Chinwe Ezeigbo's blog

The letter by the Governor of the Central Bank of Nigeria (CBN), Mallam Sanusi Lamido Sanusi, to President Goodluck Jonathan alleges potential fraud at the Nigerian National Petroleum Corporation (NNPC). This Policy Brief presents the facts of the case, which is the opacity of operational and financial transactions in NNPC that can possibly lead to high levels of fraud and significant risk to Nigeria. This document is a background to a Roundtable Discussion hosted by Nigeria Natural Resource Charter for industry stakeholders to sustain the debate for improved transparency in Nigeria’s oil and gas sector.

This policy brief examines the 2012 Executive Draft Petroleum Industry Bill (PIB) to determine whether the Bill achieves its intended reform objectives. It analyses the PIB vis-à-vis Government’s reform objectives as contained in the National Oil and Gas Policy as well as best practice from other jurisdictions. It concludes that overall the PIB falls short of its objectives and makes recommendations on what can be included in the Bill towards achieving its goals.

The World Bank released the latest Africa’s Pulse Volume 7 on April 15, 2013. It reports that Africa has maintained impressive growth momentum as well as having made progress towards the Millennium Development Goals. Another highlight of the report includes a graph on the fastest growing economies that depict a number of African countries outperforming China and India in terms of economic growth.

Greater transparency is needed in the extractive industry to prevent illicit cash outflows from developing nations.  

One of the main themes of the Africa Progress Report 2013 on Equity in Extractives is transparency. The lack of transparency in the extractives sector is the bane of many developing countries, who cannot hold their governments accountable because the international economic system is set up in such a way as to promote opaqueness. Is it any wonder that financial institutions were able to take advantage of this and so mismanage the global economy that a worldwide recession was the end product?

This lack of transparency costs developing nations billions of dollars each year. It shields transnational corporations (TNCs), as well as governments in sub-Saharan Africa and other developing regions, from scrutiny. Behind this cloak of secrecy, tax evasion and avoidance, and other forms of illicit dealings, cash outflows are carried out with impunity. Moreover, the possibility of detection is slim to none.

Fortunately, since the mid-2000s, there has been a growing movement of civil society organizations pushing for greater transparency, specifically in the extractives industry. If transparency becomes the order of the day, billions and possibly trillions of dollars in illicit transfers could be detected and stopped. The good news is this has begun and promises to continue.

Much of the Global North, including the G8, seem to be moving more and more in the direction of removing the opaque barriers that have stood in the way of transparency for a long time; this is to their advantage. As the Africa Progress Report 2013 states: “If the international community comes together to tackle tax evasion, rich countries as well as poor will gain as the losses associated with aggressive tax planning diminish. By the same token, when there is a deficit of trust there are no winners – and resource governance in Africa has long been blighted by a lack of trust.” 

Let us take a look at some positive developments.

The US

An excerpt from the 2013 Africa Progress Report, published by Kofi Annan and the Africa Progress Panel (APP), which he chairs, reads as follows:

“In July 2010, the United States Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Its Section 1504 represents a landmark, requiring full disclosure of 'any payment made by the resource extraction issuer, a subsidiary of the resource extraction issuer, or an entity under the control of the resource extraction issuer to a foreign government... for the purposes of the commercial development of oil, natural gas, or minerals.' In 2012, the Securities and Exchange Commission (SEC), the principal government agency responsible for regulating the US financial sector, adopted the final rules for implementation of the legislation. Companies will be required to file annual reports with the SEC. Critically, the reporting will require public disclosure of all payments in excess of US$100,000 on a project-by-project basis.”

This is a significant move by the United States, taking the lead among the G8. Regrettably, other countries who are major players in the extractives industry, like the European Union (EU), Canada, and China, were not as keen on pushing for such regulations. Probable reasons for this are outlined in the aforementioned report. Fortunately, after much deliberation, the EU has agreed to follow the US example.

