More on: Corruption and governance
Nigeria’s President-Elect Muhammodu Buhari addresses a news conference outside his house after he voted in Daura, March 28, 2015. REUTERS/Akintunde Akinleye
I was wrong. For the past several months, I argued against the growing talk of a potential win by Nigeria’s opposition party in last Saturday’s presidential polls. I spouted the conventional wisdom: the president of an oil-rich country, especially one with weak institutions, enjoys too many advantages and too much influence to be unseated.
The win by opposition leader Muhammadu Buhari signals a major step forward for Nigerian democracy. It’s the first time a Nigerian opposition party has won since military rule ended in 1999, and the elections seem to have been relatively peaceful.
Buhari’s win surprised me because Nigeria’s oil sector theoretically confers great advantages on the incumbent. For the five years that President Goodluck Jonathan sat atop the world’s 12th largest oil industry, oil prices averaged over $100 per barrel, and he exercised high levels of discretion in how oil revenues were spent.
For instance, he influenced the amount of oil revenues distributed among the country’s powerful governors, and funded special programmes for the Niger Delta region that cost $1.2 billion in 2013 alone.
The head of state also gets to allocate valuable upstream, import and export licenses, which can be used to reward friends or appease enemies. Oil minister Diezani Alison-Madueke steered many of these prized assets towards Nigerian companies, many of which relied on strong political connections to garner favour in discretionary selection processes.
The leakiness of Nigeria’s oil sector also nets political gains, if political elites benefit from illicit flows. Nigeria loses around 100,000 barrels a day to oil theft. As suggested in a 2013 Chatham House report, much of that theft relies on official complicity, and therefore may have benefited powerful interests in the Niger Delta.
However, the election results suggest that these advantages were not enough to return Jonathan to power. Rather, shortcomings in how Jonathan managed the country’s oil wealth may have led voters to turn toward his opponent. Broadly speaking, high poverty rates continued in spite of historic oil returns.
More specifically, three examples illustrate the administration’s weak governance record. First, while Jonathan used oil money to increase security budgets from $3.2 billion in 2009 to $4.8 billion in both 2013 and 2014, the military has struggled in the fight against Boko Haram, and security was a hot electoral issue.
Second, a failure to accumulate savings during the years of high oil prices left Nigeria ill-prepared to manage the dramatic 2014 price crash. The economic decline led to major downgrades in Nigeria’s investment classification, and the dropping value of the naira left everyday Nigerians – a.k.a. voters – feeling the pinch.
Third, numerous scandals, controversies and critical reports suggested that Jonathan managed the oil sector in a sub-optimal manner that left room for corruption. The 2012 fuel subsidy scam saw Nigeria lose $6 billion; the 2012 Ribadu report pointed out other losses on a similar scale; and the central bank governor blew open a 2013 controversy over whether the national oil company NNPC illegally retained $20 billion in public funds. The government’s unkept promises to pass the Petroleum Industry Bill reinforced its reputation for opposing, or at least unable to effect, a clean-up.
Nigerians will now find out if Buhari can manage the country’s oil wealth in a manner that engenders broad-based development. Oil sector reform simply must be a priority for the victor. From restructuring NNPC to rethinking the problematic excess crude account, there are many ways to increase the benefits that Nigerian citizens receive from their oil wealth.
With lower prices encouraging fiscal discipline and a new leader in power, it seems a promising time for this agenda to advance. This time, I hope I’m right.
(Alexandra Gillies is the director of governance programmes at the Natural Resource Governance Institute.)
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