AN OVERVIEW OF DEMAND AND SUPPLY SIDES TO EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVES (EITI) IN NIGERIA

AN OVERVIEW OF DEMAND AND SUPPLY SIDES TO EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVES (EITI) IN NIGERIA

BY

John G. Ikubaje

Voice and Accountability Technical Officer and Governance Specialist

Maitama – Abuja

NIGERIA

E- Mail Address: jikubaje@yahoo.com

Mobile Numbers: +234 8023151044, 7025010937

Being a Paper submitted to PWYP National Regional conference for publication in their newsletter.

Introduction:

Corruption is not only a global but also an ancient phenomenon; a practice that is neither unique to a particular society, country and or continent. However, corruption analysts have argued that the degree of its effects on socio-political and economic development varies from one country to another. Analysis of corruption in Africa has shown that the level of economic development in the continent cannot effectively and sufficiently mitigate the effects of corrupt practices the way it does in developed countries (Ikubaje, J; 2006; Diamond, L; 2004). In other words, for abject poverty to be dealt with, and for life to be more meaningful in the continent, corruption must be successfully challenged and tackled to its foundation.

As we try to demonstrate below, there is a correlation between bad resource governance - corruption and poverty - underdevelopment. This fact of life is not restricted to Africa in general and Nigeria in particular alone; it is also the reality of life in so many resource-rich countries outside the African continent. Countries like Canada, Venezuela, United States of America just to mention a few have also demonstrated that good resources governance will not only transform the economy of a country for the better but it also has the potential of entrenching sustainable development. For some decades, many African countries, particularly, the Sub-Sahara Africa continues to rank among the poorest in the world; this ought not to be so given the quantity and quality of her human and natural resources. It is rather unfortunately that the international development and financial institutions like the World Bank (WB) and the United Nations in their World Development Report (WDR) and Human Development Report (HDR) respectively continue to rank the majority of African countries as poor in terms of development. In the same manner, the Corruption Perception Index (CPI), developed by the Transparency International (TI), a global civil society organization based in Germany also continue to rank majority of these African countries among the most corrupt countries in the global community. One question that keeps begging for answer in the world today is; what is the relationship between corruption and poverty? Several answers have been provided but the fact that corruption also thrives in many developed countries make some analysts to conclude that corruption might not necessarily be the main problem in some poor countries. Transparency International, in one of its recent newsletter however concluded that corruption is the major explanation for poverty in many parts of the world, Africa inclusive.

Some scholars have also argued that for Africa to rise above the problems/challenges of poverty; HIV-AIDS; and conflict crises etc, corruption must be tackled to its foundation through a mechanism of vertical and horizontal (social) accountability (Diamond, L; 2004); for me, this explanation underlines why I hold in high esteem the works of ANSA on social accountability in Africa. I believe this conference is an opportunity to add my voice to the debate of transparency and social accountability in the continent using the Nigerian experience of the Extractive Industries Transparency Initiatives (NEITI) from 2003 to drive home my points.

Natural Resources and Development in Nigeria

As many of you may be aware, Nigeria is famous for her huge population of over 140 million people. It remains the largest national population on the African continent and the largest concentration of black people on earth (Ibeanu; O. and Egwu; S, 2007). In addition to this huge population, the country is endowed with significant agricultural, mineral, marine and forest resources. Over 60 percentage of her population is involved in the production of the food crops such as cassava, maize, rice, yam and cash crops such as cocoa, coffee Palm Kernel produce, etc. Oil and gas, by value are the most important minerals. They are exploited and produced in the Niger Delta basin and offshore on the continental shelf and in the deep-sea of the Nigerian territorial waters.The Oil sector for example, accounts for over 70 per cent of Nigeria’s revenue at levels of governments- Federal, State and Local Government; 40 per cent of the GDP, and more than 85 per cent of foreign exchange earnings (Ezekwesili; 2006). It is also documented that over $400bn of the country’s oil money has been stolen by Nigerian present and past leaders from independence in 1960 to date (London Daily Independent, 2006). Gas, as earlier indicated is one of the world most valued natural resources; its abundance can be confirmed from the ceaseless manner with which the oil companies continue to flair it in Nigeria’s Niger Delta in the past three decades. The Nigerian National Petroleum Corporation (NNPC) manages the oil sector while the Liquefied Natural Gas (LNG), established few years ago administers the gas sector.