European Union

On June 12, 2013, the European Parliament approved EU Transparency and Accounting Directives. The move was applauded by Annan and the Africa Progress Panel (APP). The press statement from the APP states: “The vote in the European Parliament creates a binding legal requirement for EU-listed and large privately owned oil, gas, mining and logging companies to publish all payments over €100,000 to governments in every country where they operate. This brings the EU in line with similar extractive industry transparency rules in the United States, under the 2010 Dodd-Frank Act, that will take effect this year.” Notably, the EU initially resisted transparency in a bid to protect their business interests overseas.

Canada

Canada is home to some of the world’s largest mining companies; yet, it had long resisted the transparency movement in extractive transactions. On June 12, 2013, Canada announced that it would “now establish new mandatory reporting standards [and bring] the country in-line with the direction taken by the US and the EU,” according to an APP statement. Indeed, this was a landmark decision considering how much influence Canada wields in the extractives sector.

Switzerland

Like Canada, Switzerland is a huge player in the commodities market. The Bern Declaration issued a press release just a day before the EU adopted its new transparency measures, which reads: “On the eve of the adoption of new EU transparency rules for commodities companies, Switzerland has now also taken the next political step. As today's decision by the National Council shows, there is now broad consensus that the Swiss commodity trading hub needs mandatory transparency standards.” Again, this step is worthy of note. The measure not expected but is very welcome. The press release concedes that: “The increasing pressure on Switzerland is also reflected in the recent success of international transparency efforts.”

China

China is still resisting the move, however. Overall, it is in China’s best interest to join, as the days of blatant opaqueness of deals impoverishing millions seem to be numbered. They will have to either join sometime in the near future or risk possible loss of trade to those who practice open business.

Why Now?

For centuries, opaque deals have been the modulus operandi in extractives sector. The international system is set up this way. However, why have there been such drastic moves towards transparency?

In an enlightening World Economic Forum blog entry titled, The Crumbling Silos of Secrecy, authored by the executive director of the Africa Progress Panel Secretariat, Caroline Kende-Robb, we get a clue as to a possible motivation for the consensus among of the Global North towards a shift to more transparency. Kende-Robb explains: “As austerity bites in many G8 countries, citizens are demanding fairness and action. They feel cheated, and will no longer tolerate secret deals, illicit financial flows and tax havens that stash money away for the rich.” She adds: “In Africa, too, citizen opposition is growing to the squandering of oil, gas and mining resources as evidence emerges of undervaluation, shady deal making and mismanagement.”

Who would have thought that any good could have come from the global economic downturn? It makes absolute sense that the Global North and South would, in times of austerity, push for more transparency as a means of stopping further damage to the world's economy. Needless to say, this should have been done eons ago.

Credit must be given to the US for leading the pack, and to the EU, Switzerland, and hopefully Canada for following suit.

 


 

This article was originally published on the Fair Observer website. The author Solomon Appiah is a policy enthusiast with a heart for the development of Africa. A DAAD Public Policy and Good Governance fellow, he is a native of Ghana. 

For more information: 

Blog: www.solomonappiah.wordpress.com

Follow on Twitter: @SolomonAppiah5

 

 

 

Image credit: Flickr images/Julien Harneis

 

 

3 May 2013                                                                                                  

                                                                                                                                            

The BusinessDay Newspaper has just published an article which captured highlights of the workshop hosted by the Nigerian Natural Resource Charter (NNRC) in Lagos to provoke discussions on Fuel Subsidy in Nigeria. This workshop was hosted alongside the launch of the "Citizens Guide to Energy Subsidies in Nigeria" by the Center for Public Policy Alternatives (CPPA).

The article highlighted some key issues discussed during the presentations and the recommendations of the Charter on the issue of subsidies. Key among these are the inequitable distribution of resource revenues in the 2013 budget to key sectors like education, health and agriculture as compared to the provisions made for subsidy in the budget. 

