Final report on the financial, physical and process audit of the Nigeria oil and gas industry: An independent report assessing and reconciling physical and financial flows within Nigeria's oil and gas industry - 2015.
After nearly 50 years of exploration, the oil and gas sector continues to play a significant role in the economy and accounts 53% of total revenue to the government. The country has faced significant challenges in managing the sector such as the unaccountable use of revenues and corruption. Nigeria EITI has been effective in strengthening public debate and promoting policy options around signature bonuses, unpaid royalties, fuel subsidies, crude oil and refined products theft, and unpaid subsidies by the national oil company (NNPC). It has identified USD 9.8 billion owed to the Federal Government, of which USD 2.4 billion has been recovered through Nigeria EITI’s efforts.
A segment of the Petroleum Industry Governance Bill (PIGB) was passed by the Senate in 2017 and is expected to reorganise the legal and fiscal terms governing the oil and gas sector.The bill has recently been passed by the House of Representatives and only needs to be assented by the President before it is law.Companies operating with a concession or license in the oil sector are liable to pay royalties, petroleum profit tax and corporate income tax. In many cases, production-sharing contracts between the government and petroleum companies also determine the fiscal terms of oil and gas operations in the country. Companies involved in mining activities are liable to company income tax (20% or 30%), capital gains tax (10%), value added tax (5%) and education tax (2%) among others.
The state participates in the oil and gas sector through its national oil company, NNPC, and its various subsidiaries, which represent government interests in the various production arrangements and contracts in the oil and gas sector. The government is on the path of restructuring the NNPC as part of the reforms under the PIB.
In accordance with the Petroleum Act, the Ministry of Petroleum Resources, through the Department of Petroleum Resources is empowered to oversee the license allocation process in the oil and gas sector. Oil and gas licenses are awarded through open tenders or direct negotiations, and the Minister of Petroleum Resources is empowered to grant licenses on a discretionary basis.
In the mining sector, the Mining Cadastre Office is responsible for granting licences and for maintaining a records of all license applications. Licenses are granted according to the Guidelines on Mineral Titles Application and on a “first come, first served” basis
Objectives of beneficial ownership transparency in Nigeria
- Anti-corruption agenda and the ongoing oil sector reforms.
- Government’s commitment to implementing Open Contracting Data Standard, and the establishment of a publicly accessible registry of the licensed owners of all companies operating in Nigeria.
- Elimination of all forms of corruption through transparency and accountability in the extractive industry.
Progress on implementing beneficial ownership disclosure
Nigeria proved its desire to implement beneficial ownership when they participated in the beneficial ownership pilot in 2015. Both the oil and gas and the mining audit provides legal ownership for the companies, which in some cases are natural persons. The report does not confirm if these natural persons are legal owners or beneficial owners. Concerns over confidentiality in disclosing beneficial owners, lack of political will and legislation requiring ownership disclosure were key challenges outlined in Nigeria's evaluation report.
Nigeria EITI plans to organize a series of technical workshops to build capacity in beneficial ownership disclosure. Read Nigeria's beneficial ownership roadmap below for more information.
Nigeria is Africa's largest producer of crude oil. In 2015 - total crude oil production was 776,668,000 barrels, a decrease of 2.74% compared to previous year. In terms of exports, a total of 60,557,000 barrels of crude oil was exported.In the gas sector, a total of 3,250,667.66 million standard cubic feet per day of natural gas production was reported by thirty-four (34) companies. This shows an increase of 25.36% when compared with 2014 production. Export gas sales volume increased by 1.72% (16 thousand metric tons) in 2015 (i.e. 951 thousand metric tons in 2014 and 967 thousand metric tons in 2015).
Nigeria is richly endowed with various types of mineral resources.The 2015 NEITI Solid Minerals Audit report notes that the government is committed to diversifying the nation's economy; from dependence on oil revenue to non-oil revenues. In September 2016, the Federal Government of Nigeria through the Ministry of Mines and Steel Development, re-launched the Solid Mineral Policy Roadmap, aimed at ensuring policy continuity and consistency in the sector. During the year, 2015, the total volume/quantity of actual mineral production was 30,520,114.59 tonne and the total volume/quantity used or sold was 39,272,590.75.
Oil and gas dominate the extractive sector in Nigeria, and the country holds 29% of Africa’s proven oil reserves. Most of the oil and gas activities are found in the Niger Delta in the southern part of the country.Nigeria is richly endowed with various types of mineral resources. Presently, there are over thirty-four mineral finds in commercial quantity spread across the entire country. Some key mineral resources include gold, coal, bitumen, iron ore, tantalite/columbite, lead/zinc sulphides, barytes, cassiterite, gemstones, talc, feldspar, and marble.
Over 90% of the revenue accrued to the government in terms of royalties and other fees on minerals comes from quarrying operations according to the 2015 Solid Minerals Audit. A new development in quarry operation is dimension stone quarry for the production of granite and marble blocks, tiles and slabs.
|Oil||37,070||million barrels||Nigeria has about 2% of the world's proven oil reserves|
|Gas||5,111||billion Sm3||Nigeria has about 2% of the world's proven gas reserves|
|Iron Ore||3||billion tonnes||Nigeria currently has the 12th largest iron ore reserves in the world.|
|Bentonite and Baryte||7.5||millon tonnes|
|Limestone||568||million tonnes||Limestone occurrences are reported in over 30 States of the Federation.|
The NEITI Reports have all the information and data that will guide the government to reform the industry.
