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Nigeria

Extractive Sector Transparency (NG0003)

Overview

At-a-Glance

Action Plan: Nigeria National Action Plan 2017-2019

Action Plan Cycle: 2017

Status: Inactive

Institutions

Lead Institution: Nigeria Extractive Industries Transparency Initiative (NEITI)

Support Institution(s): Central Bank of Nigeria (CBN), Federal Inland Revenue Service (FIRS), Nigerian National Petroleum Corporation (NNPC), National Assembly (NASS), Ministry of Niger-Delta, Federal Ministry of Mines and Steel, Federal Ministry of Petroleum Resources, Department of Petroleum Resources (DPR), Nigeria Content Development Board (NCDB), Revenue Mobilization, Allocation and Fiscal Commission (RMAFC), Office of the Accountant General of the Federation (OAGF), Corporate Affairs Commission (CAC), Raw Mineral Research and Development Centre (RMRDC). Natural Resource Governance Institute (NRGI), Civil Society Legislative Advocacy Centre (CISLAC), Publish What You Pay, Budgit, Public and Private Development Centre, ANEEJ, Miners Association, African Centre for Leadership, Strategy & Development (Centre LSD), Institute of Chartered Accountants of Nigeria, PENGASSAN, NUPENG, Nigerian Union of Journalists, WANGONeT, Nigerian Labour Congress

Policy Areas

Access to Information, Anti-Corruption, Beneficial Ownership, E-Government, Extractive Industries, Fiscal Openness, Legislation & Regulation, Open Data, Private Sector, Public Participation, Public Procurement, Publication of Budget/Fiscal Information

IRM Review

IRM Report: Nigeria Implementation Report 2017-2019, Nigeria Design Report 2017-2019

Starred: No

Early Results: Major Major

Design i

Verifiable: Yes

Relevant to OGP Values: Access to Information , Civic Participation , Public Accountability , Technology

Potential Impact:

Implementation i

Completion:

Description

Nigeria’s extractive industry has failed to deliver development and improve the well being of the vast majority of her citizens. The wide spread opacity in the industry has allowed corruption to thrive, thus, deepening issues of underassessment, underpayment and under-remittance/non-remittance of revenues due to government, thereby limiting what the government can deliver to improve the lives of citizens. A backlog of remedial actions to improve accountability across financial, processes and production has not been prioritized or implementation has been too slow leading to further leakage and loss in citizens’ confidence.

IRM Midterm Status Summary

3. Work together with all stakeholders to enhance transparency in the extractive sector through a concrete set of disclosures related to payments by companies and receipts by governments on all transactions across the sector’s value chain.

Language of the commitment as it appears in the action plan:

“Nigeria’s extractive industry has failed to deliver development and improve the well being of the vast majority of her citizens. The wide spread opacity in the industry has allowed corruption to thrive, thus, deepening issues of under-assessment, under-payment and under-remittance/non-remittance of revenues due to government, thereby limiting what the government can deliver to improve the lives of citizens. A backlog of remedial actions to improve accountability across financial, processes and production has been prioritized or implementation has been too slow leading to further leakage and loss in citizens’ confidence”.

Milestones:

3.1: Disclose oil, gas and mining contracts in the area of exploration and production, exports, off taking and swaps on a publicly accessible portal in both human and machine readable formats.

3.2: Quarterly disclosures by NNPC, its subsidiaries and PPMC of sale-level data on oil and gas sales.

3.3: Develop Beneficial ownership register for companies that hold exploration, production and export licenses and publish in publicly accessible formats that are human and machine readable.

3.4: Develop policy on custody transfer meters in the oil and gas sector.

3.5: Get all extractive sector companies to adopt Global Memorandum of Understanding as an approach to the CSR programmes.

3.6: Mandate all relevant players (government and private sector) to develop, disseminate and annually report on individual plans (including timelines) for treatment (clearing) of remediation plans (from the NEITI audits).

3.7: All key stakeholders responsible for remedial actions hold annual open briefing sessions for sector stakeholders and interested public (including CSOs).

Start Date: January 2017 End Date: June 2019

Action plan is available here:

Context and Objectives

This commitment seeks to increase access to information on extractive sector revenue and production, and enhance civic participation and accountability, including through technological innovation.