The article also showed highlights from the NOI Polls recent polling on petroleum pricing in the country. The results of the polls showed that "...many Nigerians purchase fuel at prices way above the official pump price of N97 stipulated after the partial removal of fuel subsidy by government last year".

Click here to read full article. Presentations made at the workshop can also be found here.

Event

NNRC-CPPA WORKSHOP ON ENERGY SUBSIDIES IN NIGERIA: OPTIONS AND IMPLICATIONS

26April 2013

LAGOS- 18 April 2013- The Nigerian Natural Resource Charter (NNRC) in collaboration with the Centre for Public Policy Alternatives (CPPA) convened a workshop to launch A Citizens’ Guide to Energy Subsidies in Nigeria. This guide was published by CPPA and the International Institute for Sustainable Development’s Global Subsidies Initiative (GSI). The conveners of the workshop also sought a range of views from participants regarding the current subsidy regime. This was timely especially with recent agitations following the federal Governments proposed complete removal of fuel subsidies in Nigeria.


Key participants at the workshop were some members of the Expert Panel of the NNRC including former Nigerian Minister of Petroleum Resources and Chairman of the Panel, Mr. Odein Ajumogobia, representatives of the Nigerian Employers Consultative Association (NECA) and Nigerian Economic Summit Group (NESG). There were also representatives from the Jetty and Petroleum Tank Farm Owners of Nigeria (JEPTFON), the Trade Union Congress (TUC) and Civil Society Organizations among others.

The workshop commenced with brief comments made by the Chairman of the Expert Panel of the NNRC. This was followed by presentations made by Ms. Chinwe Ezeigbo- researcher with the NNRC- and Dr. Otive Igbuzor- Executive Director of African Centre for Leadership, Strategy and Development (Centre LSD) and member of the Expert Panel of the NNRC.

Ms. Ezeigbo, in her presentation, highlighted the facts regarding subsidies and revenue allocation in Nigeria. She also underlined the recommendations of the Precepts 1, 7 and 9 of the Charter. These precepts prescribe practical ways through which governments can best utilize revenues generated from the resource sector to achieve sustained economic and social development for its citizens.

Dr. Igbuzor focused on the advocacy issues on energy subsidy in Nigeria. He highlighted among other things that subsidies have been used as an opportunity to mismanage resource revenues and encourage corruption in the sector. He also emphasized the need for government to implement subsidies which are targeted towards the poor.

A panel discussion was convened after the presentations to discuss the state of subsidies. Panelists included members of the Expert Panel of the NNRC and representatives of JEPTFON and NECA. A question and answer session was held following these discussions with a range of questions and comments from the audience.

There was no consensus to support either a complete removal or the retention of subsidy in Nigeria. A key reoccurring message, however, was the need for a better management of the subsidy regime to enable transparency and accountability in the use of resource revenues. Also key were the recommendations for strategies to be developed to ensure subsidies are targeted to benefit the poor through, for instance, subsidizing general sectors such as public transportation.  

In the afternoon session, Dr. Folarin Gbadebo-Smith, the Managing Director and Chief Executive Officer for CPPA, introduced the Citizens’ Guide to Energy Subsidies in Nigeria. He gave an overview of its key findings on energy subsidies in Nigeria.  Free copies of the Citizens Guide can be accessed on this link

Presentations made during this workshop can be accessed on this link. Also see news article following this workshop here

What are your views on the following issues? Are resource revenues being used for the benefit of the current and future generations? Is public spending effectively allocated and controlled? Does the development of oil deliver significant economic and social benefits to citizens?

We are invited to express our views on these pertinent issues and more by scoring the industry here.




Image source: Getty Images 


See video

Event

NNRC Business Lunch: What would the Charter say about the Petroleum Industry Bill (PIB)?

