Switzerland must boost transparency and regulation of Swiss and Swiss-registered oil traders, whose practices are draining billions of dollars from Nigeria and complicating impressive efforts to reform Nigeria’s oil industry, including compliance with the Extractive Industries Transparency Initiative (EITI).
Among the top 10 oil producers in the world and the leading producer in Africa, Nigeria used the EITI to combat the lack of transparency and accountability by disclosing extensive sets of data that uncover major irregularities and corruption, thus triggering public scrutiny and debate.
But Swiss companies and Swiss-registered companies have been seriously implicated in fraud surrounding imports and exports of petroleum products to and from Nigeria, according to a recent report, Swiss Traders’ Opaque Deals in Nigeria, by the Berne Declaration.
In 2011, for example, Swiss traders bought 35 percent (US$ 8.7 billion) by value of Nigeria’s oil exports from the Nigerian National Petroleum Corporation (NNPC), a state-owned company. Nigerian traders with a Swiss-based subsidiary bought another 21 percent (US$ 5.3 billion). The Berne Declaration says that in some cases the NNPC sold oil at prices lower than market rates to two Swiss traders.
“This type of operation appears incongruous: why would the NNPC sells its crude oil at a discount? Who benefits from these transactions?” the Berne Declaration asks.
Nigeria’s people lose out on the import side too. Despite being a major oil producer, Nigeria must import 80 percent of its refined products, including petrol and kerosene, because its refineries do not function as they should. These imports are heavily subsidised to make them affordable on the domestic market. But this system has been massively abused, the Berne Declaration says.
Two reports by Nigerian authorities, for example, found that around 70 locally-based importers may have taken part in a variety of techniques that add up to massive fraud, for example, by falsifying import papers in order to over–declare the scale of oil imports and to collect more subsidy.
“No less than 6.8 billion dollars of unjustifiable subsidies were paid out in 2009 and 2011 – that is the equivalent of nearly four times the Nigerian health budget for 2013”, the Berne Declaration report says.
Most deliveries take place outside Nigerian territorial waters, so the Berne Declaration say they cannot give a figure for what share of Nigeria’s petroleum products are supplied by Swiss traders.
“Nonetheless, several indicators tend to confirm that they dominate this market of deliveries to Nigerian importers,” the report says, noting Nigerian requests for support from the Swiss legal system, questionable shipping practices, and links between Swiss traders and Nigerian companies, guilty of fraud. Of the 70 companies suspected of fraud, at least seven have subsidiaries in Geneva, the Berne Declaration says.
In its 2013 Africa Progress Report, Equity in Extractives, the Africa Progress Panel urges the international community to promote a global transparency standard, develop a credible and effective response to tax avoidance and evasion, and to tackle money laundering and anonymous shell companies.
Photo credit: APP