April 26 (Bloomberg) -- Nigeria is gripped by a “civil war” over political patronage and the corruption it fuels, with government officials trying to end systemic graft at risk of losing the battle, central bank Governor Lamido Sanusi said.
They “have to literally wage a war against those who believe that we should continue doing things the way they’ve always been done,” Sanusi, 51, said in an interview last month in Lagos, the commercial capital. “I don’t think the reformers are winning.”
Hopes for change have faded since 2011 when President Goodluck Jonathan promised to fight corruption and named former managing director of the World Bank Ngozi Okonjo-Iweala as finance minister, ex-Goldman Sachs managing director Olusegun Aganga as trade and investment minister and retained Sanusi as central bank governor. Sanusi said on March 20 he won’t seek a second term when his contract ends in June 2014.
While the International Monetary Fund has praised the government’s “prudent macroeconomic policies,” corruption is costing Nigeria billions of dollars. The funds could be used to reduce the poverty that fuels insurgencies by the Islamist group Boko Haram in the north and militants in the southern oil-rich Niger River delta.
As of 2010, more than 60 percent of the population of Africa’s largest oil producer and most populous nation lived on less than $1 a day, up from 51.6 percent in 2004, according to the National Bureau of Statistics.
“Political corruption has always been one of the drivers of unrest and activism,” said Roddy Barclay, an analyst at Control Risks, a London-based business consulting group. “It plays into issues such as Boko Haram and the Niger delta militant campaigns.”
Last month, Jonathan pardoned his former boss, Diepreye Alamieyeseigha, the ex-governor of oil-rich Bayelsa state who was convicted for corruption and money laundering in 2007.
The pardon, which allows Alamieyeseigha to return to politics, “makes a joke of all the war against corruption,” said Nuhu Ribadu, 52, who headed the Economic and Financial Crimes Commission when its probe of the governor led to his conviction. Alamieyeseigha pleaded guilty and returned about 43 billion naira ($270 million) of embezzled funds to state coffers, Ribadu said in an interview.
The U.S. Embassy in Abuja, the capital, called the decision “a setback in the fight against corruption.”
Okonjo-Iweala, in her book Reforming The Unreformable published last year, hailed Alamieyeseigha’s sentencing to two years in prison as one of the first high-profile convictions of a corrupt official in Nigeria. “It was an important signal that there could be no more impunity,” she wrote.
Jonathan’s spokesman Doyin Okupe said the pardon was granted after Alamieyeseigha served his two-year jail sentence, returned stolen funds and was “extremely remorseful.” He has strong influence on militants who attack the oil industry in the Niger River delta and “has been assisting this government to ensure that the boys are kept quiet,” Okupe told reporters on March 14.
The Movement for the Emancipation of the Niger Delta, the main rebel group in the oil-rich region of Nigeria, said on April 3 it’s resuming assaults after a hiatus of about four years following the imprisonment of its suspected leader. Attacks, including kidnappings and bombings, cut Nigeria’s oil output by more than 28 percent between 2006 and 2009, according to data compiled by Bloomberg.
While the U.S. acknowledges the Nigerian government’s moves against graft, more must be done, Ambassador Terence McCulley said yesterday in an op-ed on the embassy’s website.
“Corruption in Nigeria diverts financial resources from building roads, hospitals, schools, and otherwise investing in infrastructure that would serve businesses, attract foreign investment and create jobs,” McCulley said. It “serves to promote criminal and extremist activity by creating barriers to legitimate economic endeavors.”
Record-high interest rates and economic growth of more than 6 percent last year fueled foreign investment in stocks and bonds. That has helped boost the Nigerian Stock Exchange All Share Index by 60 percent since the beginning of 2012 and strengthen the naira 2.2 percent against the dollar over the same period. Still, foreign direct investment is coming under pressure.
An increase in militant attacks and the stalling of the passage of a bill that will change the way the oil industry is regulated led to a 45 percent slump in FDI to 393 billion naira in the first half of 2012 compared with a year earlier, according to the central bank.
Corruption, the poor quality of infrastructure, high crime and widespread insecurity cost Nigerian companies more than 10 percent of sales in 2011, a level that is twice as high as in South Africa, Brazil, Russia and Indonesia, according to the World Bank. Berlin-based anti-graft group Transparency International ranked Nigeria 139th out of 174 countries in its 2012 Corruption Perceptions Index, from 143rd the year before.
The officials trying to clean up Nigerian governance can’t expect to make quick progress, said Abubakar Umar Kari, a lecturer in the political sociology department at the University of Abuja.
“They’re a tiny minority, because they are just like one island within a sea of graft,” he said. “There’s a well-entrenched system of graft and gratification system of corruption in place, and until it’s extricated, uprooted, individuals like Lamido Sanusi and Okonjo-Iweala will not make much difference.”
Nigeria’s 53 years of independence from the U.K. have been tainted by numerous examples of corruption, from the unfinished $5 billion Ajaokuta Steel plant to last year’s conviction of former Delta state Governor James Ibori for 13 years in the U.K for stealing about $250 million of public funds.
Albert “Jack” Stanley, the former KBR Inc. chief executive officer, was sentenced in February 2012 to 2 1/2 years in prison in the U.S. for bribing Nigerian officials to win $6 billion in natural gas contracts.
Between 2001 and 2010, Nigeria had the seventh-highest level of illicit financial outflows out of 143 developing nations, totaling $129 billion, according to Washington-based Global Financial Integrity.
A task force commissioned by the petroleum ministry to look into graft found that Nigeria LNG, owned by state-run Nigerian National Petroleum Corp., Royal Dutch Shell Plc, Total SA and Eni SpA, may have underpaid the country for gas before exporting it to international markets. That cost Nigeria about $29 billion in the decade through 2011, according to the report.
Nigeria relies on crude oil sales for about 80 percent of government revenue and more than 90 percent of foreign income, according to the central bank.
Since the report was submitted to Jonathan in November, “not a word has been heard so far,” said Ribadu, who headed the task force.
The report is “entirely flawed,” Nigeria LNG said in November. NNPC spokeswoman Tumini Green and General Manager of Media Relations Omar Farouk Ibrahim didn’t answer several calls and text messages seeking comment.
Another parliamentary probe said the government paid 1.1 trillion naira illegally to fuel importers between 2009 and 2011 and recommended top officials be investigated.
“We just have to keep doing our best,” Sanusi said. “Everybody just has to keep trying not to give up and maybe something will give, and something has always given in the history of every country.”
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