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Corruption and Bribery in the Oil Sector in Nigeria and Angola Essay

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Introduction

Nigeria and Angola are some of the African states that are frequently faced with corruption in the oil sector mainly because of a number of factors, including the presence of Multinational Companies and defective governmental policies. Personal rulers ruled these states in early 1990s before the end of the Cold War.

The political leaders entered into various contacts with MNCs from developed countries, who took advantage of underdevelopment in Africa. The two states are the largest producers of oil in Africa, even though they are still poor, as compared to other states that have oil across the world.

Government contracts are awarded to friendly oil companies that would later share the proceeds with a few elites in government. Some organizations such as the Global Witness claim that oil fields have provided the two states with billions of dollars but the same dollars end up in pockets of few government autocrats.

In fact, the global agency on corruption and misappropriation of public funds claims that poverty in the two states should be attributed to corruption and mismanagement of public resources such as oil (Shleifer &Vishney 1993, p. 602).

In the two states, non-existent companies are given lucrative concessions, but no clear records showing the beneficiaries of the projects. On the other hand, officials from Angolan and Nigerian governments claim to be making progress as far as transparency in the oil sector is concerned, which would attract genuine foreign investors.

It is established that Nigeria is the main oil producer in the entire region of Africa, pumping approximately 2.14 barrels of crude oil in the global market per day while Angola is known to contribute approximately 1.79 million barrels of crude oil to the world market daily. Currently, Angola is in the final touches of a deal, enabling it to receive 1.4 billion US dollars to boost the oil sector.

Due to this partnership, the state has gone ahead to reveal its expenditures and records on oil exploration (Baumol 2002, p. 19). Equally, Nigeria has also set up some policies that would help it cope with the increasing cases of oil fraud, one of them being liberalizing the oil sector.

This paper talks about corruption and bribery in the oil sector in Nigeria and Angola. It is established that corruption in the two states is closely related, even though each state will be discussed separately.

Background Information

Angola

On 15 July 2000, one of the most stable oil companies in Angola , the Marathon Oil Company, deposited 13, 717, 989 American dollars to one of the Jersey banks accounts in England. The bank is known for its rigorous banking laws. Investigations revealed that the one of the Angola’s bourgeoisie, Sonangol, owned the luxurious bank account.

It was later established that the amount represented the one-third agreement between the American based oil company and the Angolan government. The firm had been contracted to transact oil business on behalf of the Angolan government. Within the same period, Sonangol was believed to have transferred a certain amount of money to a private account belonging to him.

Furthermore, private investigations revealed that in the same period, some government officials, including the government minister, received some sums of money (Jerome, Adjibolosoo & Busari 2005, p. 26).

For instance, a charitable organization owned by the then head of state, as well as a private bank in Angola charged with the responsibility of checking the bank accounts of those alleged to be engaging in illegal firearms trade, received huge amounts of money.

It is evident that byzantine political and economic associations in Angola are prevalent. In fact, the state is one of the lowest in terms of transparency according to the TICPI rankings. The most surprising thing is that American firms and other firms from developed nations continue to conduct business with the government oil firm of Angola.

In the state, human rights organizations, diplomatic missions and supranational organizations have raised alarms over the misappropriation of public funds but no one is willing to listen. Indeed, the proceeds from oil end up in the pockets of a few individuals in government. Moreover, the finances are used to procure firearms that would later be used to propagate civil unrests.

However, neither the UN nor the IMF has been able to substantiate such claims. It is therefore true that proceeds from oil have destabilized the nation for many years, leading to loss of lives and property. The 25-year-old civil war is approximated to have affected several individuals, 500,000 people having been killed.

Nevertheless, infant mortality rate is always high because the state is unable to provide quality healthcare to expectant mothers and the newborns. Similarly, life expectancy has declined to hit 45 years, down from 60 years (Kochan & Goodyear 2011, p. 12).

In Angola, individuals are known to export more oil as compared to the state agency charged with the responsibility of marketing Angolan oil abroad. In 2000 for instance, the state exported oil totaling to 6.9 billion US dollars. Out of the total amount, 2.9 billion dollars belonged to one individual that is, Sonangol.

Analysts claim that about one billion US dollars flow into and out of private bank accounts yearly. Surprisingly, the Angolan law provides that all oil proceeds should be used to better the living standards of citizens, through construction of infrastructure, offering quality healthcare and improving the knowledge of citizens.

The International Consortium of Investigative Journalists observed that money is usually transferred from Multinational Companies to private bank accounts, without considering taxation and other requirements. This would mean national and international laws governing the behavior of state and non-state actors in the international political economy are not followed.

