The Civil Society Legislative Advocacy Center, CISLAC has observed developments in the oil and gas sector in Nigeria since the commencement of this administration. As a stakeholder concerned in promoting transparency and accountability in the sector to ensure that this non renewable resources benefit the lives of all citizens, we feel a need to speak and place on record our concerns, expectations and suggestions for achieving progress. Three broad areas capture our attention and evoke our reaction.
Firstly, is the seeming intractable problem of oil theft. Even though this menace predates this administration, its effects are nonetheless even more grievous. So serious is this problem that stakeholders are unable to determine either the volumes of crude stolen or the magnitude of the financial loss to the nation. The Chair of Shell Companies in Nigeria puts the estimates at about $6 Billion loss annually in 2014. The immediate past Finance Minister in 2013, indicated a volume of over 300,000 bpd and a financial loss of some $12 billion annually, corroborating the figures of survey conducted by the Global Financial Integrity at the instance of the Central Bank of Nigeria in the same year. The immediate past Minister for Petroleum Resources estimated that Nigeria lost N1.29 trillion to industrial scale theft of crude oil and production shutdown last year in 2014. PENGASSAN puts the estimates at $25 million daily. The inability of stakeholders to agree on the volumes is in itself a problem resulting from the absence of metering facilities which needs to be addressed.
In spite of the numerous committees set up by the previous administration, the problem had escalated. It is obvious that beneficiaries of oil theft had usually included top politicians, high ranking military officers, militants, unscrupulous oil company personnel, rogue oil traders, disgruntled communities, and a range of local and international facilitators. This explains why curbing it has been difficult as the political will has been lacking. Our findings show that virtually all the Special committees set up by the previous administration on the issue have no evidence of measurable performance or impact beyond rhetoric and media grandstanding as the menace got aggravated while they existed.
We are aware that the new administration recognises the problem and have indicated intension to stem it. We have heard media reports of the president castigating its perpetrators and criticizing previous efforts while promising to confront it headlong. We are equally aware of recent statements indicating that the government knows the actors and the financial institutions in which proceeds of oil theft are kept and note the banning of 113 ships for related matters. We also fully support all efforts to sanction offenders and recover the funds as impunity has contributed immensely to this problem. We are however concerned that the stealing will continue unless other specific steps are taking. This is by ensuring that statutory institutions step up to their duties. The Nigeria Maritime Administration and Safety Agency, NIMASA must strictly enforce the Ship Registration; the Nigeria Ports Authority must strictly enforce the Ship-to-Ship Transfer regulations. A recent report by the Natural Resource Governance Institute indicates the potential for the non transparent and complex oil sales arrangement of crude oil by the NNPC to middlemen to create confusion that can provide a cover for criminal groups to perpetrate oil theft, further buttressing the case to urgently address the corruption. The government must also strengthen vessel clearance practices around oil installations and enforce the rule to arrest ships with their Automatic Identification Systems (AIS) transponders switched off. The government should also institutionalise the practice of publishing the names of suspect ships and updating it regularly to serve as a deterrent. Government should commence the process of installing independent metering facilities that will ensure real-time measurement of crude production, transmission and export to prevent rogue oil firms from exploiting the current system to perpetrate oil theft. We are aware that illegal oil refining contributes to the levels of oil theft but the substantial culprits are the large scale off-shore players who ferry crude to the internal market.