16 March 2013

Lagos-7 March- A Nigerian Natural Resource Charter (NNRC) steered business lunch on the 
Petroleum Industry Bill (PIB) brought together prominent members of the media and some members of the Expert Panel of the NNRC at the Regent Hotel in Lagos.  The event was held to evaluate the key provisions and objectives of the Petroleum Industry Bill (PIB) against best practices outlined in the Charter.

Presentations were made by two members of the Expert Panel of the NNRC- Mr. Tunji Lardner and Ms. Lois Laraba Machunga.

In his presentation, Mr. Lardner – a prominent public policy analyst and Executive Director of WANGONeT – discussed how the objectives of the present PIB addressed issues of social development, equity and transformations as proposed in Precepts 1, 2, 11 and 12 of the Charter. He analyzed how the provisions of the current PIB ensure that every transaction in the oil and gas value chain culminates into the transformation of the lives of Nigerians.  The precepts examined by Mr. Lardner suggest best practices aimed at ensuring that the greatest social and economic benefits accrue to the people of Nigeria from the exploitation of its national resources.

Ms. Lois Laraba Machunga- an industry expert and founder of JALZ Energy Ltd- benchmarked the provisions of the PIB against the guidelines in Precepts 3 to 6 of the Charter. These precepts suggest best practices for activities on the value chain regarding the fiscal regime, award of contracts, local impacts and the workings of the national oil company. Ms. Machunga highlighted issues in the PIB which do not satisfy international best practices as suggested in the Charter and which need to be addressed.

A key observation made during the presentation was that there are overarching institutional challenges in several sectors beyond the petroleum sector. For instance there is a significant gap between legislation and implementation of legislation. Should these larger systemic issues continue to go unaddressed; even the best PIB will not be a success. A lively discussion followed the experts’ presentations. From prominent bloggers to television personalities, journalists focused on strategies for a better way forward, keeping the NNRC best practices in mind.

The members of the Expert Panel of the NNRC came together in November 2012 to discuss and score the Nigerian oil and gas industry as it stands against international best practices suggested in the Charter. The result from this scoring was compiled into a report called the “Benchmarking Report”. This report was disseminated to participants at this event. The report provides a comprehensive overview of the state of the industry against international best practices. Future scoring reports will serve as a useful analytical tool in order to track the progress made in the sector. Click here to access benchmarking report: http://nigerianrc.org/content/benchmarking-exercise-report

How do you think Nigeria is doing in governing its oil and gas sector? We invite the public to provide their opinion on the state of the industry against the precepts by conducting their own scoring here: http://nigerianrc.org/have-your-say

There are more NNRC events planned for April that will facilitate discussions with stakeholders on the fuel subsidy dilemma and the local content challenge. Visit the website for updates on these events.

 

To read the presentations made at this event, click here: http://nigerianrc.org/content/expert-panel-presentations  

 

 Fuel Subsidy: New Report with Facts

A new piece of research from NOI Polls sought to find out how people buy fuel, where they buy it from and how much they buy for. The results confirm what we as Nigerians can probably guess – that people are paying more at the pump than they should. Now, for the first time, we have hard evidence to push forward the stagnant debate over subsidy removal.


This research shows that the official selling price for fuel, which is N97 per litre, is only observed in the regions that include Lagos State and Abuja. More than 40% of people surveyed purchase fuel at the official selling price in those areas. More than 38% of the people surveyed in the rest of the country pay between N110 to N120 for fuel.


Despite the fact that a majority of the geo-political zones pay more than the official selling price for fuel, there is still an aversion to complete removal of the subsidy. 59% of the people surveyed are not in support of the government’s decision to remove fuel subsidy. This is likely linked to the fact that 70% of respondents interviewed nationally say that reduction of fuel subsidy has increased spending in their households.


This research reiterates the fact that the fuel subsidy regime as it is in Nigeria is ineffective. This is demonstrated especially by the evidence that shows that many Nigerians purchase fuel at prices way above the official pump price stipulated after partial-subsidy removal by government. In effect, fuel marketers benefit twice with every Nigerian that purchases fuel above the fuel pump price of N97.


