Libya’s central bank and NOC publicly clash over USD 839 mn in oil revenues unaccounted for

A showdown between Libya’s central bank (CBL) and the National Oil Corporation (NOC) about October’s oil revenue spilled into the public eye this week. CBL said only USD 361 mn were deposited into the bank’s coffers from oil revenues during the first two weeks of October, leaving a gap of USD 839 mn that means the deposited amount is less than a third of the USD 1.2 bn that the NOC claimed it had transferred to the CBL during the same period.

Is this an accounting gap? The NOC is saying the USD 361 mn figure does not reflect the full amount of what it transferred because the CBL uses an accounting mechanism that subtracts the cost of fuel imports from the crude revenues. The CBL didn’t directly dispute the NOC’s claims, but said it welcomes independent audits of its records, if needed.

The real risk is if it isn’t just an accounting gap. With two competing governments (one in the east and another in the west), large volumes of crude oil used to slip out through unofficial channels “before they can be monetized and deposited as USD revenues,” Libya experts previously told us. If this proves to be a case of leaking revenues, it would be a blow to Libya’s unified budget (the country’s first in 13 years), which passed last April under US mediation precisely to put an end to leakage like this via providing a degree of revenue sharing between the rival governments.

This gives a peek into the limits of economic arrangements without political resolution, which the CBL Governor Naji Issa recently flagged in an interview with the Global Finance Magazine. Issa lauded the unified budget for restoring confidence in the CBL’s ability to govern the market and start work on delayed banking modernization files, such as instant e-payment systems and real-time salary transfers. But he warned that the CBL “remains under huge pressure” without a unified government due to pressures to increase spending from rival governments and a spate of structural economic challenges that require politically backed reform.

Some of the structural challenges Issa flagged are driven by Libya’s extreme exposure to hydrocarbon market shocks. Oil revenues account for some 90% of the government’s overall revenues. The country’s budget is also tied up by heavy spending on payroll and subsidies, which together account for some 75% of all spending.