Economic Confidential, January 2008

FOCUS

MONITORING EXTRACTIVE INDUSTRIES

COMMUNIQUÉ ISSUED AT THE END OF A TWO-DAY TRAINING WORKSHOP FOR CIVIL SOCIETY ORGANISATIONS ON THEIR OVERSIGHT ROLE IN THE EXTRACTIVE INDUSTRY’S REVENUE AND EXPENDITURE TRANSPARENCY, HELD AT THE NAF CLUB, KADUNA BETWEEN DECEMBER 21 AND 22, 2007.

Introduction:

A two-day capacity training for Civil Society Organisations on their oversight role in the extractive industry, organized by the Civil Society Legislative Advocacy Centre (CISLAC), with support from Oxfam GB Nigeria, held in Kaduna between December 21 and 22, 2007. More than 40 participants, including resource persons, Civil Society actors from all over Nigeria, the media and other stakeholders were in attendance. Goodwill messages were also given by PACT Nigeria, NEITI Secretariat and Publish What You Pay (PWYP).

After the opening ceremony, resource persons took turns to lead participants in the training which incorporated six broad aspects of audit in the extractive industry. They include ``Revenue Transparency: Capturing Women’s Voices,’’ by Ms Lillian Ekeanyanwu of the NEITI Secretariat; ``The Role of CSOs in the NEITI Audit Report Compliance,’’ by Professor Adele Jinadu of the Centre for Advance Social Sciences (CASS), Port Harcourt, and the ``General Principles of Audit,’’ by Mr Adeoti Sunkanmi of the NEITI Secretariat.

The others are ``An Overview of the NEITI Audit Process’’ and `Summary of the 1999-2004 Audit Report,’’ by Messrs. Eric Otchere and Anthony Iniomoa, both consultants of the Hart Group of auditors, as well as ``Empowering Extractive Communities to Track Revenues for Transparency and Accountability,’’ by Professor Assisi Asobie of the University of Nigeria, Nsukka. There was a session devoted to an action plan on further engagement with the extractive industry.

Observations

After exhaustive discussions of each presentation, participants observed the following:

1.            Participants discovered that Nigerians including the federal government do not know how much oil the country produces or exports as the metering systems in use are outdated and not standardized which often cause confusion.

2.            That oil revenue regulatory and monitoring agencies do not fully understand and lack the technical and fiduciary capacity to ensure that Nigeria gets the full revenue due to it.

3.            Most Nigerians do not understand the issues around the extractive industry, especially the operations of the oil, gas and mining companies and returns to government accounts.

4.            In determining how much oil and gas is produced and exported, the country depends on oil companies for records. This situation has not, therefore, allowed Nigeria to have full control of developments in the oil, gas and mining sectors and to derive maximum benefits from the sector, as well as the ensuing general insecurity in the Niger Delta.

5.            The Central Bank of Nigeria, receives oil revenue on behalf of government, and is unfortunately also the keeper of the money and records, which creates important issues of transparency and accountability.

6.            The Hart Group audit of 2004 of the Nigerian Extractive Industry has revealed deep systemic weaknesses in all three levels of Physical, Financial and Process areas of the oil and gas sector.

7.            The collapse of the refineries has compounded the crises of accountability and transparency in the oil and gas sector as oil reserved for the refineries are being exported by the NNPC in a rather un-transparent fashion. The non-functioning of the refineries has also brought about Refinery Down-Time costing about $120 million per annum, which runs into $1.56 billion between 1994 and 2007.

8.            The communities around which extractive activities take place are largely excluded from the process, leading to poverty and violence in such communities.

9.            Certain clauses in the NEITI Act hinder effective implementation of the law, especially the concealment of information by oil and gas companies and method of recruiting consultants for audit.

10.         The current arrangement in the extractive industry allows operators to enjoy huge profits to the disadvantage of Nigeria, because of the monopoly they have on production information.

11.         Overall, Nigeria lacks the technological knowledge to actively engage the extractive industry, hence the over dependence on foreign technologies.

Recommendations

Participants made the following recommendations on how best to engage the extractive industry process in Nigeria:

1.            Nigeria as a nation must work to take ownership of the complex processes that are involved in the extractive industry so as to assert its sovereignty and in the process guarantee its responsibility to its citizens.

2.            The Federal Government should declare a state of emergency on the incapacity of its agencies charged with regulating and monitoring the extractive industry. The Office of the AGF should be empowered to closely monitor revenues from the sector to ensure that Nigeria gets all the revenue due to it as provided by law.

3.            To reduce wastage of hard earned national revenue, government must do everything possible to ensure the revival of all the country’s refineries to both reduce the corruption involved in the export and import of domestic oil allocation.

4.            To increase transparency and accountability in the oil and gas sector, President Umaru Yar’Adua should immediately appoint a Minister for Petroleum Resources and open the petroleum sector to parliamentary oversight and public scrutiny. The present situation where the president is holding tight to the petroleum ministry can not be justified because even under the military, the ministry had a minister.

5.            Given the technical nature of the oil and gas sector, there is the urgent need for further training of the civil society organizations on how to track revenues accruing to Nigeria from all sectors of the extractive industry.

6.            Government should take immediate steps to amend the NEITI Act, in consultation with civil society organizations and other stakeholders, to remove the bottlenecks in the implementation of the legislation.

7.            NEITI should intensify its enlightenment and public education on the implications of the law, and how best citizens can take ownership of the extractive industry audit process.

8.            Government should develop the political will to reduce the control that the extractive industry companies enjoy. This will ensure maximum benefits to citizens

9.            In view of the fact that women are the major victims of the extractive industry activities, gender should be mainstreamed into the NEITI process, by removing any form of discrimination against women in the Act or operation of NEITI.

10.         Judging from the findings of the Hart Group’s audit report, there is the need for annual audits of the sector.

11.         The yearly audit should be complemented by a four-year exhaustive investigation/audit of the extractive industry on the three key levels of Financial, Physical and Process activities to block the loop holes that oil and gas companies and public servants have used to steal revenue.

12.         Given the important role of NEITI to Nigeria’s development, CSO representatives need to be included in the team that will conduct next audit.

13.         The National Stakeholders Working Group (NSWG) on NEITI should be constituted immediately

14.         The youth should be mainstreamed into the NEITI process

Conclusion:

Participants commended CISLAC and Oxfam GB Nigeria for organizing the training session, and called for further training to enhance knowledge on all aspects of the extractive industry.

AUWAL MUSA RAFSANJANI                                               SURVEYOR EFIK

Executive Director                                                  Publish What Pay,

CISLAC