Demonstrators gather at a burning barricade during a protest against the elimination of a popular fuel subsidy, that has doubled the price of petrol, at Gwagwalada on the outskirts of Nigeria's capital Abuja, in this January 9, 2012 file photo. In January, hundreds of thousands of Nigerians took part in the biggest protests in the history of Africa's most populous nation. Sparked by a hike in state-subsidised petrol prices, they were fuelled by anger at the graft that has for decades channelled oil wealth into the pockets of its elites. Those who have grown rich on Nigeria's oil usually avoid talking about graft, let alone tackling it. But sometimes the anger of a public impoverished by decades of malfeasance forces action. Responding to a public outcry, the government has in recent weeks announced a raft of measures to address corruption in the oil sector, an issue that may come to define Goodluck Jonathan's presidency almost as much as the Islamist insurgency in the north. To match Insight NIGERIA-CORRUPTIO

Joe Brock and Tim Cocks

Jolted by a public outcry since the start of the year, Nigeria’s government has announced a series of measures to address oil industry corruption in the world’s eighth-biggest producer. It is an issue that may come to define Goodluck Jonathan’s presidency.

An important supplier to the US because of the high petrol content of its oil, Nigeria has attracted billions of dollars of investments from the top oil multinationals. Yet poverty in Africa’s second-biggest economy is rising, with almost 100 million people living on less than a dollar a day, data released last month shows.

The proportions of Nigerians living in absolute poverty – those who can afford only the bare essentials of food, shelter and clothing – has risen to about 60 percent.

Two recent audits of the oil industry show billions of dollars in irregularities despite years of government promises to clean it up.

In January, Nigerians took part in the biggest protests in the history of Africa’s most populous nation. Sparked by a hike in state-subsidised petrol prices, the protests were fuelled by anger at the graft that has for decades channelled oil wealth into the pockets of a minority. Corruption has left oil-dependent Nigeria unable to meet its basic health, infrastructure or education needs.

Goodluck Jonathan won a presidential election last year that observers said was Nigeria’s cleanest since the end of military rule in 1999. Many voters had hopes that he would root out corruption. Among the actions announced by Oil Minister Diezani Allison-Madueke in January was the hiring of two accounting firms to audit the industry.

But even as the minister announced the new measures, auditors working for the Nigeria Extractive Industries Transparency Initiative (Neiti), a government-funded watchdog, were winding up another investigation into the oil industry. That study, examining the period 2006 to 2008, was sent to the relevant government authorities at the end of January.

A copy reviewed by Reuters lists discrepancies and shows billions of dollars missing from Nigeria’s oil revenues.

Getting a clear picture of how much money Nigeria has lost to corruption over the years is almost impossible. The system is haemorrhaging cash in so many places that accountants often struggle to make sense of it all. State oil firm Nigerian National Petroleum Corporation (NNPC) does not measure its output. The government estimates that average output is 2 million to 2.6 million barrels of oil a day.

“Right now, no one can tell you exactly how much of our crude is extracted from our soil,” said Orji Ogbonnaya Orji, who sits on Neiti’s board of directors. “We depend on records from the oil companies. That clearly has to change.”

The Neiti audit shows some startling gaps: $540 million (R4.1bn) missing from $1.675 billion in signature bonuses, which are advance payments to develop fields, a standard producer country demand. Then there’s 3.1 million barrels of oil missing from NNPC declarations about its joint ventures compared with the figures released by NNPC’s foreign partners. That equates to 0.25 percent of output.

NNPC also received $3.789bn in dividends from Nigeria LNG, a liquefied natural gas venture over the 2006 to 2008 period, but there is no record of those dividends being paid into the federal accounts.

An NNPC spokesman did not respond to requests to explain the irregularities listed in the report in detail. The firm denies malpractice. When asked about corruption last month, NNPC managing director Austen Oniwon replied that the issue was overblown. “Corruption in NNPC is in the imagination of some people.”

The Neiti report says foreign oil majors may have underpaid royalties “of $2.33bn arising from subjective interpretation of volume, pricing” and grading variables.

“We are questioning the basis of those calculations,” Orji said. “They are not calculated on the basis of empirical fact.”

Foreign firms also seemed to have underpaid petroleum profit tax by more than $1bn, Neiti said. The report recommended a review of the tax returns of Chevron and Exxon Mobil. Exxon officials were not immediately available to comment. A Chevron spokesman said the firm “complies with all laws and regulations in the locations where we operate; as a matter of long-standing policy Chevron does not release specific financial details”.

The Neiti audit has just been delivered to the government.

Another audit, this time by KPMG and focusing on the state oil firm, was delivered to the oil ministry in November 2010. The government has not published it. A copy shows similar practices. It notes NNPC invoices for domestic crude in US dollars but pays the government in naira and that “exchange rates used by NNPC were lower than (those)… published by the Central Bank of Nigeria”, causing a loss of 86.2 billion naira (R4.2bn) to the treasury from 2007 to 2009.

KPMG also said fuel subsidy claims were based on unverified declarations of fuel imported or refined rather than actual retail sales at pump stations.

Asked about the KPMG report in January, Jonathan pointed out that he had set the investigation in motion. “If people have been found to be corrupt, the law will take its own course.” – Reuters