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Nigeria

Open Contracting and Licensing in Extractives (NG0018)

Overview

At-a-Glance

Action Plan: Nigeria Action Plan 2019-2021

Action Plan Cycle: 2019

Status: Active

Institutions

Lead Institution: NNPC and Ministry of Mines and Steels

Support Institution(s): NNPC, Ministry of Petroleum Resources (MPR), Department for Petroleum Resources, Federal Ministry of Finance, Budget and National Planning Civil Society Legislative Advocacy Centre (CISLAC), Publish What You Pay, BudgIT, Stakeholders Democracy Networks, Global Rights, Nigeria, Miners Association, Natural Resource Governance Institute (NRGI), African Centre for Leadership, Strategy & Development (Centre LSD), ANEEJ, ONE Campaign, Policy Alert, PLSI.

Policy Areas

Access to Information, Anti-Corruption, E-Government, Extractive Industries, Fiscal Openness, Open Contracting and Public Procurement, Open Data, Publication of Budget/Fiscal Information

IRM Review

IRM Report: Nigeria Design Report 2019-2021

Starred: Pending IRM Review

Early Results: Pending IRM Review

Design i

Verifiable: Yes

Relevant to OGP Values: Access to Information

Potential Impact:

Implementation i

Completion: Pending IRM Review

Description

Brief description:
There have been commendable efforts in the extractive sector to enhance transparency and accountability. For instance, the National Oil Company, NNPC, has published monthly operational and financial statements since 2015, engaged with CSOs and citizens’ groups and openly broadcasted bid opening rounds for new licenses. NNPC has also committed and actively participated in the global processes, including the OECD and the Extractives Industries Transparency Initiative (EITI) Commodity working group, working towards bringing further transparency to commodity trading by State-Owned Enterprises globally. The Ministry of Mines and Steel launched the ‘Road Map for the Growth and Development of the Nigerian Mining Industry’ in September 2016 which identified some initiatives within the short, medium and long-term timeline which the Ministry can undertake to better position Nigeria’s mining sector.
Despite these efforts, the extractive sector still has not fully delivered on developing and improving the well-being of the vast majority of citizens. The pace of reform has been slow and there is still widespread opacity in the industry which has allowed corruption to thrive. In the case of the oil and gas sector, deepening issues of underassessment, underpayment and under-remittance/non-remittance of revenues due to government have limited what the government can deliver to improve the lives of citizens. A backlog of remedial actions, especially as identified by NEITI audit reports, 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.

A first step towards achieving transparent, broad-based and effective citizens’ participation in the extractive sector is to publish contracts which are the fundamental documents that set out the terms of all investments and projects in the sector. Contract disclosure in the oil, gas and mining sector is increasingly a global norm with progress by governments, international financial institutions and the EITI making bold steps to disclose or require public disclosure. The Government of Nigeria has made several commitments to publish petroleum contracts including at the 2016 UK Anti-Corruption Summit where the President committed to working towards full implementation of the Open Contracting Standard, and the 7 Big Win’s that commits to publishing all established fiscal rules and contracts within two to four years. A growing number of companies with operations in Nigeria also have expressed support for contract disclosure, the majority of these companies have noted, however, that in their view the decision to publish contracts must be initiated and implemented by the government.

Transparency and accountability remain the basis of a sound corporate governance regime. The OECD’s position is that information disclosure and higher standards of accountability in SOEs, coupled with other governance reforms, can contribute to improved efficiency and performance of SOEs. Best practice and global standards demand that information disclosure, including both financial and non-financial data, is essential for the government, so it can be an effective owner; oversight from the National Assembly; the media to raise awareness on SOE efficiency; and taxpayers and the general public to have a comprehensive picture or SOE performance. Transparency, driven by enhanced disclosures, constitutes a major component of an SOE’s accountability to shareholders, potential investors and business partners, and an increasingly engaged civil society.

General problem:
Recent years have seen intense debates between the government, the NASS and companies around issues like fiscal obligations and environmental liabilities. Contract transparency would establish an even playing field of information and encourage better informed debates. Disclosing contracts, which to date remain shrouded, could be another way to demonstrate the new way of doing business. Contract transparency could have deterred some of the poor oil deals struck in the past, such as the lopsided oil-for-product swap deals which the current government swiftly canceled. Establishing this practice now would deter future lopsided deals, creating a strong anti-corruption legacy.

Currently NNPC does not disclose a detailed annual report that would include the audited book of accounts, its finances, the cost of its operations and significant spending on non – commercial activities. It equally does not disclose notable earnings by its subsidiaries and sales level data of the state’s share of production or other revenues collected in-kind in terms of volumes and revenues received on crude oil, gas and refined product sales.

Specific OGP issue:
This commitment will focus on civic participation and public accountability.

Rationale for the commitment:
Publishing contracts will give the general public the ability to hold public officials accountable for contracts they enter into with their private entities.