Prior to the discovery of oil and gas, Nigeria’s economy developed rapidly. There was healthy economic competition among the different geo-political regions that made up the country. For example, the northern and the Western Nigeria were known for their Ground Nut and Cocoa exportation, while the Eastern Nigeria was popular for her Palm Kernel production. Each region, utilized their hard-earned resources to develop their respective regions. Unfortunately, the experience changed when the cheap source of income- oil was discovered. The cash crop production gradually diminished and the healthy economic competition among the regional governments also disappeared for direct monthly allocation from the Federal Government. The Federal Government controls and manages the oil revenue and allocation; this underscores why all attention is focused on the monthly allocation from the Federal government by both the state and the local governments. Majority of the latter levels of government are not economically viable and therefore lack the capacity to initiate and successfully implement development programmes that are above their monthly earnings. In Nigeria, the Federal government owns, control and manages the natural resources. Her income is mainly derived from the oil and gas exportation. This is one of the reasons why the people of the Niger Delta continue to demand for ownership and control of their natural resources. Instead of being a blessing, some have argued that oil is a curse to the majority of Niger-Delta people (Ibeanu; O. and Kyari Muhammed F; 2005). Aside from this injustice that characterized the ownership and control of oil and gas, corruption analysts in the country argues that the petroleum industry is the bedrock upon which the grand corruption that sustains other forms of corrupt practices in the country is perpetrated (Ikubaje, 2006). It is sad to note that instead of lifting millions of Nigerians out of poverty, natural resources, although with specific reference to the oil and gas, have been a curse. It is rather unfortunate that the usual description of the scenario, resource curse is a reality in Nigeria’s Niger Delta.This experience ought not to be so in Nigeria if not for the corrupt practices and bad natural resource governance. Today, corruption in Nigeria is so serious to the extent that almost all governance crises, economic woes and development predicaments are attributed to the problem; the above experiences were some of the cogent reasons why President Olusegun Obasanjo’s government did not waste time but immediately signed up to the Extractive Industries Transparency Initiative (EITI)[1].

The Nigeria Extractive Industries Transparency Initiative (NEITI)

Following the high profile corruption exposed in 1999 and 2000, international initiatives to improve governance in the extractive industries rapidly gathered momentum (Gillies. A; 2007). In October 2002, Tony Blair, the Prime Minister of the United Kingdom announced the launch of the Extractive Industries Transparency Initiative (EITI) at the World Summit for Sustainable Development in Johannesburg. With the commitment of African leaders in the partnership for Africa Development (NEPAD), the Extractive Industries Transparency Initiative (EITI) was launched to improve governance in resource–rich countries through the verification and full publication of company payments and government revenues from oil, gas and mining industries. The initiative was jointly launched in London by the British government- Department for International Development (DFID), Catholic Agency for International Development (CAFORD), Transparency International and The Global Witness and George Soros, the chairman of Open Society Institute. The EITI is a coalition of governments, companies, civil society groups, investors and international organizations. In 2005, the EITI conducted an extended and thorough consultation on how to take the initiative forward. This was led by the International Advisory Group (IAG). The IAG produced a report that contains the governance structure, the approved methodology and the future direction of the EITI. The EITI has a robust yet flexible methodology that ensures a global standard is maintained throughout the different implementing countries. The EITI Board and its international Secretariat remains the guardian of the methodology. Implementation itself, however, is the responsibility of individual countries. The EITI in a nutshell, is a globally developed standard that promotes revenue transparency at the local level. The World Bank (WB), IMF, G-8 and numerous other companies and NGOS have since devoted more critical attention to extractive industry governance reform as well (Ibid).

