Nigeria and other oil producing countries in Africa are losing an estimated 40 per cent of the potential revenue from oil and gas projects before the money reaches national treasuries.

In his presentation, ‘Follow the Money: Redirecting Global Capital Flows to Just Transition Initiatives,’ at the ongoing Just Transition Platform (JTP) meeting in Gaborone, Botswana, former Coordinator, African Forum and Network on Debt and Development (AFRODAD), Jason Rosario Brazanga, identified corruption, inflated project costs, crude theft, tax avoidance and illicit financial flows as the biggest sources of the losses.

Brazanga warned that weaknesses in the governance of the extractive sector are depriving governments of billions of dollars needed to finance infrastructure, healthcare, education and climate adaptation.

This comes as the Nigeria Labour Congress (NLC) has blamed corruption and haphazard urban development plans for the large-scale floods that occur in Nigeria yearly.

According to the presentation, revenue leakages occur throughout petroleum project cycle, steadily eroding what governments should earn from their natural resources.

Also, the presentation estimated that governments lose about five per cent of potential revenues during the licensing stage through concealed beneficial ownership, bribery, kickbacks and the award of undervalued contracts.

The biggest losses occur during project development, where governments forfeit an estimated 15 per cent of expected revenues through inflated equipment costs, excessive interest charges on loans, cost overstatement and thin capitalisation.

Discussants that included the Coordinator, East Africa Tax and Governance Network, Tax Justice Network Africa, Leonard Wanyama and Programmes Coordinator, Institute of Economic Affairs, John Mutua, noted that under many petroleum contracts, companies recover project costs before profits are shared with governments, meaning inflated expenditure directly reduces the public share of oil revenues.

Another 10 per cent is estimated to be lost during production through crude oil theft, under-reporting of production volumes, trade misinvoicing and smuggling.

The final 10 per cent disappears during the sale of crude through abusive transfer pricing, profit shifting and the sale of oil to offshore subsidiaries at artificially discounted prices.

The cumulative effect, the experts noted, is that governments receive barely 60 per cent of the potential value of their petroleum resources, leaving significantly less money available for national development.

The findings come at a time when many African oil-producing countries are facing growing fiscal pressures, rising debt burdens and increasing demands for investment in energy infrastructure and climate resilience.

Participants argued that improving governance in the extractive sector could substantially increase domestic revenues without raising taxes or expanding oil production.

In Nigeria, opaque licensing processes, weak contract oversight, poor production monitoring and inadequate tax enforcement have long been identified as major governance gaps that allow public revenues to leak from the system.

The experts urged the adoption of compulsory disclosure of the beneficial owners of companies bidding for oil assets, competitive licensing rounds, independent audits of petroleum project costs and stronger oversight of production volumes through digital monitoring systems to halt financial leakages.

They also urged governments to strengthen transfer pricing regulations, improve cooperation among tax authorities, customs agencies and anti-corruption institutions, and intensify efforts to combat illicit financial flows.

On the recurrent flooding across Nigeria during raining season, National Coordinator, Nigeria Labour Congress Programme on Climate Change, Green Jkbs and Just Transition, Echezona Asuzu, has blamed systemic governance failures driven by weak public institutions and fiscal misappropriation for the occurrence.

He explained: “The two streams of governance dysfunction manifest in inadequate drainage infrastructure, poor urban planning, the lack of enforcement against building on natural waterways, and the redirection of floodwaters from major construction projects into residential estates. These challenges have been exacerbated by the impact of climate change.”

He raised an alarm that blockage drainages, lack of timely evacuation of waste, which is now prevalent in Abuja, conversion of green areas to residential spaces may result in massive flooding.

“The same problem of flooding is becoming a nightmare in Abuja. While nature significantly accounts for the flood phenomenon in Lagos, the flood situation in Abuja is man-made, largely as a result of corrupt and convoluted urban development policies. The conversion of green areas and flood plain to housing estates in Abuja is a promissory note that will soon be cashed with wear and tears,” he stated.