Nigerian EITI

Nigerian EITI: Unclear Matters Arising

Ifeanyi Izeze

The outgoing Obasanjo-led Nigerian Government would obviously be remembered for many things. One of them is that it signed more international treatise than any previous government and majority, if not all, were useless or rather irrelevant in context to whatever Nigerian situation they were supposed to address. A glaring case is the Nigeria Extractive Industries Transparency Initiative (NEITI) which is the Nigerian subset of a global initiative aimed at following due process and achieving transparency in payments by Extractive Industry (EI) companies to governments and government linked entities.

President Olusegun Obasanjo committed to the tenets of EITI in November 2003, created a unit dedicated for the initiative in the Presidency, and subsequently launched the Nigeria EITI (NEITI) in February 2004.

Now, the NEITI Bill, which was approved by the House of Representatives of the National Assembly on 19 January 2006, is awaiting passage by the Senate. This legislation will guarantee mandatory annual audits of the extractive industries sector. Oil companies will be legally required to disclose payments and the recently established Oil Revenue Monitoring unit will be made formally independent of the Finance Ministry and merge with the NEITI Secretariat. This idea sounds very good.

As said, the primary objectives of the NEITI (as in the Bill) include: to ensure due process and transparency in the payments made by extractive industry companies to the Federal Government and its agencies; to ensure accountability in the revenue receipts of the Federal Government from extractive industry companies; and to eliminate all forms of corrupt practices in the determination, payments, receipts and posting of revenue accruing to the Federal Government from extractive industry companies. The organization is expected to “develop a framework for transparency in the reporting and disclosure by extractive industry companies of revenue due to or paid to the Federal Government.”

Question one: Who would develop the framework for transparency in accounting or rather spending of such earnings by the Government especially the Presidency because this is where the Nigerian problem lies? On corruption and/or un-reconciled accounting matters, government and the government people are worse culprits than extractive industry companies. Even in cases were some companies may want to cut edges on payment to government, they collaborate with government officials who direct such companies on how to circumvent due process the check-systems in place.

It sounds good enough for NEITI to undertake to “evaluate the practices of extractive industry companies regarding acquisition of acreages, budgeting, contracting, materials procurement and production cost profile in order to ensure due process and transparency.”

However, is NEITI an independent organization or an arm of the Federal Government/Presidency? Clear answer to this question would correct the perception by some stakeholders and the general public that EITI was supposed to be and operate as a Non-Governmental Organisation (NGO). And if it is a non-governmental entity, how come it is being enmeshed into the Presidency? There is some confusion here.

A check on the list of government people on the National Stakeholders Working Group of the supposed Non- Governmental Organisation will tell the story better. The NEITI NSWG has two cabinet Ministers including Petroleum (Energy); the Permanent Secretary, Federal Ministry of Petroleum Resources; Permanent Secretary, Federal Ministry of Solid Minerals; Group Managing Director, Nigerian National Petroleum Corporation; Chairman, Federal Inland Revenue Service (FIRS);Group General Manager, National Petroleum Investment Management Services; The Director Revenue was given to the Ministry of Finance; Managing Director, Nigeria Liquefied Natural Gas (NLNG); Chairman, Niger Delta Development Commission (NDDC); Desk Officer, Oil Accounts Research Department, Central Bank of Nigeria (CBN); Director, Nigeria -Sao Tome and Principe Joint, Development Authority (JDA); and Auditor-General of the Federation. Haba.

Nigerians would want to know whether NEITI will perform the assigned functions as an NGO or a government agency situated right at the heart of the Presidency. Beyond doubt, if it will operate as an independent NGO, the initiative may achieve some measurable success. But if as a unit of the Presidency, the entire initiative may just be another well packaged deceit and an impotent image laundering tool.

NEITI agreed to “ensure that all payments due to the Federal Government from extractive industry companies, including taxes, royalties, dividend, bonuses, penalties, levies and such like, are duly made,” but would not bother how government spends the money, at least, that was the impression given in the functions outline of the Bill. Of course how can they worry about how the money would be spent when the people/officers in government who should be held accountable to the public are all permanent members of the security council of NEITI?

To “identify weaknesses and undertake measures that will enhance the

capacity of any relevant organ of the Federal, State or Local Government

having responsibility to monitor revenue payments by extractive industry

companies to the Federal Government,” is not what the peculiar fraud and

corruption problem of Nigeria is. The problem is in the accounting for

inflated expenditures by the Federal Government and its officials. The

companies, except very few of them, would gladly do things the way it

should be done. But would the Government and its people do things the

way it should be done?