Nigeria’s oil and gas sector represents about 53% of government revenues. The total revenue flow to the Federation, other tiers of government and sub-national entities from all sources (including crude oil sales, taxes,
royalties and other incomes) came to $24.791billion.The total revenue from the 2015 Oil And Gas Industry Audit was $3,780,204,290 and while the total losses came to $2,267,426,012.There was a decline of 54.6% in the total financial flow in 2015 ($24.791 billion) when compared to 2014 ($54.55 billion). The decrease in 2015 was largely due to drop in the sales revenue from crude oil and gas attributable to a global fall in the price of crude oil.
The revenues reported by the government from the solid minerals sector in 2015 amounted to N69.200 billion. There was an increase in government revenues from the Solid Minerals Sector from N55.814 billion in 2014 to N69.200 billion. This represents a 23.98% increase and is due mainly to the growth in the amount of taxes paid to FIRS and increase in royalty rates.
Nigeria EITI (NEITI) has produced seven oil & gas reports disclosing details of ‘first trades’ by Nigerian National Petroleum Corporation (NNPC), the Nigerian SOE. Presently, NNPC publishes production, lifting and sales values in aggregates but does not disclose details on off-takers and the beneficial owners operating in commodity trading.
Through its participation in the targeted effort, NEITI aims to conduct an in-depth study that will strengthen transparency and accountability in Nigeria’s commodity trading. As such, the commodity trading report will aim to:
- Disclose the identity of the beneficial owners of commodity traders operating in the Nigerian Oil & gas sector.
- Develop a well-defined framework and suitable methodology for mainstreaming commodity trading reporting in the Nigerian Oil & gas sector
- Design a detailed framework and structure for commodity trading reporting in accordance with the EITI requirements.
Revenue from oil and gas are normally allocated to the state budget from joint venture operations through NNPC in accordance with the state’s share in each of the operations. The government’s share is accounted for directly by the NNPC while the sales proceeds with respect to crude oil and gas liftings are accounted through bank accounts overseen by the Department of Petroleum Resources and Federal Inland Revenue Service respectively.
Oil and gas producing regions receive 13% of the government revenue from production in their territory. These revenues are distributed according to an allocation formula (52,68% to central government, 26,72% to regional governments, and 20,60% to local governments).
The EITI encourages multi-stakeholder groups to explore innovative approaches to make the EITI more relevant and useful.
EITI reports go beyond financial audits and include physical and process audits.
NEITI is trying to investigate, raise debate and promote policy solutions on matters such as data on signature bonuses, unpaid royalties, crude oil and refined products theft, unpaid subsidies by NNPC. NEITI audits have identified USD 9.8 billion owed to the Federal Govt, of which 2 billion has been recovered.
The NEITI Fiscal Allocation and Statutory Disbursement Audit 2007-2011 brings transparency to the allocation, disbursement and utilisation of revenue from the Federation Account to federal, state and local governments and thereon to local beneficiaries.
Nigeria was found to have achieved meaningful progress in implementing the EITI Standard. View more information under the Validation section of this page or go to the Board's decision in full. Previously, the country was compliant under the 2011 Rules.
Implementation in Nigeria has mostly focused on oil and gas, which accounts for 99% of extractive sector revenue. The EITI process has exposed outstanding debts by the national oil company to the government, recovered uncollected taxes, identified weaknesses in the regulatory bodies, audited oil-related transfers to the subnational government, estimated oil theft, and examined oil sales. Nigeria EITI also contributes to the ongoing debates on the management of the national oil company, NNPC.
EITI implementation in Nigeria is led by the National Stakeholder Working Group (NSWG). The NSWG comprises representatives from civil society, government, and extractive industry companies and representatives of communities (the six Nigeria geo-political zones), and the media. The NSWG makes decisions based on consensus and is required to meet quarterly. The day-to-day work is carried out by the NEITI Secretariat, which comprises about 50 staff. The NEITI Secretariat is currently run by Mr. Waziri Adio, Executive Secretary.
The NEITI Act 2007 establishes the NEITI body, functions and MSG. It requires reporting from related government bodies and from all extractive industry companies.
Nigeria was found to have made meaningful progress in meeting the EITI Standard on 11 January 2017. The country needs to take corrective actions on a number of requirements and will be validated again on 11 July, 2018.
Nigeria's progress by requirement can be found in the scorecard below.
Nigeria's work plan for 2017. This is an action plan agreed by the national multi-stakeholder group. This includes the objectives and priorities for EITI implementation and associated activities. See Requirement 1.5.
Second issue of NEITI's Occasional Paper Series.
Nigeria's Validation commenced on 1 July 2016. On January 11 2017, the EITI Board found that Nigeria has made meaningful progress in implementing the 2016 EITI Standard.
The following documentation laid the basis for the Board's decision, attached below:
Nigeria's work plan for 2016. This is an action plan agreed by the national multi-stakeholder group. This includes the objectives and priorities for EITI implementation and associated activities. See Requirement 1.5.
This EITI Report covers Nigeria's oil and gas sector in 2014. It was published in December 2016.
This EITI Report covers Nigeria's mining sector in 2014. It was published in December 2016.
This EITI Report covers Nigeria's mining sector in 2013. It was published in December 2015.
This EITI Report covers Nigeria's oil and gas sector in 2013. It was published in September 2015.
EITI responsibilities: Africa and Middle East. Oversight for finance, human resources, communications, and the Global conferences.
Eddie Rich has been Deputy Head of the EITI since the International Secretariat was established in 2007.
Pablo is Regional Director at the EITI International Secretariat working with the Middle East and North Africa and Anglo/Lusophone West Africa.
Prior to joining the EITI he was Senior Advisor at the Council on Ethics for the Norwegian Government