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sharing in governance of extractive industries

Civil Society and Extractive Industries Transparency Initiative (EITI) in Nigeria

The “resource curse” syndrome otherwise known as paradox of plenty phenomenon in resource-rich countries such as Nigeria where revenues accruing from the extractive sector - oil, gas and solid minerals fuels corruption, social conflicts, civil wars and political instability rather than supporting socio-economic and sustainable development. Most of these resource-rich nations are plagued with various forms of social, economic and political problems due to lack of transparency and accountability in the management their natural resource wealth. In some of these countries, political, bureaucratic and religious elites collaborate with extractive companies to plunder state resources with impunity.

To help resource-rich nations out of this socio-economic and political predicament, an Extractive Industries Transparency Initiative (EITI) was launched in 2002. The EITI is a global multi-stakeholders framework for promoting transparency and accountability in the management of revenues accruing from the extractive sector through a mandatory disclosure of payments and receipts of revenue flows in the sector.

The objective of EITI is to assist member countries in reversing the regime of secrecy and opacity which has encouraged and sustained corruption in these countries through a regular audit of the extractive sector and widespread dissemination of the findings of the audit reports, which contains the payments made by extractive companies to government in form of taxes, royalties, signature bonuses, rents etc. as well as the receipts of what government has received. It is believed that the availability of information on what companies pays and what government receive as reveled in the audit reports will empower citizens to demand accountability from their political leaders.

At the initial stage, EITI at the global level is limited in scope as it focuses only on revenue transparency as a critical first step, but countries willing to tackle broader governance challenges in the extractive industries has to factor-in her own national interests and peculiarities by broadening the scope of EITI implementation and considered complementary socio-economic and political reforms. For instance Nigeria broadens her EITI implementation by making extractive industries audit report much more comprehensive to include physical, process and financial. This expanded scope of the NEITI reports has now been adopted and fully incorporated in the 2016 EITI standard.

Conceptually, EITI is a tripod standing on three stakeholders-pillars namely: the extractive companies, the government (entities) and the civil society. Each of these stakeholders is expected to play clearly defined roles. Expectedly, in any multi-stakeholder arrangements it is assumed that each stakeholder has the required capabilities to play their given roles. This also implies that lack of capacity, financial or otherwise, or unwillingness on the part of any of the stakeholders to play its roles will render the whole arrangement impotent and ineffective.

EITI places very crucial and strategic roles on the civil society. The roles of civil society includes advocacy, sensitization, mobilization, whistle-blowing, monitoring and oversight. Most importantly, the civil society is expected to use the information and data disclosed in the EITI reports to hold government and companies to account and cause necessary policy changes and reforms in the extractive industries through advocacy and campaign.

Unfortunately, the civil society in Nigeria, like in most sub-Sahara Africa has not been well positioned to play the roles envisaged by the EITI, unlike their counterparts in the advanced democracies where the concept of EITI was muted. The civil society in Nigeria is still weak. And this can be directly located within the context of the political-economy of the civil society itself in particular and that of the Nigeria state in general. For instance, there is high level of poverty, illiteracy and ignorance in the country.

Furthermore, most Nigerians are still grappling with problems of meeting basic needs of life, level of political consciousness is low, there is also a huge capacity gaps on the part of the civil society to interrogate governance and public finance issues. It must be understood that civil society actors in Nigeria operates under a peculiar and challenging economic environment, unlike their counterparts in economically advanced countries where funding opportunities and incentives for social actions exist in abundance.

Although, there no legal, policy or structural barriers to civil society operations in Nigeria because the government provides enabling environment for civil society participation in the EITI process including all aspect of public governance. But funding for social work and civil society engagement remains the greatest challenge to civil society operations, including engagements and participation in the Nigeria EITI process.

