By Velda Addison, Hart Energy

A corruption scandal that led to the October arrests of Nigeria’s former oil minister and the chairman of a Nigerian oil firm does not bode well for a country that depends on oil and gas for 35% of its gross domestic product.

Despite its position as the dominate oil producer and a natural gas powerhouse in Africa, the country has already hemorrhaged investment dollars and demand for its hydrocarbons. The arrests are the latest development – and embarrassment—as the country investigates billions of missing dollars in oil revenues.

Foreign investors with deep pockets—including Shell, Chevron and Total—were already divesting assets in a country infamous for oil thefts, pipeline sabotage and political instability. A revised petroleum billhas been stalled since 2008. The bill aims to revamp the oil and gas industry’s fiscal terms and organizational structure.

Unfavorable market conditions gave the majors more reason to divest, putting more responsibility on Nigerian companies to keep the once thriving industry afloat.

Nigeria’s economy also took a blow due to lost business from one its top customers for oil: the United States. Nigerian crude has dwindled to 1% of U.S. imports from as much as 11% in 2012 as the shale boom surged, according to the U.S. Energy Information Administration (EIA).

Then last summer allegations surfaced that about $20 billion in crude oil revenues were not put into federal accounts by the Nigerian National Petroleum Corp.

The state oil company denied wrongdoing, pointing to operational costs and subsidies. Results of a PwC forensic audit concluded that the oil company should refund at least $1.48 billion to the federation account, or about 7% of the missing revenue. However, the amount could rise to $4.29 billion, depending on the validity of about $2.81 billion in deductions, according to news reports. The firm also recommended the company change its financial management practices.

The audit was released publicly in April by then President Goodluck Jonathan while current President Muhammadu Buhari vowed to further investigate the claims.

Now, the arrests: Former oil minister Diezani Alison-Madueke was arrested in London last week as part of a corruption probe. The investigation followed accusations by Lamido Sanusi, the former central bank governor, who accused Alison-Madueke of reigning over an oil sector that leaked billions of dollars during her tenure, according to a Reuters report.

Sanusi was fired by Jonathan after bringing attention to the $20 billion in missing oil revenue.

Alison-Madueke stepped down in May when Buhari was elected. She has reportedly denied wrongdoing.

In addition, Nigeria’s Economic and Financial Crimes Commission arrested Olajide Omokore, chairman of Atlantic Energy, on money laundering and corruption charges, Reuters reported Oct. 6.

Atlantic Energy signed a strategic alliance agreement with NNPC in May 2011 to manage oil blocks sold by Shell.

“A lot of people have been shocked,” one oil executive in Nigeria told Reuters. “The net is widening and it's not clear how deep the rabbit hole goes. There will be a few people looking over their shoulders.”

Hopefully, Nigeria will be able to resolve these concerns and make any needed changes, including to operational procedures, as the world’s oil and gas sector awaits the end of the downturn.

At an estimated 180 trillion cubic feet, Nigeria holds more proved natural gas reserves than any other country in Africa, EIA said.

Nigeria is also the continent’s largest oil producer, with about 37 billion barrels of proved crude oil reserves.

The country’s economy still depends heavily on its hydrocarbon resources. It would be unfortunate if corruption, theft and more scandal stood in the way of Nigeria’s progress.

Velda Addison can be reached at