General

The way to take NEITI forward

March 7, 2016 12:39 pm

Nigeria Extractive Industries Transparency Initiative (NEITI) is the body in Nigeria with the statutory mandate to ensure transparency in the extractive industries. The extractive industries in Nigeria comprises mainly of the petroleum & mining sectors.

The objectives, nature, structure, principles and procedures of NEITI are derived from the Extractive Industries Transparency Initiative (EITI), which is the global parent organization.

The importance of NEITI cannot be overemphasized in a growing economy like Nigeria. Petroleum, for now, is the mainstay of the nation’s economy and transparency is required in the petroleum sector for the nation to reap the full benefit of the oil & gas found within its shores.

The NEITI Act 2007 contains specific functions of the agency, which include but not limited to:

Ensure due process and transparency in the payments made by all extractive industry companies to the federal Government and statutory recipients.
Monitor and ensure accountability in the revenue receipts of the Federal Government from extractive industry companies.
Eliminate all forms of corrupt practices in the determination, payments, receipts and posting of revenue accruing to the Federal Government from extractive industry companies.
Ensure transparency and accountability in the application of resources from payments received from extractive industry companies.

From the international operation of EITI and the provisions of NEITI Act, one of the functions of NEITI is, to conduct annually, independent audit of the extractive industries.

The main objective of the audit will be to establish what companies pay to government in terms of taxes, royalty, signature bonuses, rents, grants, concessions etc.

The NEITI Audit also aims at establishing what government actually receives into its coffers.

The Audit also ought to investigate if the companies pay what they ought to pay and if government receives what it ought to receive.

NEITI also carries out similar audit to establish the fiscal allocation, statutory disbursement and utilization of the revenues by tiers and levels of government to meet strategic national development goals and priorities.

At the conclusion of each audit exercise, NEITI is required by law to send the report to the National Assembly, the Auditor General of the Federation and the President of the Federal Republic of Nigeria for action on its findings and recommendations. It should also be the duty of NEITI to widely publish the report to enable the citizens especially the civil society to use the information and data to hold government and companies accountable.

NEITI has conducted a series of audits in the industry but unfortunately, the nation has not seen much of the implementation of the findings and recommendations of the Reports of NEITI and the body itself has not cried out enough to attract support from civil society and the media.

Most recent reports released by NEITI disclosed that, from 2004 – to date, the total sum of $ 9. 8 Billion Dollars are recoverable revenues in the possession of oil companies representing cases of under assessments, underpayments of taxes, royalties, etc. Of this amount, only $2.4 Billion US Dollars have been recovered through inter-agency efforts.

As expected, companies will contest the position of NEITI on this bid to recover the money. This makes it imperative for NEITI to publicize widely its reports and make the sources of its information so transparent that the companies will find no room to contest the agency’s findings.

In 2012 alone, N1.355 trillion was processed for payment by PPPRA. N690 billion was actually paid as at the time of the NEITI Audit of 2012. This includes the direct deductions by the NNPC, as its own subsidy claims. However, the Audit further revealed that a document presented during the exercise and signed by NNPC/PPMC, DPR and PPPRA puts the actual subsidy claim for 2012 at N871.1 billion. At each audit, subsidy claims can be anything but accurate, resulting in unimaginable conflicting figures.

As at the time some informed individuals and government departments were publicly condemning the subsidy scam, it was expected that given its mandate, NEITI should have been in the vanguard of exposing the irregularities and injecting transparency in the entire process. Uncommon courage is required in the leadership of NEITI to meet the objectives and international standard of NEITI and the time is now… because it is time for change!

In 2011, NNPC sold Government’s 55% share in five Oil-Wells to NPDC. The Minister of Petroleum Resources approved the transaction. The 8 Oil wells were sold for a token total sum of $1.85 Billion Naira. Out of this amount, NPDC claimed to have made a part payment of $100 Million Naira in February 2014. Between the time of sale in 2011 and February 2014, there was no remittance of any such money to the Federation account. The transaction was not transparent.

NEITI needs to embark on some advocacy effort and adequately engage the print and electronic media to stamp transparency in the dealings of all the subsidiaries of NNPC and other stakeholders in the oil and gas sector.

NEITI Audit Reports disclosed that a total dividend, loan and interest repayments from NLNG to NNPC in 2012 has accumulated to $11.6 million Naira. In 2012 alone, it was at $2.795 billion. This represents an increase of 10% when compared with $2.538 billion accumulated in 2011. But the NNPC failed to provide any evidence that the funds were paid to the Federation Account as required by Law. The total amount received from NLNG by NNPC to date (including amounts revealed in previous audit reports) stands at $11.631 billion. This again was not widely publicized by NEITI so as to bring pressure to bear on NNPC from the public.

