Nigeria EITI: After Validation, What Next?

Published on 10th January 2011

Oil workers in Nigeria                  Photo courtesy
Last October, the Nigeria Extractive Industries Transparency Initiative (NEITI) missed an opportunity to be designated as an EITI compliant country. This was after a committee constituted by the global board of the initiative based in Norway considered a validation report on Nigeria’s implementation progress. At the end of the meeting in Tanzania, NEITI was given a close-compliant status and handed a six months ultimatum to meet certain conditions in order to become an EITI compliant country.

Validation is an independent quality assurance mechanism that evaluates EITI implementation progress in implementing countries and provides such report to the global EITI. Even though Nigeria signed on to EITI in the last quarter of 2003 and started implementation in 2004, it is not yet compliant according to the laid down procedures by the global EITI board. Out of thirty two implementing countries so far, five countries (Azebaijan, Liberia. Timor Leste, Ghana and Mongolia) are compliant. Countries like Nigeria Kazakhstan, Democratic Republic of Congo, Mali, Mauritania, Niger and Peru have achieved the 'close to compliant' status. The global EITI mandated NEITI to improve six aspects of her operations before next April in order to be awarded a full compliant status. The issues raised include a timely completion of 2006-2008 audit as well as a modus operandi (charter) for the NEITI board. For a country that was once a poster child of transparency “effort” in the extractive industry worldwide, this is clearly a less than a satisfactory performance. But that is by the way.

The leadership of NEITI is in top gear working on the six issues raised by the global EITI and will most likely meet the deadline to become compliant. Pundits speculate that this momentum will slowly disappear as the Nigerian extractive industry returns back to business-as-usual in the hands of inept bureaucrats and dubious multinationals.

Former President Obasanjo identified the manifestation of corruption in Nigeria while he spoke at the annual Transparency International (TI) conference in Berlin in 2003. He identified the roots as “the collapse of governance; subversion of due process; erosion of accountability procedures; manipulation of existing laws and regulations; erosion of public confidence and a culture of contempt for the rule of law.”

The NEITI Act 2007 ambitiously gave NEITI a responsibility among other things to “eliminate all forms of corrupt practices in the determination, payments, receipts and revenues accruing to the Federal Government from the extractive industry companies”.  This objective is at the core of the work of NEITI but seven years after EITI implementation in Nigeria the business as usual status still remains. NEITI 2005 audit reports confirm that “the amount of oil produced (at the well head) is not reliably known. The Department for Petroleum Resources (DPR) has no system of measuring production other than through monitoring terminal receipts. DPR has no data from which possible product losses between production point and the terminal can be estimated, measured or inferred.” Another curious revelation in the 2005 audit is the management of signature bonuses. The audit clearly states that “the management of signature bonus was not transparent.”
 
Many of these findings were also contained in the landmark 1998-2004 audit carried out by NEITI. An inter-ministerial task team was put together in May 2005 but very little happened. Pundits therefore believe that the forthcoming 2006-2008 audit report will have the same lapses and as minimal remedial action has been carried out. One key aspect of remediation is the installation of precision meters at flow stations as recommended by the auditors. Despite intensive advocacy mounted about this and technical support offer by Norwegian government, the program did not manage to take off.

The oil and gas industry is the heartbeat of our economy. Any effective reform must have a buy-in of government as the highest level. In the early days of NEITI, many of the actions required presidential intervention to elicit adequate compliance on the part of companies. Any thing short of that will reduce NEITI to that dog that barks so hard and bites very little.

There is an urgent need to review and amend the NEITI Act to tighten loose ends such as the procedure for the appointment of the Executive Secretary. The requisite qualifications are unclear and there is no horizontal accountability. This has given rise to political cronies and clueless individuals to be appointed to such sensitive positions. Sanctions clauses in the Act are a slap on the wrist and confidentiality clauses still remain.

The Petroleum Industry Bill contains a few complimentary clauses that could strengthen NEITI. If it has not been passed now, then the likelihood that it will pass this legislative year is slim as law makers are now pre-occupied with elections. In their haste, they may pass a watered down version. It was recently revealed that Nigeria loses 3.6 billion dollars (550 billion naira) worth of revenue annually as a result of the unpatriotic delay in the passage of the Bill. Time is ticking and billions of dollars are leaking away from our national patrimony before our very eyes.

Revenue transparency cannot be a standalone issue anymore. Every national EITI must reflect domestic realities on ground and be integrated into country governance and reform programs including the budget systems, taxation systems, and revenue and public expenditure management systems. NEITI must therefore be seen to affect poverty level especially in the Niger delta region, contribute to conflict reduction and boost national prosperity. She must position herself to become a real harbinger of change in the dark alleys of our extractive industry. This government must rise to its responsibility to raise the bar of political will to implement good governance in a sector that is the only backbone of our national economy. Nigerians are running out of patience!

By Uche Igwe.

Africa Program at Paul H. Nitze (SAIS) Johns Hopkins University Washington DC.


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