Making transparency work for development in Nigeria

This blog post was originally written by Katherine Lay (picture) for the ONE.org  Africa Blog, and is republished here with their permission.

The Secretariat of the Nigeria Extractive Industries Transparency Initiative (NEITI) recently announced that it has recovered US$443 million of the $2.6 billion owed to the government as revenue by oil and gas companies.

Audits produced for the period 1999 to 2008 uncovered huge discrepancies in reported payments and receipts. This information spearheaded efforts by the NEITI Secretariat to recover revenue owed by companies to the government – funds that are critical for the country’s socio-economic development.

Nigeria’s leaders have long supported the Extractive Industries Transparency Initiative (EITI)’s transparency standards to promote open and efficient management of the extractive resources sector. Hailing the EITI as a vehicle for greater economic and political stability, former President Obasanjo signed up to the initiative in 2004. This provided a clear signal to investors and international finance institutions that the government is committed to more transparent governance.

The country’s current Finance Minister Ngozi Okonjo-Iweala affirmed that compliance with the EITI lifted Nigeria’s profile in the eyes of investors, and that its improved credit rating led to sizeable increases in foreign direct investment. Recognizing that transparency is beneficial for business in the extractive industries, where investments are capital intensive and dependent on long-term stability to generate returns, Minister Okonjo-Iweala noted that the EITI has helped to mitigate political and reputational risks for companies operating in Nigeria and has generated information necessary for accurate revenue collection by government.

As the first African country to make reporting of payments and receipts legally binding through the NEITI Act, Nigeria has set the “gold standard” for audits under EITI regulations. Its reports investigate the conduct of government and extractive industry practices in greater depth than any other EITI member country has attempted. These audits have assisted efforts to overcome the country’s institutionalized corruption. Before joining the EITI, Nigeria ranked at the bottom of Transparency International’s Corruption Perception Index (CPI). Every year from 1999 to 2004 – when Nigeria joined EITI – the country ranked last or second-to-last globally. By 2010, the CPI ranked Nigeria 134th out of 178 countries.

However, if the NEITI objectives are to translate into visible improvements in the lives of Nigerian citizens, government agencies must make concerted efforts to recover revenue, and to allocate it to areas that need it most. The NEITI Secretariat’s announcement of recovered funds indicates positive commitment to the first part of this process. The amounts are significant: $81 million for the audit period 1999 to 2004, $91 million for 2005, and $208 million for 2006 to 2008. They now need to be allocated efficiently.

In a country that has the second highest maternal mortality rate in the world, and where 52, 000 women die in childbirth each year owing to the absence of healthcare facilities, the recovered amount could fund the construction of 20 new health centers in each of Nigeria’s 774 Local Government Areas. It can provide insecticide-treated bed-nets to 44 300 000 more people, thereby helping to control Nigeria’s malaria pandemic. It can reduce the 42% youth unemployment rate by extending youth employment and social support operations to all states. And it can salvage roads that form key trade networks across the country, including the East-West Road and the Benin-Ore-Sagamu Highway, which are currently death traps.

In its vigilant monitoring of extractive revenue flows, Nigerian civil society has played its part in demanding this recovery of funds. NGOs represented in the NEITI National Stakeholders Working Group have proactively used the NEITI Act and the Freedom of Information Act to encourage more companies and government agencies to disclose information to NEITI auditors. The NEITI process has empowered civil society to ask informed questions and to hold the government to account for the extractives revenue that it manages on behalf of citizens.