Today, the WB has taken the initiative a step further as NEITI++, emphasizing transparency and good governance in the ‘’upstream’’ and ‘’downstream’’ with the aim to promoting sustainable development. Twenty two countries are presently implementing the initiative worldwide.

The Nigeria experience is fascinating. The Nigeria Extractive Industry Transparency Initiative (NEITI) is the national version of the global EITI. Nigeria signed on to the global EITI in 2003. In addition to the earlier espoused argument, it has also been documented that the urgency for the establishment of NEITI was particularly located in the revelations of a World Bank Study commissioned by President Obasanjo administration in 2000, which disclosed certain disturbing lapses in crude oil output and disposal, funds inflows, funds outflows and institutional capacity required for the effective management of the revenues accruable from the extractive sector (Garuba. D,an Ikubaje; J. 2007).This amongst others set the stage for the inauguration of a 28-member National Stakeholders Working Group (NSWG) in February 2004 as the platform for implementing the country’s EITI initiative.[2] The group is a multi-stakeholder coalition and it operates through the NEITI Secretariat which is structured along five teams: the Technical Evaluation Team which evaluates all tenders for NEITI assignments and report findings to the NSWG; the Legislative Team which sets the agenda for and strategy for the legislative backbone (i.e. NEITI Bill) for the initiative; the Focal Team which designs and oversees Technical Assistance Programmes; the Civil Society Team which directly engages broader interest groups such as trade unions, professional bodies, non-governmental organisations and community-based organisations; and the Media Team which ensures the wider dissemination of the work of the NSWG. NEITI is now an agency mandated by law to promote transparency and accountability in the management of revenues from oil, gas and mining sector. Nigeria is the only country with enabling law. NEITI also pioneer a new mode of engagement between the government and the civil society. It created a civil society liaison office and facilitated a process that led to the development of the civil society/NSWG memorandum of understanding.

NEITI now has a new vision and mission. Its vision is to be accountable, effective, well-resourced and result-oriented while cultivating a culture of transparency, accountability, due process and zero–tolerance of corruption in Nigeria’s extractive industries to the benefit of Nigerian citizens remains the mission of the agency. The body is tasked with a vision to develop an extractive industry that will be a model among leading countries in the world in transparency and investor friendliness, with policies and regulations that maximizes value to government and its people on a sustainable basis; NEITI seeks, through its NSWG, to achieve the following objectives:

· An independent audit of Nigeria’s Extractive Industries (EI).

· Codification of NEITI principles and objectives to ensure their existence in subsequent years beyond (Obasanjo’s) administration.

· Building capacity in the EI; particularly government Agencies relevant to EI revenue management and Civil Society

· Developing and implementing a communication strategy to fully engage the different publics; particularly the Nigeria Civil Society Organisations and Community Groups to ensure that Nigerians know that the EI resources belong to them.

· Developing and implementing a Revenue Disclosure, investigation/study/oversight and publication mechanism to ensure that Nigerians get all the information on their Extractive Industries revenue and public expenditure enabling them hold their various governments to account.[3]

These objectives are at the core of the principles and objectives of the EITI which Charles McPherson of the World Bank summarized in three points, viz:

· Ensuring that resource revenues are properly accounted for and contribute to sustainable development and poverty reduction

· Providing guidelines to stakeholders on auditing, reporting and disseminating information on resource payments and revenues

· Facilitating transparency and accountability in support of EITI implementation

Nigeria has demonstrated a high level of commitment to the EITI and even exceeded the minimal compliance standards to assume a leading role in the advancement of the initiative in Africa. She has also domesticated the initiative and exploited various advantages of the WB through the EITI Trust Fund and Sustainable Management of Mineral Resources Projects (SMMRP). DFID is also one of the strongest donors to NEITI and is presently responsible for the staff salaries and will do that up to September 2008.

