An analysis on the impact of corruption on petroleum sector, a case study of NNPC

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An analysis on the impact of corruption on petroleum sector, a case study of NNPC  

Abstract

The research examines the impact of corruption in oil and gas industry as implication for economic growth. survey research method was adopted for this study. The finding of the study is that the level of corruption in Nigeria has significant impact on economy growth. The implication of this finding is that economy cannot grow fast without zero tolerance in corruption. The study concluded that despite efforts of ICPC and EFCC corruption still remain problem to Nigeria economy. The study recommends that all the public loots should be thoroughly investigated and offenders once found guilt should e prosecuted and the loots taken back on the value of what has been stolen.

 

 

 

 

 

 

CHAPTER ONE

  • Background of the study

Corruption remain one of the greatest hindrance to economic and political development of any nation.(Mohammed, 2013). Corruption has been identified as one major obstacle militating against rapid growth and development of the Nigerian economy (Nagari, Umar & Abdul, 2013). It undermines good government, fundamentally distorts public policy, leads to the misappropatriation of resources, harms the private sector and private sector development, and particularly it hurts the poor (Ajao, Dada & Olaoye, 2013). They also state that as a result of the negative effects of corruption on economic development, Nigerian government and international organizations seek for solution on how to combat the menace. Researchers has that corrupt practices have been perpetrated in governance, public and private places since the pre- colonial era to the colonial period and through independence to present Nagari et al., 2013). Corruption is an ancient practice that has been traced back to pre-biblical time and made itself known in the ancient civilizations of developed and developing countries (Nwankwo, 2014).

Corruption is a disease, which eats into political, cultural and economic growth of any country and destroys the functioning of various organs of the government. The rise of public administration and discovery of petroleum and natural gas are two major events seen to have led to a litany of ignoble corrupt practices in the country (Wikipedia, 2014). Corruption steals money social programmes and services through bribery, kickbacks and inflated pricing of contracts and public projects (Obioma, 2012). He also notes that corruption breeds crises in the country turn out to constitute some of the greatest dangers to the security of the nation. The level of corruption and poor governance prevailing in the Nigerian system still remain high, albeit there are so many efforts by economic and financial crime commission (EFCC), independent corrupt practices and related offences commission (ICPC), Transparent international, World Bank and many other organizations to reduce it (Akinwale, 2012). Baghebo and Atima (2013) stress that since the Royal Dutch shell discovered oil in the Niger Delta in 1956, precisely in Oloibiri, in Bayelsa state, the oil industry has been marred by political and economic strife largely due to a long history of corrupt military regimes, civil rule and complicity of multinational corporations, notably Royal Dutch Shell. Ribadu (2006) as cited in Ajao, Dada and Olaoye (2013) say that the history of corruption in Nigeria is strongly rooted in the over twenty nine (29) years of military rule, out of forty six (46) years of her statehood since 1960. According to him, successive military regimes subdued the rule of law, facilitated the wanton, looting of the public treasury, decapitated public institutions and free speech and instituted a secret and Opaque culture in the running of government business. The result was total insecurity, poor economic management, abuse of human rights, ethnic conflicts and capital flight. Prior Studies have looked at corruption in Nigeria (Bakare, 2011. Lawal & Victor, 2012; Ogundiya, 2009; and Mohammed, 2013). However, no prior study has focused on corruption in the oil and gas industry in Nigeria. Hence there is need for this study. The focus of the exercise is on corruption in the oil and gas industry in Nigeria, keeping constant the existence of corruption in the other aspects of the Nigerian society economic, social, political, religious, academic institution and corruption in the services, etc. the nature, types, consequences, efforts made to reduce corruption in the oil and gas sector in Nigeria.

