Second issue of NEITI's Occasional Paper Series.
After nearly 50 years of exploration, the oil and gas sector continues to play a significant role in the economy and accounts 77% of total revenue to the government. The country has faced significant challenges in managing the sector such as 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 new Petroleum Industry Bill (PIB) has been in the making since 2007, and is expected to reorganise the legal and fiscal terms fiscal terms governing the oil and gas sector. 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 participated in the beneficial ownership pilot, but faced difficulties in obtaining beneficial ownership information. 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 2014 - total crude oil and condensate production were 798,541,589 barrels, a slightly decrease by 0.24% compared to previous year. In the gas sector, a total of 2,524.27 Billion Standard Cubic Feet (BSCF) of natural gas production was reported by twenty-eight (28) Companies. This shows an increase of 8.56% when compared with 2013 production, In terms of exports, a total of 773,833,126 barrels of crude oil was exported whiles 1,123,511,431 million (MSCF) of gas was exported.
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 and iron ore. The 2014 EITI report notes that the government is committed to diversifying the nation's economy; from dependence on oil revenue to non-oil revenues.
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 also has mineral resources such as coal, tin, iron ore, limestone and gold, and the mineral sector played an important role in the economy before oil discovery.
|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|
|Bentonite and Baryte||7.5||millon tonnes|
|Rock salt||1.5||million tonnes|
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 80% of government revenues. In 2014, the country received nearly USD 55 billion from oil and gas and USD 5.million from mining. Total sector revenue amounts to about USD 60 billion in 2014. The most significant revenue streams are petroleum profit tax, royalties and dividends.
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
- An inter-agency body led by NEITI consisting of senior officials from across ministries has been established to follow up on and monitor the recommendations from EITI Reports aimed at improving extractive sector governance.
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 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 Acting Executive Secretary Dr Orji O. Orji.
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 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:
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