Insight: Anatomy of Nigeria's $20 billion oil leak

SWAP DEALS

The third mechanism Sanusi identified involves other types of refined petroleum products, such as gasoline. Like kerosene, these are also imported. Nigeria is Africa’s biggest oil producer but it depends on imports for 80 percent of its fuel needs because its refining capacity is tiny.To pay for the imported products, Nigeria barters its crude oil.

Sanusi’s dossier focuses on these barter exchanges, which are known as “swap deals.” The idea is that importers who bring in refined fuel worth a given amount receive an “equivalent value” in crude oil.How that equivalent value is determined is unclear. Sanusi said he was uncertain how much, if anything, is lost in these deals. But he expressed concern at the sheer value of oil that changes hands and the lack of oversight. His report estimated that between 2010 and 2011, traders involved in swap deals effectively bartered 200,000 barrels of crude a day – worth nearly $20 million at average crude prices over the period – for a loosely determined equivalent value in refined products. It is impossible to tell, he said, if all the refined products were delivered, let alone if the terms were fair.”It was clear to us that these transactions … were not properly structured, monitored and audited,” he wrote.

Sanusi wrote in his report that mismanagement and “leakages” of cash in the industry cost Nigeria billions of dollars a year.Since the price of oil has fallen by around half since the start of 2014, such losses are even more significant. As it approaches elections, Nigeria faces plummeting oil revenues and a lack of buffers to shield the economy. Construction projects are on hold and the government is struggling to pay its sizeable workforce.

Multiple scandals in the oil sector since Jonathan took power have boosted the popularity of his rival, former military leader Muhammadu Buhari. Remembered by some for deposing a civilian government in a 1983 coup and trampling on civil liberties, the sandal-wearing general often promises to “free Nigeria from corruption.”Jonathan, too, says he will “clean up” Nigeria. By using technology and strengthening institutions, “I will solve the problem of corruption in this country,” he told a crowd in Ibadan in January.