NEW RULES

Nigeria 2016 | ECONOMY | FOCUS: TRANSPARENCY

Since taking office and inheriting a cynical population, President Muhammadu Buhari has made transparency a keyword for his administration.

In a survey conducted by Transparency International (TI), 85% of Nigerians believe that corruption had increased between 2011 to 2013 under Goodluck Jonathan's leadership, and TI ranked Nigeria at 136th out of 175 countries in their Corruption Perceptions Index in 2015.

Global Financial Integrity estimates that more than $157 billion left the country illicitly over the last decade. The examples are widespread, though corruption was particularly rampant in the public sector. The most glaring example is the Nigerian National Petroleum Corporation (NNPC), which was at the heart of a vast theft of resources in which billions of dollars in oil revenue failed to reach the state. The New York-based National Resource Governance Institute concluded that malpractice at the NNPC resulted in $32 billion going missing during the last administration.

Key problems identified with the NNPC included the Domestic Crude Allocation, which was initially designed to feed Nigeria's refineries but in practice was largely exported and fueled discretionary spending to over $6 billion a year between 2011 and 2013. Poorly structured oil-for-product swap agreements were also cited as a large problem, with recent offshore processing agreements containing unbalanced terms that failed to serve Nigeria's needs. A 2015 National Resource Governance Institute report estimated that losses from such contracts could have reached up to $16.09 per barrel of oil.

The NNPC has a poor corporate governance structure. Common complaints are that the NNPC's reporting to government agencies and the public on oil sales is patchy and regularly contains contradictions. This could be a symptom of the organization's poor internal record keeping systems, which are both disorganized and secretive. Without basic checks and balances like published annual reports however, auditing the NNPC's management of oil sales is impossible. PwC's revealing audit of NNPC opened with the following: “The NNPC model of operation must be urgently reviewed and restructured, as the current model which has been in operation since the creation of the corporation cannot be sustained.”

Today, with state revenue under pressure from low oil prices, which contribute an estimated 75% of government revenues, Buhari wasted little time in introducing new, private sector blood into the NNPC. The new head of Nigeria's state oil company, Mr. Emmanuel Kachikwu, is a former lawyer and employee at ExxonMobil. There are high hopes for him and his new appointments, including direct hires from Total, Statoil, and Royal Dutch Shell, all intended to root out corruption and mismanagement at the NNPC.

Nationally, compliance with global standards is one of the key emphases of this push. With much of the economy and industry relying on FDI, the government understands that in order to sustain economic growth, Nigeria must implement a regulatory compliance framework that meets international standards. Nigerian companies are finding themselves under pressure to improve financial reporting and corporate governance. Accounting companies and start-ups are taking advantage of this growing need for companies to meet IFRS (International Financial Reporting Standards), and IPSAS (International Public Sector Accounting Standard), and seeing a noticeable upsurge in demand for their solutions as SMEs and large organizations alike open their books to attract investment.

Technology is one important facilitator of this ambition. The economy is benefiting from startups, largely young, well-traveled tech-minded entrepreneurs who are coming up with solutions. One company TBY spoke to has come up with a fuel voucher that allows companies to track fuel costs remotely, rather than dealing with cash and middlemen, thus cutting out the opportunity for drivers to pocket fuel money. Other companies are developing payroll software that roots out cases of ghost employees, a problem that is particularly endemic in the public sector.

There remains much to be done, but post-election enthusiasm and the increasing access to affordable technology could well change the status quo. With more and more Nigerians coming online everyday, thanks to the ambitious telecommunications sector, online solutions are being rolled out that reduce the space for corruption.

Technology was also lauded as pivotal to the peaceful transition of power between Jonathan and Buhari. Biometric card readers were introduced to registered voters, and although there were still efforts to rig the result, the implementation of this Chinese-made technology made it impossible to inflate turnouts and results, which have been common in past elections. Many hope that Buhari's election signals a fresh chapter in Nigeria's history, with transparency aided by technology set to be a defining theme.