Major Activities of the NEITI from 2003 to May 2007

Capacity Building: The initiative embarked on several capacity building programmes. It organized series of workshops, seminars and trainings for the selected stakeholders on EITI principles, criteria and how the oil sector operates in Nigeria. For example, with the support of the WB, it trained over twenty five officials of the Nigerian Central Bank (CBN), the Nigeria National Petroleum Corporation (NNPC) and the Federal Inland Revenue (FIRS) and the Office of the Auditor General of the Federation (OAGF). These institutions are directly in charge of the collection and management of all accrues from the oil and gas sector. In addition to the above, NEITI also trained over 150 civil society organizations across the country and conducted public sensitization on EITI through the Nigerian six-geo-political road shows.

Institutionalization of the Initiative: It also drafted a bill to legalize the initiative and the bill has been passed into law thereby making the initiative an agency of government. The implication of this is that NEITI is now a legal entity and not just a mere initiative. In other words, it can sue and be sued. The bill was introduced in 2004 and passed by the House of Representatives and the Senate in 2005 and 2007 respectively. It finally became law in May 28 2007. With this development, NEITI has been institutionalized; boosting the Nigeria’s leadership role on EITI globally and it has made payment and receipts of extractive disclosure mandatory. The Act has 22 sections and it set out the objectives, functions, structure and NEITI modus operandi. The Act is however not without limitations. There are contradictions in the Act and Section 16 for example is silent on who prosecutes and it provides no explicit prosecution power to NEITI. While Nigerians, particularly, the civil society organizations notice these shortcomings, they argue that it is too early to burden the National Assembly with deficiencies in the Act that has just been passed. Nigerian civil society believes that the national Assembly’s capacity needs to be enhanced on the Act to make it effective.

Commencement of Audit of Oil and Gas Sector: NEITI audit is restricted to the Oil and Gas for now. It commissioned the 1999 -2004 financial, physical and process audit of the Nigerian oil and gas sector. This was a major milestone in the war against corruption in the extractive industries. NEITI Secretariat popularized the findings of the first audit report and coordinates the remedies of the structural lapses identified by the audits. According to NEITI Secretariat, the exercise saved the Nigerian government more than one billion US Dollars (Asobie; A.; Adio; W. 2008). The 2005 audit is almost completed while the 2006/2007 is about to be commissioned. NEITI is seriously learning from the Ghana-EITI on solid minerals management. The initiative/agency is working round the clock to ensure its validation.

Establishment of Three Resource Centres in the Country: In order to deepen public awareness and understanding of NEITI activities and programmes, with the support of the WB, the agency established three Resource Centres across the country. These centres will afford Nigerians to read and have deeper understanding and support for the works of the NEITI. These centres are in Abuja –North Central, Lagos-South-West and PortHarcourt South-South (Niger-Delta).

Hosting and Supervising the Nigeria’s Technical Unit on Governance and Anti-Corruption Reform (TUGAR): The Federal Government under the leadership of Mr. Obasanjo emphasized the need for documentation, monitoring and evaluation of government policies and programmes. This initiative, according to Obasanjo’s government will help to determine the effectiveness and efficiency of his government programmes and policies on good governance and anti-corruption. Considering the ground breaking achievements of NEITI, President Obasanjo established TUGAR in 2007 and mandated NEITI to supervise its operations. TUGAR is expected to cover the following amongst other organizations, Economic and Financial Crime Commission (EFCC); Independent Corrupt Practices and other related offences Commission (ICPC); Public Complaint Commission (PCC); and NEITI etc. Although, it is expected that TUGAR will be independent of NEITI in future for it to be effective. The budget for this body is sub-summed under NEITI annual budget

Current Activities, Achievements, lapses and the Future Plans

One significant factor that aided the success of NEITI under President Obasanjo was his support for the initiative. Analysts have argued that his professional relationship with Oby Ezekwesili as co-founder of Transparency International (TI) must have propelled his support for Ezekwensili as the chairperson of NEITI. Ezekwesili, who is now the World Bank Vice President for Africa has the President ears. On its part, the Nigerian civil society organizations working on extractive industries transparency initiative expect the incumbent President, Umar Musa YarAdua, to also support the agency. During his campaign, YarAdua promised the Publish What You Pay (Nigeria), a national coalition that is committed to campaigning for transparency and accountability in the extractive sector, that his administration will support NEITI. His Special Assistant on Communication, Mr. Segun Adeniyi, was the representative of the Media in the previous NEITI’s NSWG. With this background, Nigerians expect the new President’s support for the agency. It is however, too early to comment on his administration impacts on the agency.

