Where Does Oil Money Go? I Went to Nigeria to Find Out
In the last five years, oil-producing developing countries like Nigeria earned about $1.5 trillion. So where is all this money?
A gas flare looms over the community of Akaraolu, in the Niger Delta. Gas flares, with constant noise, ash, and noxious fumes are just one of the negative effects on oil-producing areas of Nigeria.
Finding the site of the most recent oil spill near the community of Rumuekpe, in the oil-rich yet troubled Niger Delta region of Nigeria, is relatively easy. First, take a truck down a narrow but paved road, until it ends. Then find a farmer with a motorbike, jump on the back, and rattle down a narrow path past farmers stacking oil palm kernels and yams in sacks, pulling them out of the way as you approach. When you find a huge fallen tree blocking the path, get off and walk another 200 meters.
You’ll smell it before you see the large puddles of water and oil, black in the sun. There’s evidence of clean-up activities, such as containment ponds the oil company dug to trap the oil, but the trees and bushes near the underground pipeline are dead and nearby springs are fouled.
Looking around, you might ask yourself hard questions: Why do spills like this happen? What about the people who live here? And where does all the money generated by this oil actually go?
Local farmers reflected in a pool of oil and rain water near the site of a pipeline spill in Rumuekpe, in the Niger Delta.
We at Oxfam have been looking at the question of how much value governments in low- and medium- income countries are earning from oil production, and the number is hard to grasp: it’s something like $1.5 trillion just in the last five years. How much of this is going to governments in the form of taxes, royalties, fees, bonuses? Is it being spent on schools, hospitals, roads, training for farmers, clean water? Or on scotch, vacation homes, and luxury cars for officials?
The New York Times’ Nick Kristof recently shared a documentary that asks similar questions about Angola, an oil-rich country that also has the highest rate of child mortality in the world. Wealthy people zip around in sports cars, while babies die in hospitals of entirely preventable diseases due to lack of medicine and staff. If you have not seen this, brace yourself and watch it.
Back in Rumuekpe, local activists showed me documents provided by Total, the company responsible for the oil spill, saying it spilled four barrels of oil. It seems like a puny amount given the extent of the withered trees and undergrowth.
“This is the kind of environmental damage associated with oil exploration in this country, and Rumuekpe has faced the worst of it,” says Paulinus Okoro, who works for an organization called SDN, which is in Rumuekpe to help communities recover from years of oil-related conflict and pollution. Okoro says he has no idea if the company has paid any fines. The farmers with us say they aren’t aware of any compensation paid to farmers in this area.
Paulinus Okoro, a specialist in community empowerment working in the community of Rumuekpe, shows visitors the site of an oil spill that has polluted a nearby spring.
About 100,000 gallons of crude oil pass through the pipes in and around Rumuekpe every day. It’s a critical place for the oil industry, which comprises nearly three quarters of Nigeria’s $521 billion economy.
While there, I asked people: How much money are the oil companies working in the area (including major international companies Shell and Total) paying to the government, and how much is the government providing to your community? No one can answer either of these questions, despite the fact that Nigeria is part of the Extractive Industry Transparency Initiative, designed to make visible the benefits of oil.
And where is the government? The people I spoke with say they don’t see much attention from the federal and state authorities, and instead rely on the companies for direct aid. After about 50 years of production, oil has brought Nigeria something like $600 billion. Communities in this area don’t have much to show for it apart from pollution and violence, so it seems to me this approach isn’t working very well.
“If we know how much the government gets from the companies, we can pressure them to allocate some of what they have gotten into remediation of the environment,” Okoro says, standing next to a small spring, black with oil, reflecting the troubled faces of the farmers peering into it.
The problems in Rumuekpe may seem far away to those of us here in the United States, but we don’t have to just dismiss them with a “what are you gonna do?” shrug the next time we fill our cars with gas. There is something we can do.
The US government has failed to implement a landmark oil, gas and mining transparency law that’s part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Section 1504 of this law requires oil, gas, and mining companies to disclose payments they make to governments. It is the law of the land, Congress passed it and President Obama signed it, we just need the Securities and Exchange Commission to finish writing the rules.
Oil companies operating in Rumuekpe like Total and Shell will have to follow these rules and state publicly in their annual reports what they pay to the Nigerian government for each project. Beyond Nigeria, this law could help millions of people in oil-producing countries find billions of dollars for fighting poverty—and maybe shed some light on where that missing oil money goes.
So go to TAKE ACTION NOW to sign a petition in support of Oxfam, and urge the Chair of the Securities and Excange Commission to finish the job on transparency.
This piece was contributed by Chris Hufstader, who has been working for Oxfam America since 1998. He writes about Oxfam America’s programs in West Africa, Asia, and Latin America.