Jiraiya is not a missing nin; he did not abandon the Hidden Leaf Village. If you remember, he left the village to basically keep tabs on Orochimaru, since he knew Oro would cause trouble. A missing nin is considered a criminal, who has performed atrocities against their village or country.

As for the kanji "abura", it does mean oil. From what I know and heard, it's somewhat of a pun/joke describing Jiraiya's personality. It's trying to say that Jiraiya is a "sleazy/greasy/oily" person, basically acknowledging that he's a lewd person or pervert.

If you notice that one of his summoned frogs has the kanji "chuu" on one of its necklace beads. Chuu stands for loyalty, sort of the opposite of abura.