My reflections on EITI 

• Measuring EITI’s impact
• Improving EITI’s Standard and Validation process
• Getting the most from EITI’s constituencies

EITI has a huge impact but needs to communicate this better 

EITI at the country level: the case of Nigeria

Nigeria is the quintessential resource-cursed country. It has more oil than any other country in the continent, and the sector accounts for over 90% of the country’s exports.  With the largest population in Africa, good management of the sector affects a huge number of people.  Yet the oil and gas sector in Nigeria was for many years considered a byword for corruption. We have all read about scandals in the sector on almost a daily basis, especially in the deliberately labyrinthine state-owned sector where money and oil was being leaked out of the system by the politically connected.  As NRGI writes in its Resource Governance Index:

Governance challenges are present throughout the extractive decision chain. Value is lost particularly in licensing and in the Nigerian National Petroleum Corporation’s (NNPC) sales of government oil, as well as when revenues from oil and gas are shared and saved. 

2017 Resource Governance Index, Nigeria

Through corruption and poor capacity, finite natural resources have been sold off for way too little benefit to the people. A lack of openness and a lack of capacity to understand these transactions has caused the situation to go on for too long. A marginal improvement of 1% in the extractive sector can mean up to a billion dollars of additional government revenues to be spent on education, health and infrastructure, in a single year.  

Through the EITI – not least with the efforts of former Finance Minister and EITI Board Member, Hon Zainab Ahmed and Executive Secretary of NEITI, Waziri Adio, and his team – much has been done.  NEITI is trying to investigate, raise debate and promote policy solutions on matters such as data on signature bonuses, unremitted funds by NNPC, crude oil and refined products theft, the need for a new petroleum law and beneficial ownership transparency. NEITI audits have identified USD 9.8 billion owed to the Federal Govt, of which USD 2 billion has been recovered.  The NEITI Fiscal Allocation and Statutory Disbursement Auditbrings transparency to the allocation, disbursement and utilisation of revenue from the Federation Account to federal, state and local governments and thereon to local beneficiaries.  The government has committed to establish a beneficial ownership register – firstly through registers in the oil/gas and the mining sectors – and to publish contracts, though there has been little progress to date.  

If Nigeria were to undertake all the recommendations of the NEITI process, it would save in the order of billions of dollars every year. In short, if EITI only operated in one country, it would still be worth the 35+ people in the International Secretariat coming into work in the morning.  The fact that it supports over 50 countries undertaking this journey with different levels of success, commitment and challenge, surely makes EITI one of the best returns on investment in the development world.  Such impact cannot be reduced to some mere boxes ticked on a Validation score card or captured in key performance indicators.  This is about a fundamental shift in the way the sector is governed.  

The world of extractives governance has transformed

“When you look at how politics are developing globally, it’s really quite amazing how the EITI keeps moving ahead…” Fredrik Reinfeldt, former Board Chair 

Zooming out to the international level - when Jonas, Sam, Francisco, Leah, myself and a few others set up the International Secretariat in 2007, we could not have imagined that a dozen years later, the EITI would be talking about company-by-company reporting, let alone project-level reporting.  In those early days, no one imagined that contract transparency would be on the table in a little over a decade. The term beneficial ownership was yet to enter into common use in discussions on transparency and corruption. There was an inkling that commodity trading was massively opaque, but there was also a sense that it lay outside of what the EITI could do.  

In my view, these have been achieved not by setting KPIs or establishing theory of change models, but by smart and entrepreneurial facilitation of the constituencies to move the consensus from the narrow to the meaningful.  

Limits of theory of change with multi-stakeholder initiatives

For some civil society colleagues, civic space is the ultimate objective of the EITI.  For implementing governments, it is usually about attracting investment, donor support, reputation and revenue. For companies, it is often about seeking a sound, stable and secure deal.  For most EITI stakeholders it is about reforms and better policy. There has in recent years been much talk about theories of change. But until research is better at capturing this multiplicity of outcomes – and indeed the dynamic and evolving nature of EITI objectives – it will be a struggle to find a single theory of change determining whether the EITI is having the desired impact.  

Plan and measure, as tools not straightjackets

My point is that I am hugely proud of what the EITI has achieved. Because most of what happens is either at the country level or in slow iterations, and because different stakeholders want different things from the EITI, what it has achieved has been hugely difficult to capture in numbers and in attribution.  

The requirement that all contracts should be published from 2021 was not something that was just agreed at the Kyiv Board meeting in March.  It was the result of at least eight years of constructive conversation. The heroes of that agreement are those that met in Lusaka in 2012 as much as those in Kyiv in 2019.  

