, including potentially within his own party. The vice-president’s office is also likely to oversee broader reforms to the judiciary, which has been a weak link in the fight against corruption. Anti-corruption activities will not be limited to Nigeria, with the authorities also calling on international partners – notably the US – to support in the recovery of stolen assets.