Product details

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Abstract

Nigeria was the seventh largest producer of oil and gas in the world but was afflicted by the 'resources curse', an oil mono-economy, neglect of the real sector, corruption, conspicuous consumption and parlous infrastructure. It depended on fuel importation to satisfy local demand as its own refineries were decrepit. Oil marketers were selected by the national oil corporation, NNPC, for crude oil swaps in exchange for imported products. The difference in the landing price of products, other margins and the regulated fuel price were subsidised by government. There was sleaze in making such lists and some marketers took advantage by manufacturing oil imports and various over-invoicing and undersupply of products to defraud the national treasury with the collusion of officials and petroleum sector agencies. The bubble burst in 2011 when oil subsidies rose to NGN1.7 trillion from an average of NGN300 billion up to 2009. When government sought to deregulate prices and halt the subsidy payments it was met with resolute strikes and civil disobedience, and only managed to raise prices slightly. Investigations by the executive and the legislature unravelled the level of graft and chicanery and recommended refunds and punishment for culpable persons, as well as legislative and sector reforms. Nevertheless, a new government still retained some of the indicted firms for the crude oil swaps and when oil landing price rose above the regulated price, directed the retention of that price and senior officials refused to call it a subsidy or acknowledge it as such. A few persons had been convicted and some refunds made but the Petroleum Act of 1969 was yet to be replaced or amended to effect reforms and executive action was being taken that was at variance with the constitutional arrangements and approved budget. The entire case highlights the 'role of law' in regulating industry in two ways: by showing how law is the infrastructure for transactions and relationships and secondly by showing what happens when the law is not followed or abused. It is meant to give students a high-level overview of the interface of law and business.

Teaching and learning

This item is suitable for undergraduate, postgraduate and executive education courses.

Time period

The events covered by this case took place in 2011-2018.

Geographical setting

Region:
Africa
Country:
Nigeria

About

Abstract

Nigeria was the seventh largest producer of oil and gas in the world but was afflicted by the 'resources curse', an oil mono-economy, neglect of the real sector, corruption, conspicuous consumption and parlous infrastructure. It depended on fuel importation to satisfy local demand as its own refineries were decrepit. Oil marketers were selected by the national oil corporation, NNPC, for crude oil swaps in exchange for imported products. The difference in the landing price of products, other margins and the regulated fuel price were subsidised by government. There was sleaze in making such lists and some marketers took advantage by manufacturing oil imports and various over-invoicing and undersupply of products to defraud the national treasury with the collusion of officials and petroleum sector agencies. The bubble burst in 2011 when oil subsidies rose to NGN1.7 trillion from an average of NGN300 billion up to 2009. When government sought to deregulate prices and halt the subsidy payments it was met with resolute strikes and civil disobedience, and only managed to raise prices slightly. Investigations by the executive and the legislature unravelled the level of graft and chicanery and recommended refunds and punishment for culpable persons, as well as legislative and sector reforms. Nevertheless, a new government still retained some of the indicted firms for the crude oil swaps and when oil landing price rose above the regulated price, directed the retention of that price and senior officials refused to call it a subsidy or acknowledge it as such. A few persons had been convicted and some refunds made but the Petroleum Act of 1969 was yet to be replaced or amended to effect reforms and executive action was being taken that was at variance with the constitutional arrangements and approved budget. The entire case highlights the 'role of law' in regulating industry in two ways: by showing how law is the infrastructure for transactions and relationships and secondly by showing what happens when the law is not followed or abused. It is meant to give students a high-level overview of the interface of law and business.

Teaching and learning

This item is suitable for undergraduate, postgraduate and executive education courses.

Settings

Time period

The events covered by this case took place in 2011-2018.

Geographical setting

Region:
Africa
Country:
Nigeria

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