Still a long way to go

There have been vast improvements. Yet the sector is still vulnerable to corruption.  Civic space is still closing. Inequality in resource rich countries does not appear to have improved. The extractives sector is still causing too much environmental and climate damage.  Nigeria may have made satisfactory progress in the EITI Validation, but no one would argue that the oil and gas sector there is now clean.  

We know that there is more to do on subcontracting, on production costs, on state-owned enterprises, and much else.  For those who say that EITI does not solve these challenges, I say “Just because it doesn’t do everything, doesn’t mean it does nothing.”  An issue as complex as corruption in the Nigerian oil and gas sector needs many tools to defeat it, not just the EITI.  It takes what Jonas and I call in our book “the heroism of quiet compromise”. 

The EITI opens up the data and ensures a platform for debate.  It improves systems and institutions.  It does not deliver policy, but it can improve policy debate.  To achieve that, more is needed than numbers and more is needed than the EITI.

Improving the EITI Standard and Validation – the “Reformers Test” 

To me the EITI is first and foremost about helping reformers in their lonely battles.  Every government is a coalition of reformers and the forces of opacity and reactionism.  The EITI is a tool to help shift the balance in favour of the reformers. It gives them a platform, recognition and reward.  It gives them backing in the difficult business of reform where they face huge domestic opposition.  Piling on more demands and obstacles from outside and talking often in punitive terms rarely helps them improve policy. This is my ‘reformers test’ which I use to consider how to apply the consequences of the EITI process.  

There has been much focus on improving the EITI Standard by adding requirements.  And certainly the Standard will continue to evolve to address emerging issues – if it stands still it risks losing its relevance.However, the reformers test highlights three other equally important dimensions.

First and most importantly, the Standard must not be overly rigid.  It must be useful to reformers in in Afghanistan and in Norway. One needs to be reasonable about how long it takes to deliver reforms in politically contentious countries. Some would say the EITI has become overly focused on the instruments of sanction.  Suspension, for example, can often be useful for sending clear signals. But it must be used carefully.  Thinking of it as a punishment for ‘bad’ governments or having automatic trigger sanctions like the maximum candidature period (the maximum time that a country can be allowed to implement before meeting all the requirements) is too crude.  The concept of a maximum candidature period makes little sense to a country like Afghanistan.  There are plenty of sanctions available without creating automatic triggers. What sanction will help the reformer and at what point?  

Secondly, the EITI will require more mainstreaming and integration.  As the Standard gets bigger, the reports should ideally get shorter, smarter and more timely.  Countries like Australia could be encouraged to implement parts of the process that are most important to them (beneficial ownership and licensing) but not be forced to go through the (expensive) motions of the other parts (e.g. reconciliation).   Demanding a big report process focused on data collection and not data analysis does not help the reformer.  

My third point is the most controversial.  I have repeatedly seen that in some countries where the space is confined, there can still be improved accountability. It is a false assumption that reforms will onlyhappen if there is a civic space that is open. The EITI should encourage, recognise and fight for the space, but safeguarding it in the current way can sometimes inhibit progress.  I hugely value the importance of civic space, but I oppose the safeguard for three reasons. Firstly, it is does not always pass the ‘reformers test’ – reform can happen even in restricted space. Secondly, civic space is dynamic – disclosure can lead to civic space opening up as much as civic space leading to disclosure.  Thirdly, and perhaps most importantly, the country situations are different.  In Myanmar, there might be limited space generally, but civil society can freely participate in the EITI process.  Even in Equatorial Guinea, the EITI process can guarantee a small island of civic space. Different solutions are required to address different challenges.   

Turning to Validation, the model works better than many give it credit for. First and most importantly, the Validation process (periodic assessment of progress) is hugely appreciated in the implementing countries.  It is the currency of the EITI.  Good recognition is what reformers crave and need.  Validation provides a key feedback loop for reformers.  

In addition, the process provides the most thorough assessment of the governance of the extractives sector in member countries that exists.  It is hugely useful for both country and for the international stakeholders seeking to provide technical and financial assistance. Furthermore, I see no big issues about the role of the Secretariat and the Board in this process, alongside the independent Validators. The statistics are clear: if there is a bias, it has so far almost always been the Board that is more generous and the Secretariat that has been the most stringent in applying the EITI Standard. 

But it is also true that we have created a process that is often testing the wrong things. It is better than it was but far from good enough. We train our eyes on the minimum – not on good systems. The trick will be to have clear rules for the minimum without a focus on technical details with limited importance. 

The EITI needs to worry less about corrective actions and more about recommendations. And to worry less about technical aspects of limited relevance and more about impact.  

