Following the alarming level of corruption in the oil and gas sector, the Executive Secretary of the Nigerian Extractive Industry Transparency Initiative (NEITI), Mrs. Zainab Ahmed, in this interview with JULIET ALOHAN, says there is need for indicted persons to be prosecuted. She also maintains that Nigeria’s implementation of the global EITI principles has brought about transparency in the hitherto secretive oil sector.?
What prompted Nigeria to sign up to the EITI?
EITI is a global initiative that was put together by some well meaning people who saw a trend that almost all resource rich countries was plagued by the phenomenon of resource curse, and they thought there should be a way in which companies, government and civil societies can work together to make sure that the wealth from the extractive industry is properly used for the development of the resource rich nations and eradicate poverty.
At the time EITI took off, former President Olusegun Obansanjo was looking at economic reforms from all ramifications, and he thought that the EITI was a good platform in which to curtail the endemic corruption that was existing in the oil sector. Nigeria signed up to the EITI in 2003 and began implementation in 2004, and it was further strengthened with the NEITI Act of 2007. The mandate of NEITI as provided by the Act is to develop a framework to ensure that there is transparency and accountability in the oil and gas as well as the solid minerals sector in Nigeria, which is transparency of revenues that companies pay to government and transparency of the receipt of those revenues by government. In carrying out this mandate we are authorised to conduct audits, to report on the revenues that the industry has generated and what it has paid to government, to report on the volume of product extracted as well as to report on the processes that the regulators use to regulate the sector.
It is almost a decade now since Nigeria signed up to the EITI; do we have any significant benefit to show for it?
The EITI implementation in Nigeria has recorded some very good results. NEITI has been able to produce audit of the oil and gas sector covering 10 years. These audits have extensive detailed information about the oil and gas sector that was previously not there. So, you can say that due to the NEITI report, the industry is not a black hole anymore.
We can also say that there is an acceptance of a consensual reporting framework within the industry on the reporting of its activities. We can also lay claims to having contributed to the improvement in Nigeria’s corruption risk rating. The corruption risk assessment actually improved between 2005 and 2008 significantly.
The rate of oil theft is becoming alarming; what is the implication of this to the country?
Nigeria is not the only African country producing oil anymore, so when the operating environment becomes uncondusive, operators are likely to find other countries to operate in; that’s on one side. On the other side, it means we are losing revenue that is highly needed. This country is 90 to 95 per cent dependent on the revenue from the oil industry, and if you look at the increasing rate at which the lost is happening, the theft has become very professional: these are not petty thieves anymore; these are people with industry background. They have enough capital to acquire sophisticated vessels to carry out their operations.
It is an issue that has to be taken seriously by everybody. One thing is clear: Nigeria cannot exactly say what is being lost. All the figures going around are basically estimates, but what is clear is that the losses are increasing at a very fast rate. That is why all hands must on deck to address it; if not, it is going to affect our budget which is hinged on the production of 2.3 million barrels per day.
Is it enough for NEITI to carry out audits, identify corruption and irregularities in the sector without the ability to act on the report?
No, it is not enough, but the Act itself gives NEITI the responsibility to report, disseminate and coordinate remedial actions. When these reports are produced, they are to be submitted to the National Assembly, the auditor-general and then put in the public domain. The purpose of EITI is that you provide extensive information to the public so that the government can use it for planning; the civil society can use it for advancing different courses; the legislature can use it for debate and oversight function, and the Nigerian public can also use the information to ask informed questions and demand answers. So we are trying to push to the point where civil society, the Nigerian public and the legislature would be using the NEITI audit to hold both companies and government to account. Once people become aware, you can’t take that away anymore. People are now looking at this industry closely; people are asking question and would continue to ask questions. Transparency is a necessary step towards accountability. When the industry becomes accountable, then corruption would be greatly reduced.
Do you think those indicted in the House of Reps probe should be severely punished?
I believe very seriously that in any environment where corruption has become endemic, that there must be some casualties; that the government must have the will to lay some very good examples so that people will be aware that it cannot be business as usual.
What is the rating of NEITI in the EITI given the level of corruption in the industry?
The EITI rates NEITI very high because of the quality of our reports and the various engagements that we are doing. They use us an example, inviting us to share our experience with other countries passing through what we went through. They also know that the NEITI audit reports were a catalyst to the current discourse that is happening in the oil and gas sector, and they acknowledge it as a step towards curtailing corruption in the country.