Petroleum (oil and gas) has dominated Nigeria’s extractives sector, with total revenue amounting to USD 17.055 billion in 2016 (65% of total revenue). [29] The Nigerian National Petroleum Corporation (NNPC) is the entity through which the Nigerian government regulates and participates in the petroleum industry. [30] The Products and Pipelines Marketing Company (PPMC) is a subsidiary of the NNPC and responsible for sourcing and distributing petroleum to all parts of Nigeria. [31] Since at least 2004, various reports have detailed NNPC’s acceptance of bribes and failure to remit the proceeds of crude oil sales to the government, with the missing funds amounting to billions of US dollars. [32]

Corruption and a lack of transparency have been addressed through Nigeria’s active participation in the Extractive Industries Transparency Initiative (EITI), a global initiative to promote transparency and accountability in the oil, gas, and mining sectors. [33] The Nigeria EITI claimed to have identified USD 9.8 billion owed to the federal government, of which USD 2.4 billion were recovered through its efforts. [34] In February 2019, the EITI Board validated Nigeria’s compliance with the EITI Standards, positioning Nigeria as the first anglophone country to have done so. [35]

This commitment is relevant to all four OGP values. Milestones 3.1, 3.2, and 3.3 are relevant to access to information; Milestone 3.6 relates to civic participation; Milestones 3.6 and 3.7 are relevant to public accountability as they incorporate a public-facing element to NEITI remediation plans; [36] and Milestones 3.1 and 3.3 address technology and innovation in support of transparency and accountability.

This commitment’s activities are verifiable. The objects of Milestones 3.1, 3.2, 3.3, 3.4, and 3.5 are identifiable: a portal disclosing oil, gas, and mining contracts; quarterly disclosures by the NNPC, etc.; a beneficial ownership register; a custody transfer policy; and extractive sector companies’ adoption of the Global Memorandum of Understanding. The relevant players in Milestones 3.6 and 3.7 are also identifiable, through the NEITI remediation plans.

Commitment 3 continues an already established initiative. The milestones support the NEITI, and in some instances, go beyond. For example, the 2016 EITI Standard encourages countries to disclose contracts; [37] Milestone 3.1 mandates disclosure on a publicly accessible portal. EITI countries were expected to disclose the value and volume of production data for the fiscal year covered by the EITI report; [38] Milestone 3.2 requires quarterly disclosures by the NNPC and PPMC. The EITI Standard recommends that implementing countries maintain a publicly available register of beneficial ownership in the extractives sector, and from 1 January 2020, beneficial ownership information must be included in the EITI report. [39] In December 2016, Nigeria published a detailed roadmap on how it intends to disclose beneficial ownership in the extractives sector, which included a commitment to a register that is machine readable and in open data format (same initiative Milestone 3.3 supports). [40] Milestone 3.5, which extends Shell Nigeria’s approach to local civic participation to the rest of the petroleum sector, [41] goes beyond EITI support of civic engagement. Milestone 3.4, on custody transfer meters (instruments that record fluid measurements in the sale of oil) was not covered by the EITI standard but relates to a long-standing policy issue in Nigeria referenced in the new Petroleum Industry Governance Bill, 2017. [42]

The NEITI’s work in transforming the culture of opacity that previously characterised the Nigerian petroleum sector has been recognized [43] and eight cycles of EITI audits have been completed. [44] The OGP commitments largely extended and consolidated existing EITI commitments. [45] Further, Ejiogu and others challenged the assumption that transparency in the form of enhanced information disclosure inevitably leads to reduced corruption and enhanced accountability. [46] Finally, according to Dauda Garba of the NEITI, parts of the commitment were too ambitious to be achieved in the stipulated timeframe. However, according to Sarah Muyonga (Nigeria Officer, Natural Resource Governance Institute), the expectation was that if fully implemented the commitment would advance greater transparency in the extractive sector, as disclosure of contracts would create some level of trust and also increase the level of competitiveness in procurement process [47]. Kolawole Banwo (CISLAC) was also of the opinion that if implemented, the prospects of transforming the sector were high [48]. Therefore, this commitment was preliminary coded as having a moderate impact.