NEITI Audit has consistently disclosed that NNPC allocates to itself, 445,000 barrels daily for domestic use. From the agencies 2012 Audit Report, Out of this quantity, only about 35 million barrels were refined in the country. However, NEITI Audit reported that PPMC records disclosed 33.4 million barrels as the actual pumped crude oil to the refineries. This shows a difference of 1.5 million barrels between the PPMC records and that of the NNPC. This conflicting report and the complicity that shrouds the gamut of NNPC’s dealing in this regard calls for great concern and a dire need for transparency.

NEITI must be vigilant at all times to have full details of any Crude-Oil Swap deals to save Nigeria the billions of Naira lost in the process of this transaction. For instance, the NEITI Audit report that covered 2009-2011 made a similar revelation of a revenue loss of over $500 million. Besides, the value of the refined products that was not delivered at all under this arrangement stood at N78.8 billion. The revenue loss to the nation on Crude-Oil swap, especially at the depot on fuel alone during the same period, stood at N11.7 billion or $74.3 million depending on the exchange rate used. How many Nigerians are aware of this gaping fact?

Stealing of Nigerian crude, destruction of oil pipelines and losses, due to outright sabotage and the economic cost to the nation have been part of NEITI Audit investigations. NEITI report showed that the nation lost over 23 million barrels of crude valued at over $2.6 billion in 2012 alone. This figure was taken from a sampling of the operations of three major international oil companies namely, Shell, Agip and Elf.

The loss by the NNPC was also computed. The breakdown shows that NNPC lost over 13 million barrels of crude valued at about $1.5billion, while the three Companies lost over 10 million barrels of crude valued at $1.2 billion. NEITI must shout on top of its voice for Nigerians to know this monumental loss and hold those involved accountable!

The Federal Government in 2005 established an Inter-Ministerial Task Team (IMTT) to oversee implementation of recommendations by NEITI. Members of the IMTT were drawn from government agencies that receive, keep custody or manage revenues derived from the sector. These include CBN, FIRS, NNPC, and Ministry of Finance, etc.

In this regard, the IMTT is to ensure that remedial issues are adequately addressed by taking responsibility for the custody, management, monitoring and regulation of extractive industries revenues with the primary mandate of developing an efficient interface framework to address remedial issues.

In late December 2013, President Goodluck Jonathan re-constituted the membership of the IMTT to include departmental heads of key institutions that would enable the matters raised be treated at the highest decision level of government. It included, amongst others, high-ranking government officials, Chief Economic Adviser to the President of Nigeria, Permanent Secretary Ministry of Finance. This was to ensure decisions of the IMTT were quickly implemented by those who had authority to do so. NEITI, which is the chair of the IMTT did not coordinate properly, leading to the following challenges:

Lack of adequate funds for the IMTT to meet regularly, continues to be an issue. The IMTT is comprised of 18 agencies with NEITI as the Chair and Secretariat and the cost of meeting greatly affects the work of the IMTT.

Representation at the decision making level and consistency in representation (by some staff of the member agencies) of IMTT members continue to adversely affect the prompt settlement of remedial issues.

The political will power to implement the recommendations resulting from incoherent driving force from NEITI. The new face of NEITI must be humbly dogged in its operation!

The solid mineral sector in Nigeria has not been properly developed despite its high potential to act as a catalyst for economic stability in the face of dwindling fortune in the petroleum sector. The huge gains of solid minerals have been left to illegal mining activities at the expense of national development. The Cadastre office and other regulatory bodies in the mining industry are yet to take adequate advantage of their statutory mandate and properly organize the mining sector as an alternative to oil and gas and as a formidable hanger for the nation’s economy.

NEITI should intervene here to draw attention to the huge revenue potentials of the mining sector and making ‘Transparency’ the Watch-Word in the industry, so as to engender greater Foreign Direct Investment opportunities.

Audit report on solid mineral by NEITI covering three cycles over a period of 2007 to 2012 showed an accrual of revenue of N109.69 Billion Naira to the Federal government and the royalty payments for the same period stood at N3.863 Billion Naira.

The construction, commercial quarrying and cement manufacturing activities are the dominants of the solid minerals sector for now. The sad story is that the amount of money going into the purse of illegal miners in Nigeria is much more than the revenue the government is reaping from the sector.

The main challenges of NEITI now are managerial and operational. NEITI is faced with the crisis of standing as a transparency organization, which is an integral part of the global EITI. This body is monitored, supervised and periodically certificated internationally and a body corporate statutorily created by the NEITI Act of 2007 domesticates it as an agency of the Nigerian government.

EITI has an underlining philosophy that autonomy from the executive arm of government, as much as possible, will meet its set standards. NEITI, on its own, must partner with government and civil society in ensuring transparency in the extractive industries. As such, while not in any manner attempting to antagonize government, NEITI must act with such independence as to assist government to enthrone sanity in all dealings in the extractive industries to protect the economic interest of government for the benefit of Nigerians. All stolen and syphoned funds must be exposed!