Here are some of the very unclear matters arising: Section 2 of the Bill stated that: “The NEITI shall be an autonomous self-accounting body, which shall report to the President.” How can an autonomous self-accounting organization report to the President whom the it is also expected to check?

Secondly, “without prejudice to subsections (1), (2) and (3), an extractive industry company shall submit to the NEITI at the end of each quarter of a year, a general report on the activities of the company and revenue payments made to the Federal Government, including taxes, royalties, dividends, bonuses, penalties, levies and such like.” The companies would gladly do that but would Government judiciously use the monies to better the life of ordinary Nigerians.

Section 13 subsection (1)(2)(3) of the Bill proposed that: “The funds of the NEITI shall consist of such sums as may be provided by the Federal Government which sums shall be released immediately they become due for payment.” Also, “Such sums as may be paid to the NEITI by way of grants, donations and gifts; not being from an individual, company or body involved in or connected with an extractive industry.” This section fully confirmed my fears about the sincerity and clarity of intention of the initiative. For the Federal Government to fully fund the organization means that it is neither independent nor non-governmental.

Section 16 of the Bill clearly stated that: “An extractive industry company which gives false information or report or fails to give an information or report required under this Act to the Federal Government or its agency; or renders false statement of account or fails to render a statement of account required under this Act to the Federal Government or its agency, resulting in the underpayment or nonpayment of revenue accruable to the Federal Government, commits an offence and is liable on conviction to a fine not exceeding N40,000,000.00.”

In addition, as stipulated in Section 16(2): “Where the company has been convicted of an offence under sub section (1), the Court shall in addition to the penalty prescribed there under order the company to pay the actual amount of revenue due or refund the shortfall in revenue to the Federal Government.”

From the definition of its intentions, it was obvious that the entire concept of EITI was solely packaged to check and/or fight extractive industries particularly those in the mega- revenue generating oil and gas sector as emphasized in the Bill. This represents a direct opposite to the peculiar Nigerian case study where Government-people are the biggest problem in the corruption issues of the country. Though the operating and service companies in the oil and gas sector have their unfair share of the corruption cake, the real and major problem as pertains to accounting for earnings lies with the Federal Government and its people.

So to convince Nigerians that it has clear intentions NEITI has to state how it is going to address the high level of corruption and misuse of oil earnings by the various tiers of Government especially the Federal Government/Presidency.

In the penalties stipulated for contravention of the NEITI Law (Bill), nothing was mentioned about Government and its officials. All that was stated were the hangman’s rope for oil and gas and casually other industries in the extractive business. Anybody who is familiar with the problem of corruption as pertains to proper accounting of oil and gas earnings would not need to be told that most of the conflicting or rather un-reconciled accounts are on the side of the Government and its agencies.

There is a genuine worry that from the way the entire initiative is structured, it may not have situational relevance in the Nigerian corruption case. In Europe and America, the structure is alright for their case because the bulk of fraud and unbalanced accounting falls more heavily on the companies’ side with pockets of cases involving governments and its people. But in the Nigerian case, the bulk is with Federal Government and if this is so, EITI or rather NEITI cannot afford to allow the culprits in the crime it set out to curb to be fully in charge of the machinery that was supposed to ask questions concerning unbalanced accounting of oil and gas earnings.

A clear instance was the various corruption cases exposed in the NEITI-sponsored Hart- Grant audit report. All the accusing fingers pointed either directly to the Presidency (as the then sole administrator of the oil ministry) or to government agencies- NNPC, NAPIMS, Calson Bermuda, refineries etc. No direct mention was made of any operating or service oil and gas company. DPR is yet to clear itself of un-reconciled earnings concerning signature bonus, royalties, bid fees and right of first, second and even tenth refusals.

How would anybody expect the Presidency to prosecuted managers of those NNPC subsidiaries when such managers took instructions or rather orders directly from the President who as at then acted as the sole administrator? How can cabinet ministers set up machineries to prosecute their president since it has become obvious that the Ministry of Petroleum Resources, DPR, NNPC, will continue to be directly administered from the Presidency?

Truth be told, the entire concept of the Nigerian subset of EITI as currently packaged, could best be described as a reversed initiative or more aptly, an upside-down mitigation package. Independent members of NSWG should rework the composition of the NSWG and pull out of the Presidency if they want Nigerians to take them seriously.

IFEANYI IZEZE, PORT HARCOURT NIGERIA. iizeze@yahoo.com