Battling Opacity in Extractive Sector

Editor June 29, 2021 2:53 Am

If anything, the extractive industries in Nigeria, have always donned the toga of being some of the least open in the world. Emmanuel Addeh writes that with the ongoing efforts of the Nigeria Extractive Industries Transparency Initiative, which appears to be pushing the frontiers of transparency in the sector, a lot appears to be changing.

It would be stating the obvious to say that Nigeria has a poor track record when it comes to operations in the oil and gas as well as the country’s mining industries.

Indeed, whether in the award of oil blocks, exploratory activities or even in basic matters like how many litres of petrol the country consumes daily, it is mostly discussed in hushed tones, with various agencies of government releasing conflicting figures.

There have been various scandals in the oil and gas industry, ranging from the Malabu Oil Production Licence (OPL) 245 and the associated unending court cases in which a former oil minister literally awarded an oilfield to himself to the other case in which the petroleum ministry allegedly purchased biros and letterhead papers for N116 million as revealed by the national assembly.

Historically, in 2003, during the President Olusegun Obasanjo administration, Nigeria voluntarily signed up to the global Extractive Industries Transparency Initiative (EITI), which basically meant that it would thereafter accede to the EITI and establish the NEITI.

Having accepted of the principles and criteria of the EITI, in 2004, the federal government inaugurated a 28-member Multi-Stakeholder Group (MSG) to implement the EITI in Nigeria.

That group was headed by Mrs. Obiageli Ezekwesili, supported by a Special Assistant to the President, Mrs. Apollonia Okigbo, and a journalist, Mr. Ogbonnaya Orji, who was seconded to the team to head a sub desk that interfaced with the media and civil society.

In 2007, a specific law was enacted to enforce the implementation of the initiative in the country, with Nigeria becoming the first country in the global EITI to support implementation with an enabling law to institutionalise the body.

At the time, the current Minister of Finance, Mrs. Zainab Ahmed was the Executive Secretary of the organisation which was directly supervised by the Office of the President, through the Office of the Secretary to the Government of the Federation.

Since then, the organisation has evolved, waxing stronger and is now led by Orji, an insider who has been with the initiative from inception, working from the NEITI’s modest office in Asokoro, Abuja, and who appears to be in a hurry to make the difference.

Orji was appointed by President Muhammadu Buhari in February this year, following the expiration of the term of office of the immediate past Executive Secretary of the organisation, Waziri Adio.

Before his selection, Orji, who started out his professional career with the Federal Radio Corporation of Nigeria (FRCN), was the Director of Communications and Advocacy at NEITI.

Also at the United Nations Development Programme (UNDP), where he worked at point in his career, Orji, who holds an MSc degree and PhD in Political Economy and International Development from the University of Abuja, successfully managed several donor-funded projects.

Immediately after his appointment, the initiative’s helmsman commenced a national shuttle of stakeholders, including agencies of government, civil society groups, the media, anti-graft bodies among others, seeking their cooperation in NEITI’s attempt to rid the extractive industries of graft.

He has pledged to continue to consolidate on the achievements recorded by his predecessors in order to give Nigeria and Nigerians the deserved value from the nation’s extractive sector, promising to expand the frontiers of their good works and fixing any lapses where necessary.

NEITI is also currently working on retrieving the over $11.6 billion that are recoverable, in collaboration with some agencies of government to work out modalities for the recovery of those revenues.

In recent years, NEITI has been working to make audit reports timelier, reducing report publication time from 29 months to 15 months, releasing over 60 per cent of the total of industry audits.

NEITI contributed in no small measure to the first attempt to enact a Petroleum Industry Bill (PIB) and the Deep Offshore and Inland Basin Production Sharing Contract (PSC) Act.

Aside that, NEITI has automated the data gathering component of its reporting process, deployed NEITI Freedom of Information Portal and succeeded in nudging the Nigerian National Petroleum Corporation (NNPC) to embrace more transparency.

But away from the past, nothing else gives more hint of what is to come, than last week’s release of two comprehensive reports covering both the petroleum sector and the country’s mining industry.

Packed with industry data that is hardly available elsewhere in the country, NEITI, in the documents that can best be described as reservoir of layers upon layers of information, again showed how companies and public institutions could indeed help themselves by not hoarding information that should ordinarily be available to the public. And to think that the feat was achieved with just about 50 members of staff!

In what appeared to be an abiding avowal for open data in the industry, NEITI in the oil and gas report, noted that the country earned a total sum of $34.22 billion from the oil and gas sector in 2019, an increase of 4.88 per cent over the $32.63 billion revenue netted from the sector in 2018.

It stated that a breakdown of the earnings, contained in the audit report, showed that payments by companies accounted for $18.90 billion, while flows from federation sales of crude oil and gas accounted for $15.32 billion.

From 2010-2019, NEITI said the aggregate financial flows from the oil and gas sector to government, amounted to $418.544 billion, with the highest revenue flow of $68.442 recorded in 2011, while the lowest revenue flow of $17.055 was recorded in 2016.