The truth is that the kind of strong and independent civil society envisaged by the EITI does not exist in Nigeria yet. Therefore, the assumption that civil society will hold government to account will have to be reappraised. For instance, Nigeria EITI has conducted eight cycle of audit in the oil and gas sector covering 1994-2015, it has also conducted six cycle of audit in the solid mineral sector covering 2007-2015. Each of these audit report has identified remedial issues and articulated far-reaching recommendations.

Similarly, findings and recommendation of these audit reports have been widely disseminated. The objective is to enable the civil society and media use the information and data contained in the audit reports to hold government to account. But despite these efforts, not much has been achieved in term of the implementation of these recommendations and remedial issues identified in the reports.

For instance, NEITI audit reports revealed that there is weak and inadequate metering infrastructure in the Nigeria’s oil and gas sector, leading to inaccurate measurement of crude production and liftings and inappropriate computation of taxes and royalties have been difficult, resulting in huge revenue loss to the Nigeria year-in year-out. Besides, there is also an issue of opaque and discretionary license and lease award processes - over the years, Nigerians public do not know how and when oil licenses were awarded. Neither information about who owns what in the oil and gas sector nor the content or terms of the contracts are put in the public domain, raising public concerns on contracts transparency.

Other revelations of NEITI reports includes: weak arrangements around the domestic crude oil allocation; Use of expired MOU on fiscal terms between the national oil company (NNPC) and Joint Venture Companies; Petroleum Profit Tax underassessment – here Joint Venture companies generate their Petroleum Profit Tax (PPT) fiscal value using Realizable Price (RP) instead of Official Selling Price (OSP) as stipulated in the 2000 MoU, leading to huge amount of PPT underpayment.

There is also the issue of loss of gas income for the Federation and Production Sharing Contract (PSC) Gas Agreement – here PSC signed on behalf of the Government of Nigeria, does not make any provision on how the parties should treat available gas for commercial exploitation. Where gas is already found and used in commercial production such as in Bonga, the absence of an agreement results in loss of income to the federation.

All these have raised two pertinent questions, the question of capacity on the part of civil society to engage EITI process, and the challenges of EITI implementation in Nigeria to record the kind of impacts desired from the process.

To bridge this capacity gaps, NEITI has made capacity building programs for civil society organizations (CSOs) part of its priorities, over the years it has conducted capacity building workshops for CSOs in virtually all the six geo-political zones in the country, and provided institutional and technical support to several CSOs on request. Also, NEITI has institutionalized civil society participation through creation of the Civil Society Steering Committee (CSSC) to broaden civil society participation and citizen engagement in its process.

By way of recommendations, NEITI should not relent on its efforts; it should continue to explore the oversight powers of the parliament. Recent efforts to fully bring the National Assembly into the NEITI process by ensuring that its audit report is debated in the plenary is a step in right direction which must be sustained. The parliament, which is an extension of the civil society, must take keen interest in the EITI reports, as the information data contained therein are veritable instrument for its oversight functions. There is a need for specialized parliamentary committee on the EITI reports.

Financial capacity remains a serious challenge for civil society organizations that are willing to engage in the EITI process in Nigeria. In this direction, the development and donor agencies need to do more to complement the efforts of NEITI, credible civil society organizations should be identified and supported both in technical and financial terms to enable them effectively engage in the EITI process in Nigeria.            Civil%20Society%20%26%20EITI%20in%20Nigeria.docx

Note: All the views expressed here are mine, not that of Nigeria EITI.

……Kazeem Lameed  writes from Abuja – lameedk@gmail.com

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Comment by Miles Litvinoff on October 10, 2018 at 10:22

A really informative and interesting analysis. Challenges facing Nigerian civil society in this context are also experienced, if to a lesser extent, by Northern civil society, such as in my own country the UK, and  even at global level. Civil society is too often expected to act as a watchdog when governments themselves should be monitoring and enforcing legal compliance and implementing transparency and accountability measures towards their citizens. Short-sighted companies often appear to prefer weak and under-resourced governments to effective and well-resourced ones, which leaves economic activity open to abuse.

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