Next Steps

The IRM researcher acknowledges the importance of this commitment to Nigeria’s revenue. Future commitments in this area could include elements such as focusing on the quality, instead of the quantity, of data disclosures. Information could be clear, meet the needs of NEITI’s data users, and attest to NEITI’s independence.

[30] The NNPC, established in 1977, has powers and operational interests in oil refining, petrochemicals and product transportation and marketing. Nigerian National Petroleum Corporation, “About NNPC,” https://www.nnpcgroup.com/About-NNPC/Pages/Corporate-Information.aspx#.aspx.
[31] Pipelines and Products Marketing Company, “Welcome to PPMC,” https://ppmc.nnpcgroup.com/pages/home.aspx.
[32] See PriceWaterhouse Coopers, Auditor-General for the Federation: Investigative forensic audit into the allegations of unremitted funds into the Federation accounts by the NNPC (Feb. 2015), http://www.wgei.org/wp-content/uploads/2015/10/Full-report-20billion-dollars-missing-oil-money_SAI-Nigeria.pdf, For an overview of reports and allegations, see Wikipedia, “Nigerian National Petroleum Corporation” (accessed Nov. 2019), https://en.wikipedia.org/wiki/Nigerian_National_Petroleum_Corporation.
[33] The EITI principles and the EITI Standard (latest version is 2016), promote payment transparency throughout the extractives value chain, beneficial ownership, and civic engagement. Nigeria joined the EITI as a candidate country in 2003 and became the first country in the world to domesticate the EITI with the passage of the Nigeria Extractive Industries Transparency Initiative Act (NEITA) in 2007 (see Nigeria Extractive Industries Transparency Initiative, 2016 Oil and Gas Industry Audit Report (2016), 13).
[34] EITI.
[35] EITI Board, “Nigeria Validation: Decision reference: 2019-20/BM-42” (27 Feb. 2019), https://eiti.org/scorecard-pdf?filter%5Bcountry%5D=32&filter%5Byear%5D=2018.
[36] Extractive 360, “NEITI Audit Reports and Mounting Remedial Issues” (17 Apr. 2018), https://extractive360.com/2018/04/17/neiti-audit-reports-and-mounting-remedial-issues/.
[37] EITI, The EITI Standard 2016 (24 May 2017), standard 2.4 (a), https://eiti.org/document/eiti-standard-requirements-2016#r2-4.
[38] Id. standard 3.2.
[39] Id. standards 2.5(a) and (c).
[40] NEITI, Roadmap on the Implementation of Beneficial Ownership disclosure in Nigeria (Dec. 2016) page18, https://eiti.org/files/documents/neiti-bor-281216.pdf.
[41] See Shell Nigeria, “Global Memorandum of Understanding” https://www.shell.com.ng/sustainability/communities/gmou.html.
[42] Senate of the Federal Republic of Nigeria, Report of the Senate Joint Committee on the Petroleum Industry Governance Bill, 2017, http://www.petroleumindustrybill.com/wp-content/uploads/2017/05/FINAL-COPY-OF-PETROLEUM-INDUSTRY-GOVERNANCE-BILL-2017-May-15.pdf.
[43] Agency Reporter, “EITI rates Nigeria’s oil, gas, extractive sector high” (The Independent, 6 Mar. 2019), https://www.independent.ng/eiti-rates-nigerias-oil-gas-extractive-sector-high/.
[44] Extractive 360.
[45] Dauda Garba (NEITI Consultant, NEITI), interview by IRM researcher,15 Nov. 2018.
[46] Amanze Ejiogu, Chibuzo Ejiogu, and Ambisisi Ambituuni, “The dark side of transparency: Does the Nigeria extractive industries initiative help or hinder accountability and corruption control?” (The British Accounting Review, Oct. 2016), https://www.researchgate.net/publication/328312022_The_dark_side_of_transparency_Does_the_Nigeria_extractive_industries_transparency_initiative_help_or_hinder_accountability_and_corruption_control.
[47] Sarah Muyonga, (Natural Resource Governance Institute, NRGI), interview by IRM Researcher, 27 Feb. 2019.
[48] Kolawole Banwo, (CISLAC), interview by IRM researcher, 27 Feb. 2019.