The choice of not making its reports widely publicized is another area that NEITI must urgently review. People cannot comment on issues they know nothing about. So many companies operating in the extractive industries want to maximize profit and, as such, can be prone to making false declarations to avoid payment of accurate revenue to the government.

The knowledge that NEITI will give wide publicity of its findings to Nigerians, in the appropriate English and Native languages, will serve as a potent antidote to all such fraudulent activities by the companies. Afterall, the companies require goodwill from the community in which they operate in order to remain in business.

Lack of funding must also be taken into account. For NEITI to achieve its objectives satisfactorily, it requires adequate funding. Budgetary allocation from the Federal Government should be prudently sufficient to cater for the serious nature of the work plan. Grants from the donor agencies can only supplement budgetary allocation and the stringent policies and timing of the donor agencies stultify access to the funds.

Lack of adequate funding may also hamper the operation of NEITI in the preparation and submission to the president and National Assembly, a report of its activities during the immediate preceding year, which includes its audited accounts for that year and the auditor’s report thereon. The audit contemplated by Section 14 of the NEITI Act 2007 is to be done by independent auditors and this requires adequate funding.

Another challenge is that NEITI is a body, which is known in Abuja and many interested parties in the states do not know what NEITI is. The message and work of NEITI must be taken to the grassroots of the states and local government areas. It is a right of all Nigerian citizens to know what is being paid and what is being received by who and when.

The difficulty in understanding, interpreting and using audit reports is another problem. This cuts across the member countries of EITI. It is fast becoming a ritual to produce audit reports in volumes in member countries, sometimes to meet EITI requirements. The report must be understood and must make impact.

It is also worthy to note that Section 16 of the NEITI Act 2007 contains offences and penalties. From the various audit reports of NEITI, some companies and government departments have been found wanting but we are yet to hear of any prosecution pursuant to this law. How much of the Act is being enforced.

The above are some of the challenges of NEITI. It is desirable to also make some recommendations in a bid to surmount these challenges so that the culture of transparency and accountability will be firmly established in the extractive industries.

Activities of NEITI must be grassroots inclined and also participatory. There is now an urgent need, with great emphasis on public education and enlightenment, capacity-building, for civil society and the media to strengthen their ability to understand and interpret NEITI audit reports for the purpose of educating the Nigerian public.

There must be a deliberate effort to bring the legislature fully into the work of NEITI. That is the National and State Assemblies and even Local Government Councils. This is in view of the need for them to take interest in NEITI audit reports at plenary sessions and cause the recommendations to be implemented.

NEITI must also ensure that its audits are timely and regular, in line with the NEITI Act, and that the findings of the audits influence revenue management transparency in the sector, with a view to aiding sustainable development.

Automation of NEITI Audits must be a matter of priority for the National Stakeholders Working Group (NSWG).

Adequate funding is essential in enabling NEITI to meet its objectives. Information gathering, auditing and dissemination of the audit reports require huge financial commitment. When this work is properly done, whatever money NEITI spends, which must be prudently spent, becomes inconsequential as against the colossal amount that will be saved for the government.

The NEITI Act 2007 must also be amended to give the body power to prosecute offenders subject to the constitutional power of the Attorney-General of the Federation. Audit reports are technical in nature and the nature of the information used by NEITI will require a synergy between the investigator and prosecutor for the proper enforcement of the Act. The fear and the stigma that follows a successful prosecution will to a large extent curtail fraudulent practices in the extractive industries.

NEITI also needs to review its scoping studies, on the basis of a set materiality threshold. Every kobo made in the extractive industry must be accounted for in the interest of taxes, royalties etc.

The agency needs to establish zonal offices, which will be responsible for gathering information from the zones, such that activities of artisanal and small scale miners and minerals smugglers will be stopped. Proper regulation of this sector will generate unimaginable revenue for the government, create employment and take NEITI to the grassroots. Nobody and no Extractive Company, despite the size of its operation, should be exempt from paying appropriately for its activities in the extractive industries.

Resource-rich nations across the world, including Nigeria, must embrace transparency and accountability in the management of revenues in their countries to avert the people’s revolution. Only good governance in EITI, member countries can guarantee peace, security and sustainable development. Member countries must channel extractive revenue for development.

President Jakaya Kikwete of Tanzania once said that the commitment of his country to EITI was in recognition that revenue from natural resources should work for the common good and not just for a privileged few.

His counterpart from Mozambique, President Armando Guebuza noted that it was important for the EITI process to be internalized as a culture of governance by resource-rich nations for Africa to break away from poverty, misery and ignorance.

In Nigeria, it is instructive to note that, in recent years, out of the four transparency index of Revenue Watch Institute on the Corruption Perception Index of Transparency International, the country scored very low although its ranking keeps improving. On the Budget Transparency Index published by International Budget Partnership, Nigeria has also been scoring rather low.

Change has come and that change must permeate all the spheres of the nation’s life, including NEITI, to promote transparency and accountability in governance.