While we note some of the measure taken to sanitize the NNPC, we are convinced that nothing short of a complete restructuring will suffice. The Corporation has in the past 16 years been at the centre of monumental corruption that has robbed the nations of much needed revenue and inflicted hardship of our teeming population. Every probe report and investigation has always turned out very damning information. The latest of this is the report by the Natural Resource Governance Institute on August 4, 2014 which estimated that Nigeria lost N6.4 Trillion to fraudulent oil sales arrangements, $32 Billion to mismanaged Domestic Crude Allocation, used discretion to spend $18 Billion in three years (2011-2013), failed to forward about $12.3 billion being proceeds of about 100 million barrels of crude from an entire stream of the country’s oil production for a whole decade, cost the nation about $1.9 Billion since 2010 till date from a single poorly and secretly negotiated offshore processing agreement and channelled Nigeria’s crude worth about $35 billion to swap deals between 2010 and 2014, through the recent offshore processing agreements (OPAs) containing unbalanced terms that did not efficiently serve Nigeria’s needs and interest. All of this has been made possible not just by corrupt leadership but a structural make up backed up by an enabling act that allows the role of investor, regulator and trader. We place on record that one of the intended goals of the illusive PIB is the unbundling of the NNPC and the corporation is known to have consistently lobbied its way against this.
We call on the government through available administrative means and exploring opportunities that do not necessary require a PIB to address. This include the regulation of the Domestic Crude Allocation to be strictly limited to the refining capacity of the refinery and treating the rest as crude for export; direct the stoppage of all existing offshore processing agreements and institute a competitive and open process and employ the more universally practiced format of refined product exchange agreements; direct the NNPC to design a crude sales system that eliminates the use of multiple middlemen and companies that are unqualified to operate in the sector; Direct the publication of annual reports and regular reports to relevant agencies. In the Long run, the government should amend the NNPC Act and unbundle the corporation by separating its commercial and regulatory function to make it more efficient and accountable. The presidential directive that all revenues be swept into the federation account is a step in the right direction as it removes the discretion of the NNPC, its subsidiaries and other revenue generating agencies to retain monies meant for the common coffers. We call on the newly appointed Group managing Director of the NNPC to initiate reforms that will achieve this ends. We enjoin the government to be decisive on the subsidy regime which the NNPC has also abused at the expense of the nation. While the government proceeds to recover fraudulently claimed subsidy payments as discovered in several reports, it should be mindful that as long as the regime continues, it will constitute debt that would become a weight on our already over stretched treasury. A quick resolution of the government’s policy direction in this regard is therefore necessary.
EITI IMPLEMENTATION IN NIGERIA
Nigeria is due to undergo revalidation in January 2016. The existence of a National Stakeholders Working Group to oversee the work of the NEITI is a necessary condition to achieve success. We therefore again call on the government to expedite the formation of a Board made up of competent, credible and passionate persons without partisanship and any other consideration as envisaged by the NEITI Act 2007. Such a Board, when it comes on stream must make the implementation of the recommendation of the reports from the NEITI Audit reports its primary priority. It is noteworthy that majority of the rot in the sector today would have be drastically reduced had this been the practice since 2005. We like to recall that the implementation of the reports was one of the campaign promises of the president. He should therefore re-constitute the NEITI Board with that in mind. The government should also institute the process of incorporating outstanding elements of the new EITI Standards. This will increase transparency and accountability in the sector. The introduction of transparent and competitive bidding for licenses, the publication of oil production contracts and list of all licensees and the beneficial owners of companies operating in the sector should commence immediately.
Finally, we make bold to say that weak legislative oversight has also contributed a lot to the damage that has been caused in the extractive sector in general and the oil and gas sector in particular. The era of post theft probes by the National Assembly should be replaced by a proactive, effective, and transparent oversight framework that prevents and stops corruption rather than dramatized but futile efforts to recover looted resources which legislative probes have turned out to be. The National Assembly must be constructive and objective in the selection of members of the committees relevant in this sector. They in turn must shun corruption and vested interest and serve the interest of the electorate in engaging the sector. NEITI audit reports should be debated in plenary and covered entities must be closely monitored.
We call for better coordination and collaboration among all the relevant agencies operating in the sector to ensure smooth and result-oriented implementation of the NEITI process and enhance transparency and accountability in the sector.
CISLAC is committed to supporting and collaborating with all stakeholders who have the interest of our people at heart and are willing to ensure that our natural resources benefit citizens of all generations.
Thank you for your attention!
Auwal Ibrahim Musa (Rafsanjani)
Executive Director, CISLAC