In 1977, the US government sponsored a bill referred to as the Foreign Corrupt Practices Act to curb the increasing cases of bribery but the law seems to be ineffective in stemming out corruption in Angola. International political economy scholars observe that Multinational Companies use their political and financial power to influence international laws that create barriers to their operations.

The power of such MNCs block the countries of the core from influencing the third world to accept policies that would curtail corruption conflicts emerging from scramble of oil. In Angola, oil firms have a tendency of hiring government security agencies, such as the police and the military to provide security to oil exploration fields, which have complicated the security of the state since early 1980s.

Oil crisis and corruption in Angola can be traced back to its establishment in 1956, when the Portuguese government set out plans to explore oil. Immediately after the departure of Portuguese in 1975, various groups scrambled for oil in the state.

Some groups employed a Marxist approach to the development of the economy, such as the MPLA, FNLA, and UNITA. In 1976, MPLA managed to form a government based at Luanda and went ahead to form a national oil company (Sonangol) that would assist to market Angola’s oil locally and internationally.

Immediately it was formed, the MPLA government used the proceeds from the Sonangol to wrestle its long-term enemy, the UNITA group, which had its funds from other sources such as diamond trade, the apartheid regime from South Africa and the US government. However, the civil war did not affect oil exploration because external forces controlled the sector.

Through the president’s charitable organization, a lot of money has been channeled to private projects that do not aim at benefiting the people of Angola. The organization claims to fund social projects such as setting up of hospitals, funding university education and supporting the construction of social amenities such as universities and schools. Through such projects, billions of dollars have been lost.

It can be concluded in this section that leading oil MNCs such as BP, Chevron, ExxonMobil and Ocean Energy are responsible for the rising cases of bribery in Angola. For instance, the head of state Dos Santos was invited in a private meeting organized by the named oil firms in the US to chart the way forward.

The Angolan forces had eliminated the UNITA opposition leader three days before the meeting but the US government was reluctant to question the credibility of the visit. In fact, the US government sent a representative in the meeting.

From the above analysis, it can be observed that the rich countries do not pressurize the less developed states to open up their economies and to embrace transparency in case their people and companies are benefiting from the arrangement. This shows that states are led their national interests in the international system.

In other words, the international system exists according to the Hobbestian state of nature, whereby life is anarchic, short-lived and brutal. The US has always opposed democratization process in Angola because it would interfere with its national interests.

Since the US MNCs are reaping maximally from the confusion and poor governance in Angola, the US would hardly use its power as the superpower to influence Angola to adopt certain policies such as those adopted in Kenya under the structural adjustment programs.

The ongoing economic partnership between the government of Angola and the IMF cannot be compared to that witnessed in Kenya. Realists would describe the problem in Angola to be associated with the nature of the international system, which is anarchic and brutal.

Ethics are not embraced because the rich states would only want their citizens to benefit from the resources found in another state. Even after the change of power and authority in the US, nothing has changed since the Obama administration has not promised to act.

Nigeria

Nigeria is one of the most corrupt nations in the world according to the international transparency body, the global witness. Just like Angola, the proceeds from oil in Nigeria do not reach the poor. Profits are shared out among the rich individuals in society. In fact, various organizations, including the UN, the IMF and the world have accused Nigerian government of corruption because close associates of the heads of states manage oil firms.

The small firms that do not meet the international operational standards are warded government tenders even without vetting them. Just like in Angola, government officials register companies with their names, which are in turn given tenders in their departments or ministries. Others are registered privately and do not identify the real owners or beneficiaries of the oil proceeds.

For instance, one of the companies owned by the senator and the president’s relative was given a lucrative government contract to manage oil activities. In Nigeria, just like in Angola, companies have battled it out in court over the existing Foreign Corrupt Practices Act.

In a recent interview with one of the Swedish journalist, the head of state, Jonathan Goodluck, admitted that corruption was rampant in the oil sector, even though he promised to handle it. The president pointed out that since the government had succeeded in tackling corruption in the fertilizer industry, it would also get rid of the vice in the oil sector.

In Nigeria, the main problem is related to the presence of MNCs, just like in Angola, even though the state of affairs in Nigeria is more complicated since it involves the ethnic communities who feel subjugated and neglected by their own government.

Petroleum exploration in Nigeria takes place under the directorship of the joint ventures, which are mainly between the MNCs and the government of Nigeria. In fact, this is usually the main problem, especially when it comes to share distribution. The national oil corporation controls the activities of all stakeholders in the oil industry.

For instance, all companies operating in Nigeria must conform to the norms of the Nigerian, by changing their names to sound Nigerian. Due to this fact, all companies must have Nigerian names to reflect their activities in the state. This means that all multinational companies operating in Nigeria have the sole purpose of bettering the living standards of Nigerians, which is obviously not true.

