22 February 2018

Nigeria's Performance in Oil, Gas Wealth Management Poor - Report

Nigeria's performance in the management of the wealth from its natural resources (oil and gas) is rated poor, the latest petroleum sector benchmarking report shows.

Details of the 2017 Benchmarking Exercise Report (BER) presented in Abuja by the Nigeria Natural Resource Charter (NNRC) showed two of the 12 precepts covered in red colour, indicating 'no sufficient progress' since the last publication in 2014.

The two affected precepts included 'managing local impacts' and 'state-owned resource companies' like the Nigerian National Petroleum Corporation.

"Meaningful participation by affected communities are absent and resulting benefit from resource extraction overwhelmed by the negative effects as government agencies responsible for monitoring lacks the technical and financial capacity to enforce compliance," the report noted.

The report observed mild changes, particularly in the passage of the Petroleum Industry Governance Bill by the Senate, removal of fuel subsidy by government and marginal improvement in transparency in NNPC operational and account information.

However, the report noted the continued muddling of NNPC's business roles with its auxiliary regulatory functions, with commercial decisions and operational activities still subject to political interference.

Of the 10 precepts in amber, showing minimal improvements, the report said seven, which required further progress, changed from red grades attained in the previous report.

These were in the areas of exploration, licensing and monitoring operations; taxation and additional company payments, and managing local impacts; stabilizing expenditure and private sector development.

Others included state-owned enterprises; investing for growth; public spending; role of extractive companies, strategy, legal frameworks and institutions; transparency & accountability and role of international community.

Although some positive developments were observed in the legal framework between 2014 and 2017, particularly on ownership of assets spelt out in the constitution and the Petroleum Act, the report said operational problems that hindered the translating resource strategy into tangible benefits still existed.

On transparency and accountability, the report said despite efforts to implement the principles in public institutions through the open government partnership by launching the Nigerian open contracting portal, the organisations were yet to prioritise proactive disclosure of information on their operations.

"There is absence of strategic impact assessment and poor disclosure of exploration and licensing information. The power of discretion for licensing award still subsists and lies with the Minister and the bidding rounds are still fraught with lack of transparency, open to abuse and marred by delays," the report said.

On taxation, the report said the fiscal regimes in the extractive industries remained unfavourable to the country, with the international oil companies benefitting more.

Besides, the report said taxes in the sector remained complex, with multiple agencies responsible for collecting various taxes and streams of revenues, while the capacity of revenue collection agencies to discharge their functions in doubt.

On investing for growth, the report said despite notable progress in timely publication of monthly allocations to the federating units, the share of recurrent expenditure remained disproportionately high, while capital expenditure and financial accumulation are rapid decline.

With no significant change in rising government expenditure management with declining commodity prices, the report said although the Sovereign Wealth Fund meant to manage oil resources was being managed professionally, the agency was being grossly underfunded to reduce expenditure shortfall.

The report noted a key concern in the role of international community in the management of the natural resources.

It said the issue was not so much in the absence of the frameworks to protect human, environmental health and social rights, but failure of the international community to translate into substantial in-country action.

NNRC Programme Coordinator, Tengi George-Ikoli, told PREMIUM TIMES at the end of the policy dialogue on Thursday that the latest report was the third in the series, since the previous publications in 2012 and 2014 to assess the governance of Nigeria's petroleum wealth.

Ms. George-Ikoli said the framework for the report, which was revised to guide the detailed approach to obtain accurate analysis of the resource sector, formed the basis for the 2017 exercise.

She said the 2017 benchmarking exercise was handled for NNRC by a consortium of civil society groups, consisting Centre for Public Policy Alternatives, Civil Society Legislative and Advocacy Centre, Centre for the Study of the Economies of Africa, Centre for Social Justice and Social Action.

A panel of independent Nigerian experts on natural resource governance, including former government officials, academics, private sector and civil society representatives held a policy dialogue prior to the presentation of the findings.

Various recommendations were made at the dialogue on how to remedy the inadequacies of the various precepts in the report.

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