Nigeria Natural Resource Charter Blog/News

SEEKING REFORMS: IMPLICATIONS OF FALLING OIL PRICES ON THE NIGERIAN ECONOMY

May 7, 2015

On March 10, 2015, the Nigeria Natural Resource Charter (NNRC) partnered with the Lagos-based think tank Center for Public Policy Alternatives (CPPA) to organize a policy dialogue on the implications of falling oil prices in Nigeria. Participants ranged from industry representatives, government officials, civil society officials, leading academics to members of the NNRC multi-disciplinary expert panel. The policy dialogue also served as a dissemination platform for assessing the governance of Nigeria’s petroleum wealth based on findings from the recently completed 2014 NNRC Benchmarking exercise report.The discussions, framed around two panel sessions, considered background factors responsible for the drop in oil prices, the implications of the drop for Nigeria’s macroeconomic stability, and how Nigeria has performed with regards risk mitigation in the past. Some of the areas of immediate impact as highlighted by the panels include: reduced exploration and production activities for oil and gas, reduced investments by international oil companies, food inflation as well as delayed implementation of the gas master plan by the Federal Government.At the end of both sessions, participants at the policy dialogue were able to suggest a number of ways by which the current economic circumstances could be tackled within the policy perspectives of governance and accountability. Some of these include:

  1. That Government should seize the opportunity of falling oil prices to cut down on wasteful public spending including: executing wage freezes, scaling down on government services, and imposing strict fiscal measures. This is the most ideal and foremost option if government is to secure legitimacy in any of its other revenue management measures.
  2. Secondly, Government should seize the opportunity to reform tax administration in order to improve its fiscal position. This may be in the form of simply widening the tax net without nominal increases in the tax code. For example, the informal sector which contributes as much as 30% to the Internally Generated Revenue (IGR) of Lagos state, the most commercial city in Nigeria, requires inclusion into formal tax templates. The efficiency of the tax regime also needs to be improved considerably.
  3. It will be important to consider constitutional reformation and the actual practice of fiscal federalism, as most states are not economically viable. A unique state like Lagos that can show the example of economic viability is being constrained by the current federal system. This period can provide the turning point or tipping point required for such fundamental policy and political restructuring.
  4. There is the need to take advantage of the current drop in oil prices to diversify the economy. Nigeria currently relies on crude oil and gas to provide at least 80% of her revenues. The drop in oil prices has led to a 48.9% decline in revenues for the first quarter of 2015. Statistics show that by the end of the first quarter alone, government had borrowed N473bn (about US$2.3 billion) in order to close its expenditure gaps. This number represents 54% of the total allowed borrowing for the year, estimated at N882bn (US$ 4.4 billion).
  5. That, Nigeria deserves good leadership that can secure the trust of citizens through accountability. Transparency continues to be a required component in the oil and gas sector, particularly in the administration of the Excess Crude Account (ECA) and remittance of revenue to the Federation account by the National Oil Company, NNPC and other relevant bodies. The need for institutional transparency has been identified as one of the major challenges to natural resource governance as reported in the 2014 NNRC benchmarking exercise.

Following successful elections in April 2015 to the office of the President, in which an opposition candidate emerged winner, the new government will have an important task on its hand – to tackle reforms in the country’s most vital sector. President-elect, Muhammadu Buhari’s administration would require sufficient policy tools to enable it deal with many of the challenges highlighted above. The NNRC Benchmarking Exercise model already represents a platform for engaging policymakers, researchers and other key stakeholders in the design of practicable solutions to reform Nigeria’s oil and gas industry. Such strategic engagement begins with instruments like the policy dialogue series that provides the opportunity to build coalitions for change between researchers, practitioners and the civil society. The NNRC hopes to foster future engagements with collaborations from the CPPA and other partners so as to deepen public understanding and to provide useful policy advice to government agencies.                                                                                                                                                                                                                                                                   Josiah Aramide writes from CPPA in Lagos

2014 Benchmarking Report to Be Launched in Abuja and Lagos

December 10, 2014

The NNRC will launch the 2014 edition of the benchmarking exercise report on the 9th of December in Lagos and 11th of December Abuja.

For the 2014 edition, the NNRC entered into a partnership with the Lagos-based think-tank, the Centre for Public Policy Alternatives, which carried out the assessment’s research under the guidance of the NNRC expert panel. To inform its review of how sector governance has changed since the first benchmarking exercise conducted in 2012, CPPA interviewed industry experts, practitioners and civil society organizations, and conducted a comprehensive literature review to provide further evidence and assess facts for consistency.

Read the report »

Sustaining Debate on the Oil and Gas Sector Transparency: Issues With CBN's Allegation Against the NNPC

April 9, 2014

The Nigerian Natural Resource Charter convened a Roundtable Discussion in Lagos on the 13th of March 2014, to examine the allegations by the Governor of the Central Bank of Nigeria (CBN) on discrepancies between the receipts of the Nigerian National Petroleum Corporation (NNPC) and the corresponding figures remitted to the Federation Account.

Sustaining the Debate for Improved Transparency in Nigeria’s Oil and Gas Sector

March 13, 2014

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.

The Petroleum Industry Bill: Achieving Its Intended Reform Objectives?

March 6, 2014

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 Environmental, Social and Economic Impact of illegal Oil Refining in the Niger Delta

February 20, 2014

Do you know how illegal oil refining and crude oil theft happen?

Transparency in the management of Nigeria’s oil revenue

January 16, 2014

On September 25, 2013, the Governor of Central Bank of Nigeria (CBN) wrote a letter to the President of the Federal Republic of Nigeria. The central subject of that memorandum was “Non-Repatriation to the Federation Account by Nigerian National Petroleum Corporation (NNPC) of N49.8 Billion representing 76% of the value of Crude Oil lifting in 2012 and 2013”. But the letter also contains complaints about “Failure of NNPC to pay N22 billion Nigerian Export Supervision Scheme (NESS) Levy”, and “Other Related Matters”.

Transforming Africa's Expansion into a Generational Blessing

July 17, 2013

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.

Transparency in Extractives: Jumping On Board

July 9, 2013

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

 

 

Press Release

May 3, 2013

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.

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