According to NEITI, the total crude oil production in 2019 was 735.244mmbbls, representing an increase of 4.87 per cent over the 701.101mmbbls recorded in 2018.

It stated that Production Sharing Contracts (PSCs) contributed the highest volumes of 312.042mmbbls followed by Joint Venture (JV) and Sole Risk (SR) which recorded 310,284mmbbls and 89.824mmbbls respectively.

The Orji-led organisation, listed others as Marginal Fields (MFs) and Service Contracts (SCs) which accounted for 21,762mmbbls and 1,330mmbbls respectively.

“Analysis of crude oil lifted by NNPC showed that 159.411mmbbls was for export, while 107.239mmbbls was for domestic refining and 97 per cent of the volumes for domestic refining (104.475mmbbls) was utilised for the Direct Sale Direct Purchase (DSDP) programme while the remaining 3 per cent (2.764mmbbls) was delivered to the refineries,” it stated.

NEITI reported that the value of the 2019 domestic crude oil earnings was N2.722 trillion, while of the figure, N518.074 billion was deducted for petrol under-recovery by the NNPC.

On recommendations, NEITI urged the Office of the Accountant General of the Federation (OAGF) to advice the NNPC to prepare its budget on a gross basis by stating its gross revenue and costs.

The report noted that the practice if adopted, would improve transparency and accountability in NNPC’s transactions on behalf of the federation and further requested that NNPC should carry-out detailed reconciliation on transportation revenues regularly as a mechanism for checks and balances.

It also observed that entities are reporting crude losses higher than the ‘fiscalised’ production and recommended that the DPR should take steps to reduce losses by the terminal operators.

In a separate report on the mining sector, the NEITI report stressed that Nigeria earned N79.96 billion from the solid minerals sector in 2019, representing a 15 per cent increase when compared to the N69.47 billion recorded the previous year.

It noted that the 2019 earnings accounted for 16 per cent of the total revenues of N496.28 billion that have accrued to the federation from the sector over the period of 13 years (2007 to 2019).

A breakdown of the 2019 receipts as reported by NEITI showed that taxes to the Federal Inland Revenue Service (FIRS) on behalf of the federation accounted for N69.92 billion or 87.4 per cent of the total, while fees and royalties paid to the Mining Cadastre Office (MCO) and Mines Inspectorate Department (MID) accounted for N2.37 billion (3.0 per cent) and N2.55billion (3.2 per cent) respectively.

Revenue accruals to the states stood at N5.1 billion, representing a 42 per cent increase when compared to the N2.1 billion recorded in 2018, with FIRS accounting for the highest flow to the coffers.

In addition, the outstanding amount of N8.887 billion which accrued from the solid minerals sector as of December 31, 2019 was distributed amongst the three tiers of government in May 2020 using the revenue sharing formula while the balance as at 31st October 2020 was N3.948 billion.

It wasn’t just about data for their sake, the transparency initiative further made recommendations which if implemented by all stakeholders would like lead to a likely more robust transparency space in the extractive industries.

It was perhaps, in recognition of the commitment of NEITI that its executive secretary, Orji was recently appointed as the chair of the EITI global Network on Contract Transparency to represent Nigeria.

The body is tasked with the specific responsibility of developing a global framework, standard and tools of engagement on contract disclosures in the extractive industries to guide in the 54 member countries of EITI.

On the selection of Nigeria for the position, Orji noted that the appointment of country to lead the global network was an acknowledgement and recognition of the enormous work and leadership that Nigeria has shown towards the implementation of the EITI over the years.

The global network is made of 2O EITI implementing countries including Nigeria, Indonesia, Philippines, Mexico, Armenia, Cameroun, Chad and the Democratic Republic of Congo.

Others include: Ghana, Malawi, Guinea, Mongolia, Mozambique, Myanmar, Senegal, Sao Tome & Principe, Togo, Zambia as well as Tanzania.

Earlier, Uzoigwe informed participants that the EITI secretariat was taking the issue of energy transition seriously and urged NEITI to lead the engagement and discussions in the country with stakeholders.

He affirmed the readiness of the EITI to support the Nigerian government in this direction, pointing out that Nigeria remains the most elaborate EITI implementing country among 55 member countries through the work of NEITI.

It is still early days yet and much more ground to cover by the transparency initiative, but what is clear if that if the saying that morning tells the day is anything to go by, then it may be safe to say that Orji has truly come clean the Augean Stable.

Like he said recently: “I have only five years to make an impact. I do not have the luxury of a second term. I do not want any of those five years not to be accounted for. Every minute of my tenure must count.

“So, I am in a hurry to get the job done because I am ready for this job, trained and equipped for this job. So, God being on our side, I want to make sure that by the time I look back in five years, there will be credible impact.”

Obviously, Orji’s job is clearly cut out. Hopefully, he will deliver and make a mark for posterity.

SOURCE: https://www.thisdaylive.com/index.php/2021/06/29/battling-opacity-in-extractive-sector/

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