Mind the gap: what discrepancies in EITI Reports reveal

“There’s a crack in everything, that’s how the light gets in.” 

I can’t be certain that poet Leonard Cohen was referring to discrepancies in EITI Reports when he wrote those wise words, but I’m sure that he would appreciate that EITI reporting exists as much to shine light on confusion as on clarity.

The Democratic Republic of Congo EITI Report published this month reveals a discrepancy of US$70m and President Kabila wants to know what’s going on. But that is pocket money compared to over US$800m of unresolved differences in the 2005 Nigeria report. And then there was the discrepancy in the Report of the US$4.7bn that the government claimed in the report was owed by the state-owned Nigerian National Petroleum Corporation (NNPC) for payments of domestic crude. In response the NNPC claimed it was owed US$1.7bn in subsidies from the government. Given that the oil and gas industry alone generates the equivalent of almost a dollar for every Nigerian every day of the year, yet 70% of them are living on less than a dollar-a-day, there is a strong public interest to at least clear up what is going on.

How can Nigeria, with all these discrepancies be compliant with the EITI standard? Shouldn’t compliance mean that these discrepancies have been resolved? 

A lack of discrepancies is often a sign of a well-governed extractives sector, but discrepancies can also lead to important debate. In Nigeria, the lack of clear figures in the NEITI process has led to a more fundamental debate about governance and the role of the NNPC, Department of Petroleum Resources, and the Federal Inland Revenue Service, which is shaping the new Petroleum Industry Bill. That the Nigeria report cannot show clearly how much oil has been produced in the country is boosting demand for better metering. 

When Liberia’s first report revealed the relatively tiny matter of an income tax payment of US$100,000 by AmLib United Minerals which the Government denied receiving, AmLib investigated and identified a clear-cut case of fraud. The firm has subsequently paid the government the shortfall, taken appropriate legal action, and has shored up its financial procedures. 

In Mongolia, the first report had a discrepancy of 20%. This raised alarm bells about the government and industry’s accounting and auditing processes. The improvements that followed resulted in year-on-year reductions in the discrepancies. 

Whilst discrepancies are only a part of the picture revealed by EITI Reports – surely the big story in the DRC is how little the country appears to receive for its abundant resources - it seems that the discrepancies stir some of the most fruitful public discussions. The EITI Rules are written so that discrepancies are allowed to see the light of day and be debated, without preventing compliance – as long as the discrepancies are identified, where possible explained, and remedial actions recommended. It is up to the government, companies, civil society and legislators to ensure that remedial actions are taken. This is one more area in which EITI compliance should not be confused with a clean bill of health. It is just a signal that the patient is taking the right medicine. That is why it is so important that no one confuses EITI compliance with ‘job done’. 

It reminds me of my time in Kenya when the daily newspapers would write “Scandal, graft, corruption” as the top news story every day. People would get exasperated and say that it did not happen under the previous regime. All that the headlines in fact were revealing was that some of the scandal, graft and corruption was being exposed, investigated, and talked about. As Oscar Wilde said: “The only thing worse than being talked about is not being talked about.”

There is indeed a crack in everything. Let’s not paper over it.