As Nigeria EITI (NEITI) marks its 10th year of EITI reporting, they report dramatic increases in Nigerian government take since the establishment of NEITI.
The recent publication “10 years of NEITI reports - What have we learnt” states that since the creation of NEITI in 2004 the average government take has jumped from 63 per cent to 75 per cent annually without any major change in the tax regime or revenue collection procedures. Without this increase, the government would have received US$9 billion less revenues in 2008 (US$49 billion against US$58 billion). In addition, the companies have reported about twice as much income per year as they did before the creation of the NEITI.
“The NEITI reports have produced a wealth of information on the oil sector, very little of which was previously available,” the report asserts.
US $269 billion was received from the oil sector from 1999 to 2008 – mostly from the sale of government-owned oil.
Over 10 years, NEITI reports have shown discrepancies that totalled US$2.6 billion. While this accounts for only around 1 per cent of all revenues received by the government over this period, it represents significant resources that could have contributed to Nigeria’s development.
Areas of improvement
The report highlights a large number of additional challenges in the oil sector, many of which mean the government does not collect as much as it could, but are currently impossible to estimate.
Firstly, Nigeria does not know the actual amount of oil produced. Oil is measured at terminals, but not at wellheads or flow stations. Around 10 per cent of the oil is estimated to be lost or stolen between these points, resulting in less revenue for the government.
Secondly, the report characterises the sector’s tax regime as ‘unregulated self-assessment’. The NEITI reports showed that tax assessments submitted by two companies did not match their own internal audited financial statements. The reports also indicate that companies are overstating several costs in tax assessments. This implies that some companies may be abusing capital allowances in an attempt to reduce their tax liabilities.
Thirdly, the government’s information management and IT systems lack the sophistication to deal with financial information flows from the sector, and it lacks of the skills and capacity to use the systems effectively. NEITI has also found that the Accountant General does not have the power to address problems in the revenue collection system.
Lastly, the NEITI audits reveal problems arising from the dual role of Nigerian National Petroleum Corporation as seller and buyer of government oil.
“10 years of NEITI reports- What have we learnt” is an account of not only what the numbers say, but what the process of producing those numbers itself reveals. NEITI’s experience also demonstrates the impact that transparency can have over the management of natural resource wealth.
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