Nigeria faces big test over fuel fraud

The Nigerian government is stepping up its attack on corruption in the oil sector as the country's anti-graft agency prepares a range of indictments.

Twelve people and seven companies will be charged, the country's economic and financial crimes commission (EFCC) said this week.

It follows a probe commissioned by president Goodluck Jonathan that found fuel traders and government officials had syphoned off 382 billion Nigerian naira (Dh8.84bn) in falsely claimed fuel subsidies last year alone.

"This investigation is massive and extensive," said Wilson Uwujaren, a spokesman for the EFCC. "More suspects will be arraigned periodically as the investigation progresses."

One of the 10 biggest crude exporters, Nigeria's oil wealth has been diminished by years of endemic corruption and chronic mismanagement. Previous attempts to tackle the problem have failed, leading to big holes in the government budget.

The government has been keen to reduce this expenditure, abolishing subsidies on petrol at the beginning of the year. After a week of strikes and protests, the government was forced to partially reinstate the subsidy.

To rescue its reformist petroleum industry bill, intended to remove all subsidies and bring transparency to the country's oil industry, experts say the government has to take a tough line on offenders.

"The government has to stop the subsidies. For the government to get the public to buy in, they have to be seen to punish those that abuse the system," said Kayode Akindele, a partner at the investment firm 46 Parallels, based in Lagos.

After years of malfeasance, the country is in a mood for change, said Idriss Hadj-Nacer, an analyst at Business Monitor International.

"The government has a better chance at succeeding now than ever before, mainly because of growing popular discontent with corruption in the oil sector."

Subsidy fraud typically involves traders overstating the amount of fuel sold into the country, collecting vastly inflated amounts of subsidies with the help of corrupt government officials, said Mr Hadj-Nacer. Subsidised fuel may also be smuggled to neighbouring countries.

Despite its oil wealth, the lack of a refining industry means the bulk of Nigeria's petrol is imported.

"It's really a watershed for the government. It wants to be serious on corruption, wants to reform the economy. This is the first big test for that," said Mr Akindele.