EITI best where it is most needed?

Nigeria’s EITI is more than a glorified audit.

“I have read NEITI reports for years”, said Nigeria’s new vice president Oluyemi Oluleke Osinbajo, to EITI Chair Clare Short and the delegation from the EITI he received on 17 June. 

Allow me to state some facts about Nigeria’s EITI (NEITI). Nigeria was one of the first countries to implement the EITI – the country became candidate back in 2007. Early on they not only reconciled what the companies reported to have paid with what the government reported to have received, but they also conducted process, physical, as well as full financial audits. 

What this means is that Nigeria’s efforts at EITI implementation is one of the most intriguing and in-depth of the 48 EITI countries. In 2007 the “NEITI Act” established the Nigerian Extractive Industries Transparency Initiative (NEITI) as an autonomous body, reporting directly to the President and the General Assembly. NEITI today is a government agency with 52 staff members. During the last five years it has been headed by the ever-impressive Zainab Ahmed, with the NGO activist and civic right’s lawyer Ledum Mittee as its chair. 

NEITI has recovered USD 2.4 billion so far

We often get asked whether the EITI has impact. In 2009 Nicholas Shaxson wrote a report titled “NEITI: Just a Curious Audit?”. While it can be difficult to provide hard evidence of impact and many have different understanding of what “impact” entails, what we saw in Abuja the last couple of days is good enough for me. NEITI may not have been more than a glorified audit back then, but it sure is now.

The efforts that recovered USD 2.4 billion out of USD 9.8 billion owed the government by the oil companies, as discovered in NEITI 2009-2011 audits is impressive impact. Just as it identified gaps in payments leading to the reclaiming of billions of dollars for the government, NEITI has followed the money to the oil producing states and set out reforms recommendations for consideration by the cabinet, parliament and the media.

Demanding accountability

The EITI is built on the assumption that transparency can lead to accountability. For this to happen, something has to be done with the many recommendations for policy reform that emerge from the EITI reports.

On 16 June, the delegation sat through a meeting of the Inter-Ministerial Task Team (IMTT). This is a meeting of senior officials from across ministries and government agencies.  In front of us we had hundreds of pages of remedial actions.

The titles of the remedial actions included:

  • The federal government should set the agenda for privatization of refineries;
  • The national oil company (NNPC) should discontinue the exchange of crude oil for refined products, and concentrate on importing refined products;
  • That the Department of Petroleum Resources defines what is meant by ‘production point’ to serve as a basis for working out royalty rates;  
  • NNPC should promptly pay its debt to the Federation (NEITI asserts that outstanding debts for dividends arising from LNG operations alone is USD 11.6 billion since 2009);
  • The need to further reconcile NNPC oil subsidy claims of USD 6 billion.

Fuel subsidies are a major waste of resources, source of corruption, redirector of resources from the poor to the middle class and contributor to global warming. The incoming administration has committed to tackling this. If NEITI’s work in revealing the costs of the subsidies helps to inform the debate and build trust, the impact could be significant. 

The chair of NEITI sat at the head of the table at the IMTT meeting. He demanded answers from various ministries, government agencies and not least the behemoth NNPC. If answers were not satisfactory, this would be reflected in the minutes and the remedial actions will remain on the agenda. While the format of the meeting – with a hundred people, power cuts and heaps of technical details – may at times have been sleep inducing, it is an excellent example of using transparency, information, to hold to account and drive reforms.  It is also a stark reminder that reform processes are complicated and take time. 

The meeting spoke volumes to the reason Clare Short led an EITI delegation to Nigeria. The following day, the EITI Board’s Implementation Committee held a meeting to discuss how to refine the EITI.

Using the EITI Standard to acknowledge Nigeria’s efforts

The EITI Standard adopted in 2013 was a major step forward. It made the EITI on the whole into the kind of platform for reforms that we had all hoped for. But some things need tweaking: the Standard has some cumbersome aspects and could do more to recognise those that make use of it to drive reforms. Nigeria, for example, does not get much recognition for their comprehensive implementation or for their extensive efforts to follow up remedial actions. In fact, it is quite likely that they will lose their compliant status because their reporting on the relatively small (less than 1% of government income) solid minerals sector may have some flaws. When the Committee discussed how the EITI can better incentivise what it awkwardly calls “mainstreaming” or “integration into government systems”, it means in practice how it can better assist, encourage and recognise for example NEITI with its work through IMTT.

“Must plug all loopholes”

It takes generations to improve systems. NEITI has built up pressure for reform in the past and now probably helps to create momentum for the new government agenda that promises faster and deeper reforms. With NEITI, the incoming administration of President Buhari has a good starting point in his determination to bring about change. As his vice president Osinbajo told us: we must plug all the loopholes. NEITI has brought out the information, based on this it has developed remedial actions and started to be a process through the IMTT to demand actions. IMTT is an accountability mechanism in its infancy. As Clare suggested to the vice president: if chaired by you it would force agencies to act. 

The media outlet This Day Live summed it up nicely in its headline, quoting Clare: “Buhari Better Equipped to Reform Extractive Sector with NEITI Reports”.

 

To learn more about the EITI in Nigeria, visit our country page or NEITI's homepage.

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