Pushing for Transparency in Nigeria’s Extractive Industry

Pushing for Transparency in Nigeria’s Extractive Industry


By: Idumange John


Nigeria is a nation graciously endowed with oil/gas and thirty-four (34) solid mineral resources. By virtue of her huge natural resource endowment, Nigeria has the
potentials for rapid economic development. However, the growth and development
potentials have been severely vitiated by corruption, lack of transparency and
accountability and their attendant negative multipliers. The result is that
knowledge about revenue flows from oil and gas is mystified by inconsistencies
and sharp practices exacerbated by lack of accurate statistics. This dangerous
trend has continued over the years and it has eroded public confidence in the
extractive industry.


The world over, it is generally accepted that greater transparency is needed in natural resource rich states to entrench accountability, curb corruption and
strengthen good governance. It was for this reason that the Federal Government
of Nigeria initiated the Nigeria Extractive Industries Transparency Initiative
(NEITI) Bill in 2004. Consequently, NEITI was established as the revenue organ
of the “Due Process Mechanism, to ensure due process and transparency in
payments made by extractive companies to government, ensure accountability in
the revenue receipts and eliminate all forms of corrupt practices in the
process of determination, payments, receipts and posting of revenue accruing to
the Federal Government.


Earlier in 2002, the Extractive Industries Transparency Initiative (EITI) was launched by former Prime Minister of the U.K. Tony Blair at the World Summit on
Sustainable Development in Johannesburg South Africa.
At that forum, it was emphasized that the EITI architecture was designed to
encourage synergy among stakeholders in working out standardized reporting
templates about revenues paid by corporate bodies in the extractive industry to
government while states also reciprocate by reporting such receipts with due
diligence and accuracy.


The Initiative is imperative in Nigeria because over the year huge revenues accruing from the extractive industry have
not been prudently applied to engineer development in the real sectors of the
economy. Ostensibly, the NEITI strategy is woven around three basic tenets
namely: the re-enactment of national ethics, law enforcement and institutional
reforms. The NEITI reforms are necessary for several reasons.


Firstly, it encourages transparency in the payment and receipt of oil revenues. This would provide reliable data base to monitor government expenditure. Secondly,
revenue transparency enhances accountability at all the three tiers of
government as well as the executive and legislative organs of government.
Thirdly, Nigeria
derives 95% of its revenue from the extractive industry hence transparency is
capable of creating access to finance and investment at both national and
global levels. Access to global financial investment is not possible without
accountability, which is central to democracy and sustainable development.
Fourthly, the NEITI process requires the engagement of services of qualified
international auditors. The new thinking would be to boost the accountability
and fiscal responsibility profile of government and catalyze economic
development.


Finally, the NEITI strategy involves “Publish What You Pay Campaign” PWYP campaign, which has the support of over 130 groups around the World. Since
NEITI imposes certain responsibilities on the various stakeholders such as the
oil companies, the Petroleum Ministry, the Department of Petroleum Resources
(DPR), other parastatals in the extractive Industry and the Central Bank of
Nigeria, (CBN). The pulling together of these numerous stakeholders will
improve the access, transparency, and accountability in public management all
of which will culminate in the reduction of inequality and corruption.


It is difficult to evaluate with scientific exactitude, the success of the NEITI experiment since it was established in 2004. However there is consensus that
the NEITI initiative has helped to reduce the endemic corruption in the oil
industry. For the first time, the multinationals have been publicly accused of
complicity in underhand deals concerning payments made to the Federal
Government.


Apparently, NEITI has made it possible for the National Assembly to probe the DPR, NNPC and other parastatals of the Petroleum Ministry. So far the revelations of such probes have been mind-boggling. The
scandalous revelations of the Petroleum Trust Development Fund (PTDF) may be
some of the dividends of the NEITI project. For the first time, the allocation
and sales of oil blocs has come under public scrutiny. Whereas modalities for
the sales of oil blocs to some influential politicians have been questioned,
the Federal Government, through the National Assembly has ordered an
investigation into some sharp practices associated with ‘the oil bloc saga’.
These are measurable signposts of success of the NEITI, and there is need to
consolidate the gains of the Initiative.


In spite of the monumental strides achieved by the Initiative, certain irregularities still persist and they are likely to loom large if adequate steps are not taken to correct them. Oil companies operating
in Nigeria
are compelled to prepare audited accounts by third parties. While the accuracy
of such accounts may not be questionable, they are not made public. Similarly,
the requirement whereby companies file annual tax returns is still treated as
nominal and confidential. There are strong indications that such returns are
not properly audited by the FIRS and NAPIMS.


The recent probes of the petroleum sector at the National Assembly reveal that discrepancies still exist among the various levels of reporting. Even the Federal Office of Statistics (FOS), which has the mandate
to publish petroleum revenues has not demonstrated consummate interest in
executing its operations with due diligence. Moreover, the integrity of such
data is questionable. Whereas pre-production payments are hardly accounted for,
there is sufficient evidence to believe that post-production statistics on
payments are criminally manipulated by some unscrupulous bureaucrats. Another
gray area is to tackle the hydra-headed monster of illegal bunkering.


The challenges highlighted above could be addressed if the National Assembly passes the Freedom of Information Bill (FOB), to provide unrestricted access to
records pertaining to payments. This could be achieved if there is robust
political will and demonstrable commitment on the part of Government to
succeed. More than ever, Civil Society
Organizations, NGOs and CBOs need to be more pro-active in providing leadership
through intense advocacy.
In the words of
Enrique Iglesias (2002), "efficient, transparent governments, closely
watched by citizens with access to accurate, timely information on state
spending can help restore trust in public institutions and strengthen
democracy".
It may also be
suggested that the de-centralization of NEITI in all oil producing States of
Nigeria would help consolidate the gains already achieved.


With the passage of the Fiscal Responsibility and Public Procurement Bills into law, there is an urgent need to re-invigorate the Internal Revenue System. Recognizing the fact that instituting transparency in
government revenue and spending is a necessary pre-condition for sustainable
democracy, there is now the need to strengthen institutional capacity to tackle
the challenges undermining transparency in oil sector.
In
the longer term, Government needs to win back the confidence of the people
through the implementation of properly articulated public sector reforms.


Nigeriais in dire need of responsible growth and this implies greater transparency so that publics can track government policy. Indeed, Nigeria needs
transparency to deepen governments’ capacity to enact sound fiscal
macro-economic policies to accelerate wealth creation and put the nation on the
fast lane to achieving the MDGs.


Nigeriais one country in the world where dishonest individuals have profited at the expense of the integrity of the nation and the welfare of the citizens. . The
corruption of governmental institutions threatens the common aspirations of
Nigerians and inflicts grave economic hardship on the poor and vulnerable.
Today, the spate of violence and cyclical instability in the polity is partly
attributable to the mismanagement of the oil revenues.



For a nation that derives 95% of her revenue from oil, corruption in the sector is not only a threat to the wellbeing of her citizens, but also a mortal enemy to
political and economic stability. It is against this background that all
stakeholders in the extractive industry in Nigeria should re-invigorate the
push for transparency. We just have two options: to conjure tremendous courage
and doggedness to push for transparency
in the management of our resources or allow the mandarins to fritter them away
to the detriment and shame of a prostrate giant.




Idumange John, is Fellow, Institute of Chartered Economists of Nigeria (ICEN)





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