Meanwhile, Mr. YarAdua inaugurated the new NSWG on the 29 January 2008 and promised to support the agency morally and financially. In his inaugural speech, he charged the group to sustain NEITI momentum and also break new grounds; this partly underlines why NEITI is working hard to validate Nigeria’s compliance. The agency is also working hard to expand its activities with the aim to incorporate the new ideas behind the World Bank EITI++. In order to accomplish these noble dreams, the newly inaugurated NSWG held a strategic retreat and orientation in mid-March 2008. The necessity of the retreat is anchor on the fact that majority of the newly constituted group has no understanding of EITI. In fact, some extractive analysts and the PWYP (Nigeria) argue that the appointment of the majority members of the newly constituted NSWG has political undertone. They also argued against the gender gap in the group composition. The group has less than three female members. In my humble view, female gender must be deliberately encouraged to participate in NEITI and individuals that know the issues (extractive issues) are what NEITI need as NSWG members and not mere politicians that will ethnicize and politicize the agency.

In addition to the above, NSWG is made up of different representations, the media; civil society, government, extractive industries- the oil and gas etc; like the first NSWG, the Federal government imposed their preferred candidate on different constituencies that made up the NSWG. There was a total disregard for democratic principle (election). To overcome this problem, Nigeria must learn from other countries, e.g Ghana and Azerbaijan. Despite these limitations, the group is working tirelessly to put in place a new orgarnogram, Code of Conduct and work plan for NEITI operation. The board/NSWG has met four times this year and as I earlier indicated, the President, Mr. YarAdua has appointed Malam Haruna Yunusa Sa’eed as the NEITI Executive Secretary. He is responsible for the overall management of the agency secretariat.

At this juncture, it is also critical to emphasize that the success of the initiative is not unconnected with the brilliant and hard working human resources that NEITI has. These personnel were drawn from different sectors of the society, the media, government, private and the civil society groups. The chairman of the board, Professor Asisi Asiobe is a retired Professor of Political Science, former chairman of Transparency in Nigeria, and a board member of the international EITI. His anti-corruption credential is a plus for the Nigerian EITI.

Proposed West Africa EITI Conference: The NEITI is planning to organize a sub-regional conference on EITI in September 2008. The aims of the conference are to share experiences among West African governments that have signed on to EITI; encourage West Africa governments that have not signed on to do so. It will also liaise with the Economic Community of West Africa (ECOWAS) and the Africa Union (AU) to support and buy into the campaign The conference will not be restricted to West African states alone; other interested African countries would also be accorded the opportunity to participate in the conference.

Challenges

In the course of narrating the NEITI experiences, I have touched some challenges. As we all know, there is no perfect initiative any where but God’s. NEITI has challenges; ranging from inadequate staff, deficiencies in the NEITI law and gender insensitivity in the composition of its board.

One critical challenge that may likely hinder the future success of the initiative is over dependence on donor agencies and inadequate funding. Although, NEITI indicates that donor support for its activities and operation is 45%, but from all indication, it is more than that. The Federal government has not committed the required resources to the initiative. As the adage goes, you put your money where your mouth is. The 2005/2006 audit is still pending. The reason is not unconnected with the inadequate financial resources. We understand that NEITI is yet to pay the Hart Group for the pending two years audits. With the available financial resources in Nigeria, in particular, revenue from the oil and gas sector, agency like NEITI ought not to complain of lack of resources.

In addition to the above, DFID has been paying the salaries of the NEITI employee in the past years and this support will stop in September if it is not renewed this year.