IRM End of Term Status Summary

3. Work together with all stakeholders to enhance transparency in the extractive sector through a concrete set of disclosures related to payments by companies and receipts by governments on all transactions across the sector’s value chain

Language of the commitment as it appears in the action plan:

“Nigeria’s extractive industry has failed to deliver development and improve the well being of the vast majority of her citizens. The wide spread opacity in the industry has allowed corruption to thrive, thus, deepening issues of under-assessment, under-payment and under-remittance/ non-remittance of revenues due to government, thereby limiting what the government can deliver to improve the lives of citizens. A backlog of remedial actions to improve accountability across financial, processes and production has been prioritized or implementation has been too slow leading to further leakage and loss in citizens’ confidence”.

Milestones:

3.1 Disclose oil, gas and mining contracts in the area of exploration and production, exports, off taking and swaps on a publicly accessible portal in both human and machine readable formats.

3.2 Quarterly disclosures by NNPC, its subsidiaries and PPMC of sale-level data on oil and gas sales.

3.3 Develop Beneficial ownership register for companies that hold exploration, production and export licenses and publish in publicly accessible formats that are human and machine readable.

3.4 Develop policy on custody transfer meters in the oil and gas sector.

3.5 Get all extractive sector companies to adopt Global Memorandum of Understanding as an approach to the CSR programme.

3.6 Mandate all relevant players (government and private sector) to develop, disseminate and annually report on individual plans (including timelines) for treatment (clearing) of remediation plans (from the NEITI audits).

3.7 All key stakeholders responsible for remedial actions hold annual open briefing sessions for sector stakeholders and interested public (including CSOs).

IRM Design Report Assessment

IRM Implementation Report Assessment

●        Verifiable: Yes

●        Relevant: Yes

o   Access to Information, Civic Participation, Public Accountability, Technology and Innovation for Participation and Accountability

●        Potential impact: Moderate

●        Completion: Limited

●        Did it Open Government? Major

This commitment sought to increase access to information on extractive-sector revenue and production, and enhance civic participation and accountability, including through use of technological innovation.

There is a high level of corruption in the Nigerian extractive sector, including within the state-owned Nigerian National Petroleum Corporation (NNPC) and its subsidiary, the Products and Pipelines Marketing Company (PPMC). [38] Petroleum is a major industry in Nigeria, accounting for 65% of total state revenue in 2016. [39] A Nigeria Extractive Industries Transparency Initiative (NEITI) audit revealed that the country has lost over $1 billion due to financial mismanagement. [40] This commitment therefore sought to strengthen existing efforts to address large-scale financial mismanagement in the oil and gas industry.

Implementation of this commitment is limited. However, the significant milestone 3.3 (develop a beneficial-ownership register) was fully implemented. NEITI and the Mining Cadastral Office (MCO) developed and deployed the Beneficial Ownership Register for Companies in the Extractive Sector. [41] This was the first public beneficial-ownership register in the region. According to Open Ownership, it is user-friendly and searchable by company, asset, and individual. The register allows bulk downloads of data, making it possible to conduct systematic analyses of listed companies. [42] Anne Chinweze shared that “publishing these contracts not only creates space for much-needed public scrutiny of deals that can be worth billions of dollars to the people of Nigeria but it also provides an important opportunity for the government and companies to build public trust in the petroleum industry.” [43] To complement government efforts, the Civil Society Legislative Advocacy Centre (CISLAC) published research on the existing legal framework for beneficial ownership and a beneficial-ownership factsheet. [44] This commitment is considered to have a major impact on government practices as a result of the creation of the NEITI Beneficial Ownership register. However, at the time of writing this report, the website was no longer properly functioning. [45]

