The 2017 Benchmarking Exercise Report; opportunities, gains and losses

The benchmarking exercise provides a wealth of evidence to measure Nigeria’s performance against twelve precepts of good practice set out in the Charter covering the entire decision chain in the management of natural resources. Precept 1 which is securing the greatest social and economic benefits for the people of Nigeria is the high-level summary of all the subsequent 11 Precepts.The main point is that there is a strong sense that natural resources are not delivering a sufficient contribution in terms of social and economic benefits for the country. Going through the main parts of the decision chain, it reveals among other things that too often information is not available on the social, economic and environmental costs of extraction to inform properly the ‘decision to extract’.Till date, it is the best reference material on activities in the oil and gas sector of the Nigerian economy, systematically cataloging critical aspects of the governance of natural resource wealth in Nigeria, and identifying changes that have taken place since the first and second reports in 2012 and 2014 respectively.The twelve precepts represent the various components of good natural resource sector governance, and are mapped to the extractive industry decision chain. NNRC scores performance on each precept using a “traffic light” system, where a positive answer to the benchmarking question scores green, a negative answer red, and where an answer is neither a definitive “yes” or “no”, an amber light. The 2017 benchmarking exercise is not just another index of information; rather, its goal is to help Nigeria improve governance of the oil and gas sector and provide key stakeholders with a tool for action.Findings from the yet to be published 2017 Benchmarking Exercise for Nigeria show that although a fiscal framework existed in the industry, its ability to generate the required revenues had proved inadequate. The NNRC noted that “On fiscal terms, the regime is not strong enough to attract investors, as compared with other African countries especially in the area of deep sea exploration. The fiscal regime in the sector is not flexible enough to respond to dynamic levels of production and profitability.”The Programme Coordinator, NNRC, Tengi George-Ikoli, stated that the presentation released by the NNRC is prelude to the actual unveiling of the 2017 Benchmarking Exercise Report reflecting changes in the management of Nigeria’s oil and gas resources since 2014. She said, “It is expected that the report would be presented and made available to the public and stakeholders in the oil and gas sector by the first quarter of 2018. The conclusions reached in this report highlight the main strengths and weaknesses of Nigeria’s petroleum sector governance, including reform priorities and opportunities.”The NNRC pointed out that the level of inter-agency coordination in the oil and gas sector was poor and this had limited the full realisation of government policies and plans. “As a result, the strategic measures to enhance the oil and gas sector’s operational effectiveness are not well coordinated,” it said.Moreover, gaps still exist in the institutional and legal framework created critical operational problems for actors in the oil and gas sector, as it stressed that of particular concern was the allocation of oil wells without regard to best practices. The report showed that the conflict between government and industry objectives and distrust among the actors limited the adequacy of consultation efforts, adding that early consultation would most likely improve trust and collaboration among stakeholders.It said oil and gas sector contracts were hardly made available to the public, as asset disclosure and information on beneficiary ownership was still not available for effective scrutiny within the industry. On oil exploration, the report stated that government had no clear policy governing the award of licenses; its decisions were rather driven by the prevailing socio-political environment.George-Ikoli stated that to accurately review changes in sector’s governance, a consortium of researchers consulted with multiple stakeholders in the sector, including industry experts, practitioners, civil society and community leaders.“The purpose of the report is to provide a benchmark for measuring progress in the country’s oil and gas sector against the 12 Charter precepts,” she said.