The latest report on oil and gas revenues released by the Nigeria Extractive Industries Transparency Initiative (NEITI) on 11 August has shown financial discrepancies and outstanding payments totaling over US$5bn for revenues generated by the sector in 2005.
By conducting a financial, physical and process audit of the sector, the report identified unprecedented financial discrepancies, mispaid taxes, and system inefficiencies. Over US$800m of unresolved differences between what companies said that they paid in taxes, royalties and signature bonuses, and what the governments said it received were identified. Of this amount, US$560m was identified as shortfalls in taxes and royalties owed to the government and around US$300m in payment discrepancies relating to signature bonuses, payments of dividends, interest and loan repayments. The largest amount owed to the government in the report is an estimated US$4.7bn by the state-owned, Nigerian National Petroleum Corporation (NNPC), for payments of domestic crude. However, the NNPC claims it is owed US$1.7bn in subsidies from the government.
The Extractive Industries Transparency Initiative (EITI) is an international reporting standard requiring governments to publish all payments they receive from extractive companies and for companies to publish what they pay to governments. The release of its 2005 audit of the oil and gas industry is a strong signal of the Government of Nigeria's determination to increase transparency in the sector. The quality and detail of the report itself demonstrates the huge potential value of a thorough EITI process, but also the immense challenge faced in Nigeria.
This point was reinforced during a 12 August visit to Abuja by US Secretary of State Hilary Rodham Clinton when she stated, "We strongly support and encourage the government of Nigeria's efforts to increase transparency". Assistant Secretary of State for African Affairs Johnnie Carson added that "Nigeria is undoubtedly the most important country in sub-Saharan Africa [and that] it also faces challenges with respect to corruption and has been described by a number of organisations as the most corrupt state in Africa and we all know what corruption can do to public confidence".
This latest NEITI Report has highlighted numerous issues that call for urgent attention and action by all stakeholders. NEITI has now presented its report to the Federal Executive Council to get Presidential and Ministerial approval for the implementation of the report's key recommendations. The report notes that "NEITI will ensure that the benefits due to the Nigerian government, agencies and above all the people of Nigeria, from the industry duly accrue to them, in accordance with the principles of transparency, accountability, and sustainable development... NEITI will facilitate this process of remediation, working in collaboration with all stakeholders".
Peter Eigen, EITI Chairman remarked that "This 2005 NEITI report offers a great opportunity to inform the better management of Nigeria's most important sector and bring the benefits - rather than the harm - of these resources to ordinary Nigerian citizens. The findings of this report will serve as a wake-up call to address the fundamental problems in the industry."
Prof Humphrey Asobie, the Chair of the NEITI Stakeholders Working Group added, "To meet the basic needs of Nigerians, to raise their standard of living significantly, and to achieve sustainable development for Nigeria constitute the ultimate value of the audits. Maximizing that value is the real essence of NEITI".
For more information, please contact Eddie Rich in the EITI secretariat.
NOTES TO EDITORS:
1. This is the second comprehensive audit of the oil and gas sector in Nigeria. The first audit covered the period 1999-2004 also commissioned by NEITI. The audit for 2006-2008 is shortly to be commissioned