NEITI: A Watchdog Over Oil and Mining Sectors

Oil Well

The picture is clear on our potentials, but the result is contradictory. Huge oil reserve and unprecedented revenue are overshadowed by corrupt practices in the oil and gas sectors due to shady deals and mismanagement which have been the bane of our economic growth and development. How sincere are multinationals operating in the country with their figures on productions as the major operators, explorers and traders compare to their local partners who are merely onlookers? How do we describe Nigerian National Petroleum Corporation (NNPC)? Is it a producer or collector of rents and royalties? The undeniable fact is that most of the stories about missing billions and conflicting figures from regulatory bodies are largely associated to revenues from the extractive industry.

To effectively monitor the oil companies and other operators in the extractive industry, it required a legislative regime, like that of EFCC, not only to enforce compliance to best standard of practice, but to lead to more revenue mobilization, poverty eradication and transparent disclosure of information from the sector. Interestingly and in a commendable manner, the National Assembly through the collaboration of the civil society organizations is working on a bill to ensure due process, transparency and accountability in the payments made by extractive industry companies and prudent management of the revenue accruing from oil, gas and mining. The bill which is already passed by the Federal House of Representatives is receiving attention at the Senate. But from all indications, there seem to be a problem over provisos to the original draft.

The Extractive Industry Transparency Initiative (EITI) strangely is a foreign initiative which could help under develop/developing countries monitor closely the operation of extractive industries. The principles of EITI were actually adopted at Lancaster House in 2003. There are 12 principles which basically dwell on the prudent use of natural resource wealth for sustainable economic development. They recognize that a public understanding of government revenue and expenditure could help public debate and inform choice of appropriate and realistic option for sustainable development. In a nutshell, in its 6 criteria, the initiative is to achieve the principles through regular publication of all material in oil, gas and mining payments and receipts to a wide audience in a publicly accessible, comprehensive and comprehensive manner.

In trying to sensitize stakeholders on the developments on the bill for the establishment of the Nigeria Extractive Industries Transparency Initiative (NEITI), the Civil Society Legislative Advocacy Centre (CISLAC) organized an interactive session in Lagos focused on how to resolve the logjam, especially now that the tenure of the present legislature and the government is a few days ahead.

Immediately the Executive Director of CISLAC, Mr. Awwal Musa Rafsanjani disclosed in his opening remarks at the forum that there are some clauses and provisos in the bill which need to be addressed because of their potentials to undermine the spirit of transparency and accountability in the extractive industries, a burning desire to digest the documents crept in.

The major objective of the bill for the establishment of NEITI is the elimination of all forms of corrupt practices in the determination, payments, receipts and posting of revenue accruing to the Federal Government from extractive industry companies. To realize this, some of the functions of the body as crafted in the practical bill and endorsed by the House of Representatives are: to develop a framework for transparency in the reporting and disclosure of revenue due or paid; to ensure transparency in the management of the investment of the government in extractive industry; to request from the companies an accurate record of the cost of production and volume of sales of oil, gas or other minerals extracted by the companies at any period; to evaluate the practices of extractive industries companies regarding acquisition of acreages, budgeting, contracting, material procurement and production cost profile in order to ensure due process and transparency; to ensure that all payments due to the government including taxes, royalties, dividends, bonuses, penalties, levies and such like are duly made and to disseminate by way of publication of records, reports or otherwise, any information concerning the revenue of government from extractive industries.

The difference from above and what is for the consideration of the Senate through its Committee on Establishment and Public Service chaired by former governor of Delta State, Senator Felix Ibru, is the introduction of provisos into some of the clauses. The alarming proviso which is repeatedly used in some sections to protect companies operating in the country is the remark that, “provided that such information shall not be used in a manner prejudicial to contractual obligations or proprietary interests of the extractive industry company and/or sovereign obligations.” The danger of the introduction of these provisos is that those companies may hide under the cover of this provision to undermine the spirit of the act and prevent NEITI from performing its duties efficiently without fear or favour. It is widely known that most contractual agreements are foisted on host countries by super-power multinationals with strong backing of their countries. Once the stakeholders are sincere, in the spirit of publish-what-you-earn (PWYE), the bill without the proviso should not pose any threat to anybody.