Main objective:
To promote/enhance citizens’ engagement by increasing access to information on extractive sector revenue and production.

Anticipated impact:
This commitment will improve contracts terms to be favorable.

See action plan for milestone activities.

IRM Midterm Status Summary

4. Public disclosure of extractive sector contracts, licenses, permits, payment to government, and revenue stream

Main Objective

“To promote/enhance citizens’ engagement by increasing access to information on extractive sector revenue and production.”

Milestones

  1. Identify and publicly disseminate mechanisms, platforms and frameworks for disclosure of contracts and putting them to use – NEITI
  2. Identify, create and update a free online portal for disclosure of contracts, licenses and permits (Public Registers) of the extractive sector
  3. Disclose contracts in a free online portal, accessible in both human and machine-readable formats. The portal should contain the full texts of all agreements, together with any subsequent amendments, annexes, schedules, side letters or similar documents. The following types of contracts/permits include:
  • Upstream operating contracts (e.g., JVs, PSCs, service contracts, any alternative finance agreements) – NNPC;
  • Sole Risk, Marginal Fields – DPR;
  • Crude oil lifting term contracts – COMD, NNPC;
  • Direct Sales Direct Purchase or any other commodity swap/exchange/barter transactions - NNPC;
  • Other refined product imports – NNPC;
  • Refined product export permit (DPR);
  • Export sales of all refined products - DPR;
  • Export sales of all natural gas liquids – DPR;
  • Export permit for crude oil lifting – DPR;
  • Licenses and leases – DPR;
  • Mining contracts;
  • Environmental documents e.g. EIA, CDA (mining) – Ministry of Mines;
  • Review, update and upload.
  1. Quarterly disclosure of actual unit production cost for crude oil, gas and refined product sales – DPR/NNPC COMD.
  2. Timely public disclosure by NNPC of the annual report and audited financials

Editorial Note: For the complete text of this commitment, please see Nigeria’s action plan at https://www.opengovpartnership.org/documents/nigeria-action-plan-2019-2021/

Commitment Analysis

This commitment aims to enhance access to information on extractive sector revenue and production, including contracts, licenses, permits, and revenue streams.  It builds on Nigeria’s 2017–2019 national action plan and includes five milestones. Three activities continue from the previous action plan, including: disclosure of extractive sector contracts in a free online portal (Milestones 2 and 3) and quarterly disclosure of oil and gas data product sales by government agencies (Milestone 4). The commitment also includes two new activities (Milestones 1 and 5), which address timely public disclosure by NNPC of the annual report and audited financials along with identification and dissemination of platforms and mechanisms for disclosure of contracts by the Nigeria Extractive Industries Transparency Initiative (NEITI). The commitment provides a detailed description of contract information to be disclosed in a freely available online portal.

This commitment is relevant to the OGP value of access to information because it seeks to provide detailed information on the extractive sector, such as contracts, licenses, and oil and gas sales.

If fully implemented, this commitment could have a moderate impact on increasing the transparency of Nigeria’s extractive sector, which accounts for 15% of the national GDP and more than 90% of exports. [68] This commitment’s greatest expected impact is the full disclosure of contractual information on a free online portal. Previously, although a register of oil prospecting, oil mining, and marginal field licenses has been included in the Department of Petroleum Resources (DPR) oil and gas industry annual report, [69] contracts have not been easily accessible, available online, or up to date. [70] This has undermined the capacity to ensure companies’ compliance with disclosure regulations. [71] However, the commitment does not clarify whether disclosures will take place to the NEITI beneficial ownership portal launched in December 2019 or another portal.

According to the Natural Resource Governance Institute, if fully implemented, this commitment has the potential to significantly increase public scrutiny of petroleum contracts and licenses. Under this commitment, the timely public disclosure by NNPC of the annual report and audited financials would also represent an important development because NNPC does not currently release audited financial statements, [72] although it has published monthly financial and operations reports for more than three years. [73] The National Assembly and the Office of the Auditor General of the Federation have also pointed out that NNPC has not published complete financial information. [74] Public access to NNPC’s audited book of accounts, finances, cost of operations, significant spending on non-commercial activities, notable earnings by subsidiaries, and sales-level data on the state’s share of production or other revenues from crude oil, gas, and refined product sales represents an important opportunity for public oversight. However, disclosure is unlikely to be achieved without buy-in from NNPC and relevant government agencies. NEITI has indicated that it plans to prepare a framework to secure “stakeholders’ buy-in,” [75] but it is not clear how publication would be encouraged.

To maximize this commitment’s impact, the IRM recommends focusing high-level political support on securing NNPC and other relevant government agencies’ buy-in. Additionally, the Natural Resource Governance Institute encourages government implementers to regularly engage with CSOs on reviewing implementation progress. It adds that the next action plan could benefit from greater inclusion of state-owned enterprises and a convening role for the Ministry of Petroleum Resources within the OGP process. [76] Given the size of the extractive industry in the Nigerian economy, the IRM recommends putting priority on commitments for the sector’s accountability and transparency.