Oil and gas industry is the mainstay of the Nigerian economy, it plays a vital role in shaping the economic and political destiny of the country. Revenue from this industry amount to 70% – 90% of the total foreign earning from export activities annually (NNPC, 2014). Nigeria economy revolves around the business activities of its oil and gas industry as it generates the vast majority of government revenues. Its major activities (acquisition, exploration, production and development) are characterised by huge capital expenditures, high technological expertise and the ability to manage investment risks. Funding of these industrial activities cannot be undertaken by developing countries like Nigeria, whose main source of revenue before the discovery of crude oil in large commercial quantities were not sustaining the developmental needs of the state. Oil and gas exploration, development and production operations have been a threat to the quality of life and hence, command expenditures on health, safety and environment. However, most oil rich developing countries lack the resources, technical expertise and capabilities to manage the large investment risks (Saidu & Sadiq, 2014). Johnston, 1994 (as cited in Saidu & sadiq 2014). opined that foreign oil companies with sufficient capital, expertise, and technology as well as investment risks capabilities are issued with licenses to explore and develop oil in the oil-rich developing countries. Nigerian oil and gas industry has witness high amount of capital inflow from Foreign Direct Investment (FDI). The impact of these foreign direct investment has little or no effect on the economic development of Nigeria as a result of lack of accountability, transparency and high spread corruption in all sector of Nigeria economy. Corruption is generally defined as the misuse of public power for self benefit. Ijewere, 1999 ( as cited in Usman, 2011) state that the cause of under-development in the African continent is due to mismanagement of resources than the lack of them. Aghalino, 2006 ( as cited in Usman, 2011) explained that, in Nigeria, “oil is thicker than blood”. Indeed, in Nigeria oil is blood and blood is oil considering the level of attention and conflicts it has generated over the years Usman, (2011). Corruption is manifested in every phase and sector of the Nigerian socio-political economy but it is more pronounced in the petroleum sector in the country. Because Nigeria so much depends on the petroleum sector as her source of living, income, economic growth and development, any corrupt practice in the sector by any person or party automatically affects all other sectors of the economy. Nigeria, the country that has earned and retained the number one crude oil producer in Africa, and has indeed moved up to become the world’s seventh largest exporter of crude oil and the 10th biggest holder of process gas reserve (The Punch Newspaper April 24, 2008: 24) has paradoxically not only ranked among the poorest countries in the world (Omotola, 2006), but also one of the most heavily indebted countries of the world until 2005 when Paris club of creditors ‘magnanimously’ cancelled substantial part of its foreign debt, which has started heaping again. External debt as at the end of first quarter 2014 stood at US$9166.02million. Despite its massive earning from oil, about 70% of its estimated 150 million people live in abject poverty on less than $2 US per a day, with Nigeria consistently being ranked higher from year 1999 to 2007 corruption perception index reports (Adomako, 2008). Despite series of anti-corruption crusade, corruption has been a ‘normal way of life’ in Nigeria. According to Adomako (2008) there is an historical symbiotic relationship that exists between oil and corruption in Nigeria. Most of the proceeds from the Nigerian oil wealth ends up in the pockets of their leaders. Nigeria’s problem has been how to spend its money and not absence of money. These factors has undermined the developmental strive of the nation generally.

  • STATEMENT OF PROBLEM

The impact of corruption in the Nigerian petroleum sector is alarming irrespective of the fact that several government administration has come up with various strategies and programs in combating this monster call corruption, some of this strategy include war against indiscipline, change begins with me, zero tolerance to corruption to mention but a few. But the more war is waged against corruption the more these hydra call corruptions continue to sap the finances of the sector dry through looting by political appointee and high ranking public servants of the sector. This study seeks to investigate the impact of corruption on the productivity of the petroleum sector.

  • OBJECTIVE OF THE STUDY

The main objective of the study is to analyze the impact of corruption on petroleum sector in Nigeria, however, the researcher seek to achieve the following objective at the completion of the research.

  1. The impact of corruption in the petroleum sector
  2. The implication of corrupt practices in the sector on economic growth
  • The ways of eradicating corruption in the sector
  1. The role of the government in combating corruption.
    • RESEARCH QUESTION

For the successful completion of the study, the following research questions were formulated:

  1. What is the impact of corruption in the petroleum sector?
  2. What are the implications of corrupt practices in the sector on Nigeria’s economic growth?
  • What are the ways of eradiating corruption in Nigeria petroleum sector?
  1. What is the role of the government in the fight against corruption?
    • SIGNIFICANCE OF THE STUDY

It is conceived that at the completion of these studies, the findings will be of benefit to the anti graft agency EFCC in their fight against financial crime and other related offenses, the study will also be of benefit to other law enforcement agency, government parastatals, the commission i.e the Nigerian national petroleum commission (NNPC) in order to curb financial irregularities in the sector.

The studies will also be of benefit to academia, students, teachers, lecturers, researchers and the general public.

  • SCOPE AND LIMITATION OF THE STUDY

The scope of this study covers an analysis on the impact of corruption on Nigerian petroleum sector. However, the study has some limitations, which are:

  1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
  2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher have to combine other academic activities and examinations with the study.
  3. c) FINANCE: The finance available for the research work does not allow for wider coverage as resources are very limited as the researcher has other academic bills to cover.

1.7 DEFINITION OF TERMS

PETROLEUM

Petroleum is a naturally occurring, yellow-to-black liquid found in geological formations beneath the Earth‘s surface, which is commonly refined into various types of fuels. Components of petroleum are separated using a technique called fractional distillation. It consists of hydrocarbons of various molecular weights and other organic compounds. The name petroleum covers both naturally occurring unprocessed crude oil and petroleum products that are made up of refined crude oil. A fossil fuel, petroleum is formed when large quantities of dead organisms, usually zooplankton and algae, are buried underneath sedimentary rock and subjected to both intense heat and pressure

CURRUPTION

Corruption is a form of dishonest or unethical conduct by a person entrusted with a position of authority, often to acquire personal benefit. Corruption may include many activities including bribery and embezzlement, though it may also involve practices that are legal in many countries. Government, or ‘political’, corruption occurs when an office-holder or other governmental employee acts in an official capacity for personal gain.

NNPC

The Nigerian National Petroleum Corporation (NNPC) is the oil corporation through which the federal government of Nigeria regulates and participates in the country’s petroleum  industry.

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