I hope that EITI Validation evolves into an automatic annual assessment of information made available – perhaps with an annual index or rating – and then every three years, each country would undertake an impact assessment. I would also suggest that EITI Validation (and the Standard itself) might become more modular in structure with more of an opt-in mindset than opt-out.  Issues such as artisanal and small-scale mining are irrelevant in the UK, but dominant in the Central African Republic.  Sales of commodities by state-owned companies is not of interest in the Netherlands but is the single source of revenue in Iraq. Subnational transfers do not happen in the Seychelles but in Peru more than 50% of revenue goes to the regions. Surely the Standard can be designed to reflect these modular realities? And a better system to encourage progress on niche and innovative areas.  

Getting the most from EITI’s constituencies 

The EITI International Secretariat is a small spider in a huge wider web.  35+ people in Oslo are not the EITI alone.  It is 1,100 people involved in MSGs in the 52 countries.  It is the 400+ staff in national secretariats.  It is the millions of stakeholders across the world.  And, at the international level, it is the many partners and constituencies who collectively work for better extractives governance.  

The implementing countries are the first amongst equals. There is sometimes a tendency to forget that they are the only ones that implement the EITI. At the Board level, one of the greatest challenges remains to ensure that implementing countries are given and take the ownership of the EITI. This is a governance deficit that we should do more to address.  

The Secretariat has often been accused of having its own agenda.  I would vigorously deny that.  What it has done however, is to seek to represent the interests and missing varied voices of the implementing countries which is rightly the constituency with which we are closest.  It is in the Secretariat’s DNA to support implementing countries. 

Moving on to supporting countries.The EITI still needs and is grateful to its supporting countries. Their funding is very much needed, and above all, the EITI needs their policy engagement. The money is relatively limited – getting governance right is financially cheap but time expensive - compared to building health systems, schools and infrastructure. What donors get for USD 6m a year is really quite extraordinary. 

The EITI should possibly have come of age to the extent that supporting countries are no longer required, but it is not there yet. They are still needed and the EITI should work on improving political support for implementation and outreach, supporting and acknowledging reformers, and encouraging greater engagement of the World Bank, IMF and other multilaterals like the Inter-American Development Bank.

Instead, too much of the discussion with this constituency has been about minimum requirements, governance and finance. The fact that supporting countries are the only constituency without any minimum requirements or at least expectations, the fact that any country – however distasteful – can call themselves a supporting country, is a significant credibility issue for the EITI.  The sub-constituency needs to resolve this issue and stop deliberating minor issues. If not, a group of progressive countries should breakaway from those who will not commit to mandatory disclosure laws, beneficial ownership disclosure, and minimum funding.  

For the supporting companies, the EITI has benefited from all the support and engagement. It is encouraging to see how the in-country management is often engaged in EITI implementation and on multi-stakeholder groups. The constituency’s development of expectations for themselves will contribute to defining what is reasonable to put in the public domain.  There are not many initiatives that garner such high level and intense company engagement in the EITI is hugely beneficial.

Still, a lot more could be achieved. If the EITI has the ambition to improve domestic resource mobilisation, then the EITI supporting companies should be a leadership group, disclosing the information for citizens to understand where economic value is created and where is it taxed. The EITI ought to link more closely to efforts underway address illicit financial flows, profit shifting and transfer mispricing. This is explored further in EITI’s financial modelling work and the relationship between EITI and anti-corruption. 

There has been relatively limited engagement with the top corporate level.  We do not know if the EITI features much in CEO’s speaking notes with heads of state, ministers or with each other.  In practice most of them know little or nothing about the EITI compared to perhaps lesser corporate bodies.  In my view they get good value from the EITI compared to their other lobbying efforts and data sources.  Their engagement with governments and civil society have helped them duck thousands of bullets.  More could be done to focus the conversations on the right subjects to the right people.

Much more needs to be done to re-engage financial institutions, especially the institutional investors and the banks.  Just at the time when the EITI is providing a critical mass of analysable data on governance and investment, the sub-constituency is at its least engaged.  The EITI needs to work with bodies like the UN Principles of Responsible Investment (UNPRI) to act like the ICMM does for the mining companies, to garner support and engagement. 

Turning to civil society, the EITI should never forget the extent to which it relies on civil society organisations as the campaigners, the watchdogs and the users. The EITI exists and has developed as a response to civil society campaigning.  They need support both in finding space to operate, but also funding them to be able to engage.  

Some recent civil society efforts have made extraordinarily good use of EITI data and platforms.  Global Witness has used EITI data to explore the role of Congo’s state-owned companies and Oxfam’s reporting and campaigning on contract transparency has engaged EITI companies, highlighting good as well as poor practices. These are the efforts that see the big prize of the EITI.  In short, I am often in awe of our civil society partners and the EITI they designed. 

Eddie’s book, co-authored with former EITI Executive Director, Jonas Moberg, Beyond Governments: Making Collective Governance Work - Lessons from the Extractive Industries Transparency Initiative sets out a wider set of reflections and lessons and is recommended reading for anyone involved in multi-stakeholder governance.