[68] Nigeria. Country Strategy Note. Natural Resource Governance Institute, August 2016, https://resourcegovernance.org/sites/default/files/documents/country-strategy-note-nigeria.pdf, P.1.
[69] Orji Ogbonnaya Orji (Nigeria Extractive Industries Transparency Initiative), email correspondence with IRM, 25 June 2020.
[70] Chinedu Bassey (Civil Society Legislative Advocacy Centre), interview with IRM, 18 June 2020.
[71] Rob Pitman and Anne Chinweze, “The Case for Publishing Petroleum Contracts in Nigeria,” Natural Resource Governance Institute, March 2018, in https://resourcegovernance.org/sites/default/files/documents/the-case-for-publishing-petroleum-contracts-in-nigeria.pdf, P.
[72] Anne Chinweze (Natural Resource Governance Institute), email correspondence with IRM, 6 July 2020; Enwemeka Stanley , Ogbette, Afamefuna Samuel, Okoh, Joel Ogechukwu, “The Role of Nigerian National Petroleum Corporation in Economic Development and Security Challenges in Nigeria,” Open Journal of Economics and Commerce, 2(3), 2019, in https://www.sryahwapublications.com/open-journal-of-economics-and-commerce/pdf/v2-i3/1.pdf, p.5.
[73] Orji Ogbonnaya Orji (Nigeria Extractive Industries Transparency Initiative), email correspondence with IRM, 25 June 2020.
[74] “Challenges before new NNPC chief” , Punch, 17 July 2019, in https://punchng.com/challenges-before-new-nnpc-chief/
[75] Orji Ogbonnaya Orji (Nigeria Extractive Industries Transparency Initiative), email correspondence with IRM, 25 June 2020.
[76] Anne Chinweze (Natural Resource Governance Institute), email correspondence with IRM, 6 July 2020.

Commitments

  1. Participatory Budgeting

    NG0015, 2019, Anti-Corruption

  2. Implement Open Contracting and the Open Contracting Data Standard

    NG0016, 2019, Access to Information

  3. Transparent Tax Revenue Reporting

    NG0017, 2019, Legislation & Regulation

  4. Open Contracting and Licensing in Extractives

    NG0018, 2019, Access to Information

  5. Implement EITI Standard

    NG0019, 2019, Anti-Corruption

  6. Establish Beneficial Ownership Registry

    NG0020, 2019, Access to Information

  7. Strengthen Asset Recovery Legislation

    NG0021, 2019, Anti-Corruption

  8. Implement National Anti-Corruption Strategy

    NG0022, 2019, Anti-Corruption

  9. Improve Compliance with Freedom of Information Act with Focus on Records Management

    NG0023, 2019, Access to Information

  10. Improved Compliance with Mandatory Publication Provisions Requirement (FOIA)

    NG0024, 2019, Access to Information

  11. Implement Permanent Dialogue Mechanism

    NG0025, 2019, Dispute Resolution & Legal Assistance

  12. Aggregate Citizens' Feedback on Programs

    NG0026, 2019, E-Government

  13. Freedom of Association, Assembly, and Expression

    NG0027, 2019, Civic Space

  14. Enhance Participation of the Vulnerable

    NG0028, 2019, Capacity Building

  15. Implement New Computer Program in 6 Government Ministries to Improve Service Delivery

    NG0029, 2019, Capacity Building

  16. Legal Instrument to Strengthen SERVICOM

    NG0030, 2019, Legislation & Regulation

  17. Citizen Participation in Budget Cycle

    NG0001, 2017, Access to Information

  18. Open Contracting

    NG0002, 2017, Access to Information

  19. Extractive Sector Transparency

    NG0003, 2017, Access to Information

  20. Tax Reporting Standards

    NG0004, 2017, Fiscal Openness

  21. World Bank Doing Business Index

    NG0005, 2017, Infrastructure & Transport

  22. Beneficial Ownership Register

    NG0006, 2017, Anti-Corruption

  23. Anti-Corruption Informationi Sharing

    NG0007, 2017, Anti-Corruption

  24. Asset Recovery Legislation

    NG0008, 2017, Capacity Building

  25. Anti-Corruption Activity Coordination

    NG0009, 2017, Anti-Corruption

  26. FOIA Compliance for Annual Reporting

    NG0010, 2017, Access to Information

  27. FOIA Compliance for Disclosure

    NG0011, 2017, Access to Information

  28. Permanent Dialogue Mechanism

    NG0012, 2017, Fiscal Openness

  29. Joint Governmnet-Civil Society Legislation Review

    NG0013, 2017, Fiscal Openness

  30. Technology-Based Citizens' Feedback

    NG0014, 2017, E-Government

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