Over 95% of all crude oil processed in Nigeria belongs to the Multinational Corporations. This means that a small percentage is controlled by the Nigerian populace thus the working class would not have access to the distribution of oil resource.

Some of the Multinational companies operating in Nigeria include Royal Dutch Shell (British), Chevron (American), Exxon-Mobil (American), Total and Agip (Adejumobi 2007, p. 23).

Owing to the many problems affecting the Nigerian oil sector, the conflicts in the Niger Delta are never ending since 1990. Since 1990s, the ever-increasing tension among the MNCs, the government and the communities around oil exploration fields led to increased corruption and mismanagement of public resources.

In particular, the minority ethnic groups, such as the Ogoni and the Ijaw believed that their resources were being exploited. Even after changing from autocratic regime to democratic system of government 1999, corruption was still a major problem in government.

Due to corruption, people in government are able to fund militia groups, which are frequently utilized during elections to instill fear among voters and intimidate political opponents (Lawal 2007, p. 5). Furthermore, money obtained through corruption in the oil sector is utilized in buying voters and persuading them to elect incompetent leaders.

In the oil exploration fields, leaders use their power and resources to fuel tribal clashes leading to instabilities and loss of lives. The militiamen are everywhere in Nigeria meaning that it has become a norm. This is attributed to corruption in the oil sector. On the other hand, the government and the MNCs use their financial capability to suppress any form of opposition from resisting communities or competing entities.

Due to corruption, victims of crime, such as rape, assault and kidnapping can never seek justice mainly because of corruption (Kofele-Kale 2006, p. 11). The culture of impunity is wide-spread to an extent that people fear conflicting with those perceived to connected to the oil economy.

Effects of Corruption on the Two States

In the global political economy, the demand for oil is rising but the supply is falling meaning that any country that produces oil is strategically important, given the fact that it can alter the economy of the world. The current international system is different from the previous one. For instance, when the oil cartels controlled the supply of oil to major world economies, the economy of the world was affected largely.

Presently, it is hard for this scenario to happen since small countries would come in salvage the situation. For this reason, corruption in states such as Angola and Nigeria can lead to unrests and instabilities in the supply of oil globally. For instance, the political instabilities and ethnic clashes witnessed in Southern Nigeria town of Warri in 2003 affected the economy of the West African states.

One of the American strategists argued that in the competitive international political economy, even a single barrel of crude oil counts a lot. This means that issues such as corruption in the third world can easily increase the prices of oil globally. From this perspective, it is true that corruption in one state can lead to conflicts related to price increase globally.

Additionally, corruption complicates the governance system since the poor are not given any chance to participate in societal activities such as voting peacefully and electing leaders of their choice. As earlier noted, politicians in Nigeria use their resources to influence voters to re-elect them or to support policies that favor their corrupt deals.

In this case, governments elected are never responsive to the wishes and desires of the majority. Such governments would only serve the interests of the masters, which are MNCs in the case of Nigeria and Angola. In other words, elected leaders in Nigeria and Angola are referred to as Comprador-bourgeoisie. Such leaders would come up with policies that would only favor the existence of MNCs and the rich nations.

For instance, leaders receive briberies only to allow defective labor laws to be applied in the state. Furthermore, the elected leaders in government, such as in Angola, are coerced by the MNCs to suppress workers whenever they attempt to demonstrate t demand for their labor rights. Regarding the environment, there would not be sustainable development because the laws governing exploration and mining are not followed to the letter.

MNCs are only interested in maximizing their profits but not preserving the environment. The kind of exploration taking place in Angola and Nigeria cannot be compared to that taking place in countries such as China, Russia, and the US.

In such developed countries, the future generation is always considered meaning that the government ensures mining and exploration adheres to the standards set by the United Nations Environmental Program.

Corruption in the oil sector in Nigeria and Angola has led to the formation of class society, whereby the minority own everything while the majority are left languishing in great poverty. In Angola for instance, we are told that government officials including the head of state and his cabinet own billions of dollars while the rest of the population is still struggling with basic needs such as food, water and clothing.

Furthermore, the gap between the poor and the rich is ever increasing, as witnessed in Nigeria whereby a certain ethnic group is empowered with resources while the other is perpetually pushed to the periphery (Tanzi 1995, p. 43). The Christian population is always in constant conflicts with the Islamic populace mainly because of issues related to resource distribution.

In many cases, money meant for development of infrastructure is channeled to arms proliferation. The Nigerian and Angolan governments can barely offer healthcare to its citizen meaning that child mortality rates in the two states are expected to rise, even though the two economies are expected to do well due to natural resources.

