NEITI and the challenges of transparency in the extractive industry

The Nigerian Extractive Industry Transparency Initiative (NEITI), an agency at the forefront of transparency and open fiscal policy has recently revealed that the extractive industry is a bee-hive of corruption. They have consistently exposed under-declaration and non-remittance of revenue that accrue from the extractive sector in their audit reports.

In an International Anti-Corruption Day in 2016, The Executive Secretary of NEITI, Mr. Waziri Adio, said that 90 per cent of the corrupt practices in Nigeria are being perpetrated in the oil and gas sector.

The Agency recently lamented that after more than 40 years of commercial oil exploration, Nigeria was only able to save about $3.9 billion dollars after more than 31 billion barrels of oil was extracted and about $1.09 trillion of crude oil exported from 1980 to June 2017.

Because of the shrouded nature of the transactions in this sector, whistle blowers have neither access to documents nor clue that could be used to uncover the extent of the loot, yet players in this sector live in opulence at the expense of the country.

Despite these bottle necks, government has recorded some lead from whistle blowers although successful prosecution has remained an albatross. Security guards now realise that, although they were primarily engaged to secure the loot of the looters, they too can become millionaires by disclosing the discrete undercover activities that take place in those castles.

Just recently, The Federal Ministry of Finance announced payment of N375.8 million to 20 whistle blowers under the Whistle blower Policy on some recovered funds.

To give legal support to this war against corruption, the Upper Chamber passed a bill titled “Witness Protection Programme (Establishment etc), SB 157″ to protect whistle blowers and witnesses directly involved in the prosecution of certain criminal cases.

The ocean of sleaze in the extractive industry has attracted the attention of law enforcement agents following revelations from NEITI. Not too long ago, a Federal High Court ordered the interim forfeiture of Oil Prospecting License (OPL 245) named Malabu Oil, considered to be the most enormous oil block in Africa with proven crude in the region of nine billion barrels, a larger volume of gas reserves with a market value of $1.1 billion appropriated to the oil cabals.

Adio maintains that “The oil and gas sector is a very strategic sector to our economy because this is where much of our revenue comes from. It is conceivable that 90 percent of the corruption in the country is either happening in that or out of the proceeds of that sector. It is a sector that is so important; it is also a sector that is technical”.

He also confirmed that about $12.9 billion, paid by the Nigeria Liquefied Natural Gas, NLNG, to the Nigerian National Petroleum Corporation, NNPC, was not remitted into the Federation Account in 2014.

Adio, however, said that NEITI was handicapped because it has no enforcement power against oil firms or cartels shortchanging the nation. “We make recommendations but we cannot enforce them. We identify people behind all these challenges in the oil sector; we cannot prosecute. We have to refer them to the EFCC.”

NEITI identified the presence of anonymous companies as a major threat against the war on corruption.
“Anonymous companies are used to deny countries of valuable revenues through tax avoidance, and sometimes outright tax evasion.

“The shroud of secrecy around them is used not only to mask possible corrupt relationships with government officials but also to obscure probable links to money laundering, drug trafficking, and terrorism financing”.

NEITI challenges government to take the lead in the disclosure of the real owners of companies that operate in the extractive sector. “It is in the best interest of Nigeria and Nigerians as full ownership disclosure has practical implication for increasing government revenues, reducing the incidence of corruption and money laundering, and cutting off funding for drug lords and terrorists.”

NEITI clarified that beneficial owners are not necessarily the same as legal owners as the beneficial owners are the flesh and blood humans who benefit from and exercise control over the running of companies, while legal owners might be other companies or individuals acting in trust or as fronts for the beneficial owners.

Adio also argued that Nigeria should establish a public register of beneficial owners of companies operating in the extractive sector ahead of the 2020 deadline recommended by the Extractive Industry Transparency Initiatives (EITI).

To beef up the fight, the National Stakeholders Working Group (NSWG) of NEITI adopted the Open Data policy as one of the measures to enshrine transparency in the industry. For NDWG, Data in the public domain should be accessible, freely used at no cost and should be shared by anyone and they called for deeper openness in the extractive industry through timely audit and ceaseless demand for accountability in the use of extractive revenue.

Reaffirming its leadership role in the transparency and accountability, NEITI launched a new website which will comply with the Freedom of Information Act (FOI).

The website will ensure openness, facilitate public access to information, improve governance, check sharp practices, promote development and restore the rights and powers of citizens to know the activities of public institutions.

NEITI equally stressed the need to de-link government expenditure from oil revenues, drumming support for policy initiatives that pursues prudent macro-economic policies, constant savings culture independent of oil price and regular payouts from the returns on investments to beneficiaries in a transparent manner.

There is no doubt that the present NEITI administration has done a lot to live up to its mandate. It is obvious that the fiscal future on the country squarely lies on how NEITI is able to dig out the wroth in the extractive sector and if possible, provide all necessary information to ensure that economic looters don’t get off the hook during prosecution.

Some experts have even recommended that a team from NEITI should serve as principal witnesses during the prosecution of economic looters, uncovered from NEITI audits. They will provide firsthand information on the antics adopted by the economic saboteurs to rip off the country.

As a lead whistle blowing agency, it is also proposed that NEITI should be considered for a 5% reward for whistle blowers, not just to boost the morale of the agency, but also to equip them for more aggressive incursions into the den of the looters.

It is hoped that such policies – if enshrined in the system, will increase transparency of government, lead to enhanced revenue, promote accountability, bring corruption to its knees and reposition NEITI in the front line for the corruption war in the extractive sector.