It was hardly surprising that international extractive industries watchdog, the Extractive Industries Transparency Initiative (EITI), recently met with officials in the new administration to underscore the need for President Muhammadu Buhari to take direct charge of oil issues, and integrate the revised EITI principles and standards in his economic policy agenda. The EITI focusses on the quality of governance of extractive industries in the world’s natural resources-rich countries and in its assessment, Nigeria was far behind on issues such as the transparency with which taxes and other revenues are remitted to the government and correctly confirmed the status of Nigeria’s oil industry as one riddled with corruption and lacking in transparency. Operations in the nation’s oil and gas sector have over the years been shrouded in secrecy turning the God given resources to a black box. This must now change.
The admonition by Clare Short, the EITI chair would have gone largely unnoticed but for the diligence of the NEITI, which came out to corroborate the characterization of the governance of Nigeria’s oil sector as opaque and corrupt. This diligence is admirable. Since its inception, NEITI has consistently exposed the opacity and corruption, which reign supreme in Nigeria’s oil sector. It is indeed tempting to think that NEITI’s origins in an international movement to promote transparency in extractive industries, which Nigeria signed up to, accounts for its tenacity and courage; but its leadership has been critical to its success. After all, NEITI is funded by the Nigerian government and its Executive Secretary and some board members are Federal Government appointees.
Without the tradition of integrity and fearlessness it has built, the paymaster of the piper would have been dictating the tune. NEITI would have been one of the many agencies meant to fight corruption and promote transparency, which have failed so woefully to do so and Nigerians would never have had the benefit of its candid reports, which are based on account of the passage of laws, which promote transparency, including the 2007 NEITI Act and the Freedom of Information Act.
But crucially the manner in which various agencies in the oil and gas sector function is totally deficient in providing an enabling environment for substantive transparency. This is hardly surprising as Nigerian officialdom has a tragic genius for crafting seemingly sensible laws and regulations and doing everything that expressly contravenes every letter and spirit of the laws. Besides, transparency seems less of a consideration in Nigeria given the constant exposure of gargantuan corruption. The impotence of the government on, if not active promotion of corruption, is the real issue.
The logical point of departure in sanitizing the oil sector should begin with the fuel subsidy regime. The emerging consensus, especially by the international donor community is that the fuel subsidy regime is unsustainable and should end. This is not true, just as the despairing claim that Nigeria’s oil is a curse, is unacceptable. Ending the subsidy will be a strategic mistake; rather Buhari should review all the arrangements with the cabal of oil marketers who have been gaming the system in collusion with officials of the Nigerian National Petroleum Corporation (NNPC). The current fuel regime is subsidizing corruption and not Nigerians, so the answer is to take the corruption out of the subsidy regime and make it benefit the ordinary Nigerian. There is nothing wrong with a government subsidizing petroleum or other products for its citizens. The USA and the EU spend billions in subsidizing their farmers to the disadvantage of the global south.
The extractive industry thrives in many other nations of the world and do yield immense benefits to the owners where and when the government of the day thinks and acts in the best interest of the people as opposed to self-interest. In this connection, corruption is the issue that is central to the problem of the fuel subsidy regime. In every aspect, the fervent desire and uncompromising will of government to act strictly in the best public interest – be it in negotiation deals or in regulation – can make all the difference in the fortunes of a nation. It is granted that the government cannot solve this problem alone since the subsidy regime is run by oil marketers and unscrupulous NNPC officials and other colluding outside interests. Indeed, some moil marketers have, with the backing of their friends in high places, grown too powerful to deal with. The challenge for the new administration, and rightly so, is to take all necessary steps to eliminate secrecy jurisdictions and introduce transparency in the subsidy regime. But if government is to earn the support of Nigerians in the effort to reform the regime, the leadership must act demonstrably in the country’s best interest. And the NEITI must keep wake over the process.
In its latest review, of the Nigeria oil and gas sector, NEITI annual audit found billions of dollars in outstanding payments owed the Federal Government by oil companies, including the NNPC. Neither the NNPC nor the Oil Ministry has confirmed or denied this claim. According to NEITI, underpayment, underassessment, and variance in royalties, signature bonuses, levies and taxes abound in the oil sector. No significant step has been taken to redress these anomalies despite NEITI’s detailed reports on the enormous cost to the national treasury and recommendations on stemming the fiscal drain.
It seems that successive Nigerian governments deliberately created and left open a system of mammoth shadow revenue taps in the nation’s oil sector. The Federal Government has refused to address the urgent need to bring fairness, transparency and due process to the bidding through which oil blocks are allocated and the process for reviewing existing oil block concessions. Billions of dollars could easily be made by high-ranking politicians and corrupt bureaucrats as a result of the wide discretion the system has for long permitted. Shamefully, despite the prevalence of required metering technology, the Ministry of Petroleum Resources is yet unable to efficiently measure the quantity of crude oil pumped by the oil companies operating in Nigeria.
NEITI in its comments also highlights one of the gravest failure of the Goodluck Jonathan administration: the failure to pass the all-important Petroleum Industry Bill (PIB). After failing to pass the PIB, the Jonathan administration diminished chances to sanitize the oil sector by making the bizarre choice to retain and by some accounts even expand the opaque discretionary powers that have often been abused by ministers. The then National Assembly, dominated by the PDP, failed to pass the PIB with squabbles over regional distribution of oil export revenue. Not only was an opportunity to improve the transparency and revenues of Nigeria’s oil sector lost, the industry was also gradually reduced to irrelevance as more African nations are discovering oil and are attracting investment into exploration and production. New technology is also bringing greater volume of hitherto commercially unviable domestic oil and gas into the western markets on which Nigerian exports rely.
Jonathan was too preoccupied with the politics of 2015 to exercise the leadership required to pass the PIB. All the same, passing the PIB is the minimum first step that needs to be taken by the Buhari administration to put an end to the rampant corruption and impunity in Nigeria’s oil sector. The new government has the opportunity of capitalizing on the 2007-2011 Fiscal Allocation and Statutory Disbursement (FASD) Audit Report, recently released by NEITI to demystify issues relating to oil bunkering, oil theft and subsidy, so that Nigerians can now know about it and know who to hold accountable. On this, history will not kindly judge the new President and anyone who fails to do his duty to ensure that Nigeria takes this remarkable step.