The government made initial steps toward greater public disclosure but often failed to sustain these outputs. The government began, but did not complete, quarterly disclosures by NNPC and PPMC. [46] NEITI published and submitted the 2015 Oil and Gas Audit Report to the Office of the Auditor General of the Federation, the National Assembly, and relevant MDAs. However, they have yet to publish the most recent audit report. Moreover, NNCP failed to publish sale-level data as required under this commitment. In a positive step, CSOs disseminated the 2015 NEITI Oil and Gas Report and hosted three townhall meetings in three states in the Niger Delta region. The Department for Petroleum Resources reviewed the procedure guide on custody transfer and the policy on custody transfer meter. The Department also published various oil and gas audits. [47]

Two obstacles to more comprehensive implementation were a lack of buy-in from relevant state actors and the NNCP's reluctance to publicly disclose financial information. [48] NNPC does not currently release audited financial statements, [49] although it has published monthly financial and operations reports for over three years. [50] The National Assembly and the Office of the Auditor General of the Federation have also noted that NNPC does not publish complete financial information. [51] According to Stanley Achonu, the breadth of the milestones contained in this commitment also contributed to a lack of clarity on who should be responsible for their implementation. [52] Full implementation of this commitment in the second action plan will likely require high-level political support from relevant state oil and gas institutions.

By the end of the implementation period, the commitment led to a major change in beneficial ownership transparency in the extractives sector. The establishment of a beneficial ownership portal for the extractives sector is a notable achievement and subsequently increased citizens’ access to information. However, government efforts to publish extractive-sector documents were not sufficiently sustained. Additionally, the lack of developing remediation channels limited this commitment’s contribution to public accountability. As this commitment is carried through to the next action plan, the government can show increased implementation by comprehensive and continuous disclosure of extractive-sector documents and implementation of remediation channels.

[38] EITI, “Nigeria Extractive Industries Transparency Initiative” (10 Jun. 2020), https://eiti.org/nigeria.
[39] Id.
[40] Id.
[41] Nigeria Extractive Industries Transparency Initiative, “About the Beneficial Ownership Register For the Extractive Industry” (EITI, 2019), https://bo.neiti.gov.ng/; PM News, "NEITI unveils owners of Nigeria’s oil, mining assets" (12 Dec. 2019), https://www.pmnewsnigeria.com/2019/12/12/neiti-unveils-owners-of-nigerias-oil-mining-assets/.
[42] Open Ownership, “Our quick assessment of Nigeria’s first public register: a strong start, but more to be done” (Jan. 2020), https://www.openownership.org/news/our-quick-assessment-of-nigerias-first-public-register-a-strong-start-but-more-to-be-done/.
[43] Anne Chinweze, emails with IRM staff, 19 Jun. 2020.
[44] Civil Society Legislative Advocacy Centre, “Fact-sheet on beneficial ownership in Nigeria” (Feb. 2018), https://cislacnigeria.net/wp-content/uploads/2018/02/BO-FACTSHEET.pdf.  
[45] See https://bo.neiti.gov.ng/. This website was not working on 2 October 2020.
[46] Civil Society Legislative Advocacy Centre, “Nigeria Country Report” (2017). https://cislacnigeria.net/policy-documents/.
[47] Open Alliance. "Behind Closed Books- A Case Study of Nigeria' OGP Fiscal Transparency Commitment" 2019. https://openalliance.ng/resources/documents/.
[48] Civil Society Legislative Advocacy Centre, “Nigeria Country Report” (2017). https://cislacnigeria.net/policy-documents/.
[49] Chinweze, emails with IRM staff 6 Jul. 2020; Enwemeka Stanley, Afamefuna Samuel Ogbette, and Joel Ogechukwu Okoh, “The Role of Nigerian National Petroleum Corporation in Economic Development and Security Challenges in Nigeria” Open Journal of Economics and Commerce 2, no. 3 (2019) 5, https://www.sryahwapublications.com/open-journal-of-economics-and-commerce/pdf/v2-i3/1.pdf.
[50] Orji Ogbonnaya Orji (Nigeria Extractive Industries Transparency Initiative), emails with IRM, 25 Jun. 2020.
[51] Punch editor, “Challenges before new NNPC chief” (Punch, 17 Jul. 2019), https://punchng.com/challenges-before-new-nnpc-chief/.
[52] Stanley Achonu (CSO Adviser OGP), interview with, Sept. 2020.

Commitments

Open Government Partnership