You once said that NEITI would go into budgetary disbursement audit; how soon would that be?
NEITI, by the provisions of the Act, is required to report on the disbursement of funds from the federation account to the various tiers of government, and another provision also says that NEITI is to report on how the revenues from the extractive industry are applied by government at various levels. It was an audit that we planned to start this year, but we reached a point where we realised that if we don’t approach the states and local governments and get their buy-in, we will not be able to carry it out successfully, for the reason that the states are independent, autonomous bodies because Nigeria is a federation. Some of them feel that they have no obligation to report to a federal government agency. So we are trying to seek audience with the governors at the governors’ forum; we are trying to seek audience with the local governments at the ALGON level; we also need to bring together, in a workshop, commissioners of Finance, accountants-general and auditors-general so that they will understand what they stand to benefit from the exercise and cooperate with us. The start-off for the audit depends on all these processes. I don’t know if we can start it this year, but the procurement process for the auditors is currently ongoing.
Your audits have reported underpayments by companies over the years; how much recoveries have NEITI made from these underpayments so far?
So far, as a result of 1999-2004 report, about $1.9 billion recovery of underpayments of taxes and royalties was made. Similarly, as a result of the 2005 report, $550 million was recovered. In the 2006-2008 report, NEITI has the potential to recover $2.6 billion. I’m saying potential because the process is that the FIRS (Federal Inland Revenue Service) and the DPR (Department of Petroleum Resources) will use the NEITI audit report, crosscheck the findings and where underpayment is established they pursue the collection. So, it is only when that process is completed that we can say the monies have been collected. It when DPR and FIRS is convinced that a company has to pay and the company resists that the court process will start.
Why are we operating a system that allows companies to be short- changing Nigeria?
A number of factors; some of it have to do with the laws. Some of the provisions of the laws are not clear and, therefore, allows companies to make a subjective interpretation; of course they will interpret it in their favour. Another is? the inability of some of the regulatory agencies to rigorously check what the companies are assessing and filling as their obligations. The remedy would be to improve on the laws – where you have provisions that are not clear, you make changes to make it clear.
The Petroleum Industry Bill (PIB) is expected to address most of these issues; is NEITI comfortable with the new Bill? Why do you think the Bill is delayed???
We have not seen the new Bill; the technical committee that government set up to put the new Bill together is still working. At a point they invited us to give us an update on their progress; we asked for a draft of the Bill but they said it was not yet ready. When it is ready, it will be made available to us and it is only then that we will be able to make our own inputs into the process. As to why it is delayed, it is a reality that Nigeria is a complex nation, and there are lots of interest groups which are fighting to protect their own interest. Our hope is that when the Bill is passed, that it is Nigeria’s interest that would override all other interests.?
How do you think you can find out exactly what Nigeria is exporting; and how much are we making from the sector?
We have reported that companies and government do not agree on the export volume. According to the JV ( joint venture) agreement, if 100 barrels of oil is produced, Nigeria should lift 60 barrels and the company should lift 40. But what we find in the audit is that the government gives information on what it has lifted and the company gives information on what it has lifted, and when you put them together, it is over the production figure; which means the two parties do not agree on the production sharing formula, and they are both interpreting the provisions in the production sharing agreement to suit their respective selves. So, one of the recommendations of the NEITI report is for the ambiguity to be ironed out because it has been subject for arbitration for a very long time and, at the end of the day, this is translating to losses for the nation
The Ribadu committee is seen as a duplication of NEITI’s responsibility; what is your assessment of the committee?
NEITI welcomes the Ribadu committee because the corruption in the oil and gas sector is endemic; you need to have different complementary efforts to show good result. We hope that the Ribadu committee will use the NEITI audit findings, look at the issues that we have been reporting over the years -? the recommendations, and advance the remediation of some of the issues. If they do that, it would be to the benefit of the nation.
The NEITI Act has been criticised as lacking in sanctions for erring companies; what’s your reaction to this?
It is not that there are no sanctions, but we have seen that they are too mild for a multi-billion dollar industry. But there is a useful sanction that states that the NEITI Board can recommend to the federal government to withdraw a company’s licence if the fault is fundamental enough. So because we recognise that the sanctions in the Act are mild, and because we know that an amendment will take time, we approached the Economic and Financial Crimes Comission (EFCC) and the Independent Corrupt Practices Commission (ICPC) to go into a working MOU to help us carry out an enforcement where necessary so we are working with them and we hope that through this NEITI would be able to enforce sanctions where the need arises.
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