Some of the radical recommendations of the senate which may be sustained is the appointment of an Executive Secretary for one term tenure of 5 years, while the tenure of board members known in the bill as members of National Stakeholders Working Group (NSWG), who should not be more than 15 in number, is for a 4 year and no more and their allowances would be determined by the Revenue Mobilization Allocation and Fiscal Commission.

While there is harmony between the two houses of the National Assembly on the financial provisions, there is an alarm raised on a section of the bill. The section states that funds of the NEITI shall consist of sums by the government through appropriation by the National Assembly and way of grants, donations and gifts from extractive industries, companies and bodies who are stakeholders. The senate only adds a proviso which states – “provided the sources of such grants, donations and gifts are properly disclosed and not in conflict with the provisions of the Act.” The civil society organizations are reluctant to accept this. They rather want NEITI not to accept any grant, donations or gifts from any extractive industry company or any person or organization interested in an extractive industry company so as to avoid extraneous influence. The fear of civil society groups may not be tenable considering the success of other similar bodies like EFCC, ICPC and NAFDAC that receive financial supports from stakeholders and foreign bodies. It is the character of individuals within an organization that determines the integrity of their assignment.

On the provision for the appointment of Independent Auditors and publication of reports, the recommendation by the Senate Committee is more detailed as it provides that upon the completion of an audit, the auditors shall submit the reports together with comments of the extractive industries to the NEITI which shall cause same to be disseminated to the National Assembly and the Auditor-General of the federation and also ensure their publication. It adds unconvincingly that no auditing firm shall be engaged for more than two years consecutively.

The Ibru-led Committee of the Senate also provides stiff penalty and sanctions for offences committed by any extractive industry company. Such offences include false information resulting in underpayment or non-payment of revenue accruable to the government; delay or refusal to give information or report and willful or negligent failure to perform their obligations under the act. The penalty ranges from conviction to a fine of not less than N30,000,000 or/and revocation of the operational license. Every director or other person concerned in committing the offence is liable on conviction to not less than 2 years imprisonment or a fine not less than N5,000,000 unless the person proves that the offence is committed without his/her consent or connivance. Similar punishments will be meted out to government officials.

The Senate Committee adds new clauses to the bill that will make the act more comprehensive and workable. They include: Legal Proceedings, Indemnity, Service of Notices and Process amongst others.

It is worthy of note that the local media and civil societies with the support of development partners like PACT Nigeria, USAID and Oxfam GB embrace this legislative process, which will promote openness in private and public sectors.

As it is, the bill requires just few amendments during harmonization by the two houses of the National Assembly to make it practical and durable that would serve as effective watchdog over the oil and mining industries, whose activities and operations in the past have been shrouded in top secrecy for fraudulent and pecuniary gains. With the tenure of the National Assembly coming to an end by June 2, 2007, this is the time for our respected legislature to pass expeditiously into law, not only this bill but also ensure that all other transparency and accountability bills receive accelerated and maximum attention. These bills include: Freedom of Information, Revenue Allocation formula, Public Procurement and Fiscal Responsibility bills. It may be surprising to learn that, the brain behind some of these well-intentioned bills especially that on NEITI and the last two is the outgoing Minister of Education, Oby Ekwesili, who attempted to privatize public schools before her new appointment as Vice President of World Bank. If the bills become realities, they would be among some of the outstanding and remarkable achievements of the Obasanjo administration.

If further debates may prolong and delay the passage of those bills, it may therefore be necessary to urge the National Assembly to pass them now while amendments can be undertaken in the tenure of incoming administration.

This article was originally published in Thisday May 1, New Nigerian May 1, Leadership May 1 and Daily Trust May 3, Daily Sun May 30, 2007


About the author

Yushau Shuaib

Leave a Comment