Pushing for Transparency in Nigeria's Extractive Industry

Source: huhuonline.com
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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.

  Nigeria is 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.

  Nigeria is 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)