Nigeria and her oil: seeking reforms to poor governance of petroleum wealth

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NNRC_2014BenchmarkingExercise_cover_0

On December 9, the Nigeria Natural Resource Charter (NNRC) launched its second benchmarking report with a media event in Lagos. A similar event was held two days later in Abuja. This assessment of the governance of Nigeria’s petroleum wealth was conducted against the twelve precepts of the Natural Resource Charter. The NNRC, led by an independent, multidisciplinary expert advisory panel of 14 members including former government officials, industry representatives, civil society actors and leading academics, presented its report to reflect the state of the industry over the last two years (2012 – 2014) using a “traffic light” system. A positive answer to the benchmarking question scores green, a negative answer red, and where an answer is neither a definitive “yes” or “no”, an amber light. Arrows with each score were used to indicate the trend or direction of travel observed over the two years with an equal sign indicating no movement at all. In total, nine red and three amber scores were reported for the industry. While the direction of travel remained static for nine precepts, it moved upwards for two and declined for one.

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Some of the findings of the research coordinated by the Lagos-based think tank, Center for Public Policy Alternatives (CPPA) revealed that:

  1. Passing the Petroleum Industry Bill (PIB) in its most ideal form and ensuring implementation of reform are crucial for good governance to take root within the sector. According to Dr. Otive Igbuzor, one of the expert panel members, “it will be a terrible thing if this 7th National Assembly closes without passing the bill”. However, lumping both oil and gas sectors together makes the bill more controversial.
  1. Responding to the global shifts in oil/falling prices: It is unclear whether Nigeria is executing a deliberate and forward-looking response to shifts in the global oil market. The shale oil revolution in the United States and new oil discoveries in neighbouring African countries have led to glaring declines in Nigerian oil exports to the US. US oil imports from Africa plunged to a 40-year low in 2014 by virtue of higher US domestic yields of shale oil. By June 2014, first- quarter reports compared to that of the same period in 2013 showed that the drop in US oil imports from Nigeria alone were valued at $2.7 billion (476 billion naira).
  1. Policy should ensure that reserve and production targets are met. This is fundamental to the transformation of sub-soil assets to prosperity for the people of Nigeria.
  1. Complexity and opacity in public revenue procedures especially those of the Nigerian National Petroleum Corporation (NNPC) undermine the oversight efforts of civil society actors. Oil account payments including remittances to the federation account are not publicly available.
  1. Improvements recorded in local content should be sustained. The government’s local content policy has added more jobs within the sector for citizens and also catalyzed an increase in participation of indigenous companies. Recent reports show that over 65 percent of total industry spend have been domiciled to reduce capital flight. As a result, capital retention of about $191 billion (3.3 trillion naira) has so far been recorded in the era of local content implementation. This is significant when compared to the $380 billion (6.6 trillion naira) capital flight that was recorded prior to the implementation of the local content policy, reducing to about $168 billion (2.9 trillion naira) post-implementation.

In order to solve these myriad challenges, the NNRC is seeking the collaboration of the media, civil society and other stakeholders to demand reforms particularly at this critical period of the electioneering process in Nigeria. “For social returns on investment, responsible citizens have a duty to think about the future,” said Tunji Lardner of the Expert Panel.

As the next leaders emerge in 2015, it is important to focus the debate on plans for developing the petroleum sector and transforming its assets into the greatest social and economic benefits for the people of Nigeria.

NNRC

Josiah Aramide writes from Lagos.

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