Another technical problem that is connected to the salary support is that, the present NEITI salary structure is not feasible and or obtainable in the Nigerian civil service salary scales/structures. The highest wage in the Nigeria federal civil service is less than $2,000 per month and some staff of NEITI earns as much as $3,000 per month. This is going to generate internal crisis within the secretariat as the government cannot accommodate the NEITI salary scale. Also important, is the fact that for the initiative to maintain it present caliber of staff, the NEITI employee must be well remunerated beyond what is obtainable in the Nigerian civil service.

Finally, the umbrella of the Nigerian civil society organizations working on EITI in the country, the Publish What You Pay (Nigeria) need support and capacity building to also continue with the momentum with which it started the campaign in 2002. The coalition encountered leadership challenge in recent time. Nonetheless, the problem is not insurmountable. To overcome this leadership challenge, the coalition has put in place a new governance structure and this had led to the appointment of a Country Programme Manager and the Head of Finance and Administration that are solely responsible for the programme, administrative and financial management. The coalition is back on track again and it plan to organize Africa conference on EITI in August 2008.

The Way forward: Despite its numerous challenges and limitations, the NEITI has accomplished ground breaking achievements. It has saved Nigerians a billion US Dollars. In terms of transparency, accountability and efficiency, it has also put the extractive industries operating in Nigeria and other relevant government agencies on their toes. The Nigeria government must commit itself to the initiative through financial support (political will); the National Assembly must be empowered to utilize the NEITI Act to engender more transparency and accountability in the Nigeria extractive sector; donor community need to continue its support to NEITI and the Nigerian civil society working on EITI. The civil society group must also imbibe the culture of internal democracy, transparency and accountability in its operations. With these, NEITI will help to promote sustainable development in Nigeria and position the country as one of the leading economy in the year 2020.

Africa Union and other sub-regional blocks must encourage their members that have not subscribe to the global EITI to do so and annual peer review on EITI will also go a long way to put African countries on their toes on transparency and accountability in general.

Finally, as we have argued elsewhere, revenue transparency and accountability in the extractive Industries without a corresponding transparency and accountability in its expenditure remains a half hearted approach to good extractive governance and sustainable development in Africa.

Thank you.

References

Adio, W. (2008), “An Overview of EITI Implementation in Nigeria”, Being a Presentation made at the CISLAC programme on the Role of Legislators in NEITI Audit Process on the 18 April 2008, Kaduna, Nigeria

Alexandra, G (2007), ‘Obasanjo, the Donor Community and Reform Implementation in Nigeria’, the Roundtable, Vol. 96, No. 392, 569-586, October 2007

Asobie, A. (2008), “Taking NEITI to the Next Level: the Role of Donors”, Being a Presentation made at the NEITI/Donors Meeting held at the NEITI Secretariat on April 1st 2008

Diamond, L. (2004), Building a System of Comprehensive Accountability to Control Corruption in “Nigeria’s Struggle for Democracy and Good Governance”, Agbaje, A; Diamond, L; Onwudiwe. E; (eds) pp. 222-40, Pub. Ibadan University Press, Nigeria.

Egwu, S. and Ibeanu, O. (2007), “Popular Perception of Democracy and Political Governance in Nigeria”, Pub. Centre for Democracy and Development, Abuja, pp.xxv-viii.

Ezekwesili, O. (2006), ‘Nigerian EITI’ in Transparency International Watch, July, Berlin

Ibeanu, O. and Kyari M, F. (2005), “Oiling Violence: The Proliferation of Small Arms and Light Weapons in the Niger Delta”. Pub. Friedrich Ebert Stiftung (FES) and Frankdad, Lagos

Ikubaje, J. (2006), “Corruption and Anti-Corruption: Revenue Transparency in Nigeria’s Oil Sector;” Pub. Joe-Tolalu and Associates, Lagos

Ikubaje, J. and Garuba, D. (2007) Unpublished, “Stocktaking of Social Accountability Initiatives in Africa: A case of Extractive Industries Transparency Initiative/Publish What You Pay in Nigeria” A research paper for the World Bank