Corruption through links with the MNCs has eroded the sovereignty of Nigeria and Angola. The state does not have the power to act unilaterally since it has to consult its development partner even offer small issues touching on state security.

The oil firms are actually represented at every level in government meaning that elected officials in Nigeria and Angola are simply puppets of the west. In global affairs, the state does not have the power and authority to contribute to important discussions because it has to consult the people who provide funds.

In this case, Nigeria and Angola are simply treated as renter states meaning that they do not have the power over oil in their own land. In 1992 for instance, Nigeria and Angola did not attend the AU summit aimed at discussing the effects of MNCs and the influence of the west in Africa.

The two states were urged not to attend by the US MNCs because it would interfere with their cooperation. It is true that the power of the state is affected by corruption.

Solutions to Corruption in Nigeria and Angola

Corruption is chronic cancer that has always affected the living standards of the poor in Africa. It is the major cause of conflicts such as tribal clashes, political instabilities, poor governance and increased crime. To solve the problem, it would be prudent to identify the major cause of the problem.

It is identified that the west, through their MNCs, are solely to blame for the rampant cases of corruption in Nigeria and Angola. For this case, it would important for the developed countries to embrace transparency by cutting links with corrupt government officials and their businesses.

As earlier stated, the west act as the safe havens for corrupt African leaders because corrupt leaders keep their resources in stabilized states such as Switzerland, France, Portugal, the US and Britain. Such states should publicly cut links with criminals who steal from their governments only to invest abroad.

This would be one of the most important policies aimed at curbing the vice (Scher, D 2005, p. 78). Sanny Abacha of Nigeria for instance is reported to have kept his money in one of the Swiss account meaning that the west propagates the activities of the corrupt individuals.

Another strategy would be to lobby the United Nations Security Council to slap economic and political sanctions to corrupt states. This would make it difficult for corrupt leaders to market stolen oil abroad, as was the case with Libya in early 1990s. This would ensure compliance and respect of the rule of law.

For this happen, the international community should intervene and the developed countries, through their MNCs should not interfere. The warlords and politicians who use oil proceeds to equip their people with arms are to be investigated, arrested and charged at the International Court of Justice (ICC).

This system of administering justice has worked elsewhere and can apply in Nigeria and Angola. In Kenya and Liberia for instance, aggressive leaders, who tend to use militia groups to instill fear and intimidate political opponents have received or are about to receive their share at the International Court of Justice (Klitgaard 1988, p. 76).

Conclusion

It can be concluded that corruption in the two states are not different in any way. Leaders in the two states divert public resources to their private accounts. The same resources are used to propagate tribal conflicts and suppress political opposition. MNCs have a big role to play in proliferating corruption because they bribe leaders in order to be given tenders and contacts to explore oil.

Corruption lowers the status of the state in the international system because government officials are generally treated with low esteem during global conferences and meetings. Furthermore, corruption creates a society with ‘ten millionaire and ten million beggars’.

Corruption in Nigeria and Angola is a global problem that should be addressed through formulation of global policies. For instance, slapping sanctions to Nigerian and Angolan government officials would be a great solution.

List of References

Adejumobi, S 2007, “When Votes Do Not Count: The 2007 General Elections in Nigeria”, Nordic Africa Institute News, Vol. 1, no. 2, pp 23-56.

Baumol, WJ 2002, The Free-market Innovation Machine: Analyzing the Growth Miracle of Capitalism, Princeton, Princeton University Press.

Jerome, A, Adjibolosoo, S & Busari, D 2005, “Addressing oil related corruption in Africa. Is the push for transparency enough?” Review of Human Factor Studies, Vol. 11, no. 1, pp 7-32.

Klitgaard, R 1988, Controlling Corruption, University of California Press, Berkeley.

Kochan, N & Goodyear, R 2011, Corruption: the new corporate challenge, Palgrave Macmillan, London.

Kofele-Kale, N 2006, “Change or the Illusion of Change: The War against Official Corruption in Africa”, The George Washington International Law Review, Vol. 38, no. 4, pp 697–747.

Lawal, G 2007, “Corruption and development in Africa: challenges for political and economic change”, Humanity and Social Sciences Journal, Vol. 2, no. 1, pp 1-7.

Scher, D 2005, “Asset recovery: Repatriating Africa’s looted billions”, African Security Review, Vol. 14, no. 4, pp 78-89.

Shleifer, A &Vishney, R 1993, “Corruption”, Quarterly Journal of Economics, Vol. 108, no. 1, pp 599-617.

Tanzi, V 1995, The Economics of Organized Crime, Cambridge, Cambridge University Press.

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