Various reasons were given by respondents as to why they think fuel is sold at different prices in different states. A majority of the people interviewed blamed the differences in fuel pump prices on lack of government monitoring of filling stations outside Abuja and Lagos. 24% attributed the variation in pricing to the cost of importing fuel, which might differ for fuel marketers. 14% blamed the price variations on greedy operators of filling stations who exploit the public by hoarding fuel. .


The reason for the continued aversion to complete removal of subsidy by respondents was not given in this research. Aversion to the subsidy could be due to a lack of or poor quality of information. It could also be due to lack of trust in government’s competence to pass on the benefits of removal back to those most affected as promised. Subsequent research by NOI Polls, expected to be undertaken on a quarterly basis for the rest of the year, will hopefully provide more insight to this. 

 

 


The UN Anti-Corruption day (the 9th of December) is approaching!

This day has been set aside by the international community to raise awareness on corruption and on the role of the United Nations Convention on Anti-Corruption (to which Nigeria is signatory) in combating and preventing it. Fighting corruption through transparency and accountability are top priorities for the oil and gas sector here in Nigeria. But improving governance in the natural resource sector is often an elusive task.

The Nigerian Extractive Industries Transparency Initiative (NEITI) is the Nigeria's first foray into international initiatives working to improve revenue management.  It is geared towards achieving transparency in the publication of revenues accrued from the extractive industry. Nigeria’s first three NEITI audit reports were regarded as the ‘gold-standard’ for other countries to follow. Find information about NEITI on this link: http://www.neiti.org.ng/ 

Again, Nigeria is a pioneer with its work as one of the first countries to integrate the Natural Resource Charter which is a global initiative also aimed at transparency and accountability in the natural resource sector. Governing the sector both responsibly and transparently, for the maximum benefit of the people, requires a series of responsible choices along the entire policy decision chain; from the point of making a decision to extract the resource to the management of the revenues accrued from production. The Charter is useful because it gives guidelines on how the activities along the entire value chain of natural resource exploitation should be conducted for the benefit of the citizens. These guidelines are based on best practices gleaned from countries who have been able to positively benefit from their natural resource explotiation. 

The Nigerian Natural Resource Charter complements NEITI’s efforts and achievements in order to make clear the responsible path for exploiting resource
wealth to the benefit of all Nigerians. Whereas NEITI focuses its efforts on matching revenues reported by companies with that received by the government, the NRC looks beyond revenues at the entire natural resource value chain. The 12 Precept design of the NRC allows accountability actors (that means, you!) to assess where Nigeria is today and more clearly make a conscious decision of where it should be going. Find more information about the NRC on this link: http://naturalresourcecharter.org/ 

In early November, the Expert Panel of the NRC met in Lagos. The experts scored the performance of the Nigerian oil and gas sector against the precepts of
 the Charter. Their conclusion was clear. There is a need for a complete overhaul of the system. (See the scoring and presentations made by the experts on this link: http://nigerianrc.org/content/expert-panel-discussion-presentations)

Understanding how corruption is allowed to exist in a system is the first step in fighting corruption! Breaking down how the natural resource sector works into 12 bite sized pieces (the precepts) is a good way to tackle the irregularities in the sector.  It can be best compared to a stethoscope for conducting a health check on the sector. The principles in the Charter would aid better understanding of how the sector can work best. This can be a way to identify where corrupt practices might exist in the sector. It can also be a tool to guide informed questions about the processes in the sector and advocate for change when necessary. 

The next steps towards fighting corruption in this sector (and in Nigeria in general!) lie with us. Accountability and transparency are not far-fetched if we can actively work towards it. The NNRC is a powerful idea whose time has come in Nigeria. Let’s make good use of it! 

 
Syndicate content
NULL