The Civil Society Legislative Advocacy Centre, CISLAC has continued to maintain surveillance to observe developments in the oil and gas sector in Nigeria since the commencement of this administration and especially since the appointment of current Group Managing Director of the Nigeria National petroleum Corporation, NNPC now also the Minister for State, Petroleum Resources. We had issued a similar Statement in August 2015 expressing concerns and calling on the Federal Government and the then newly appointed minister to take some decisive actions toward sanitizing the sector and make it more transparent and accountable to Nigerians. We note with relief that several of our positions have been taken on board in the preliminary reforms since the emergence of the new Group Managing Director. However, as we seek to push the frontiers of transparency and accountability in the sector to conform to global best practices, we find the continued need to draw attention to outstanding reforms necessary in the sector.
Ongoing Reforms in the NNPC
We note the current efforts at enhancing transparency in the sector with specific emphasis on the NNPC and its subsidiaries. We acknowledge the ongoing reforms underpinned by the “20 Fixes” unveiled by the GMD in the inaugural edition of the Financial and Operations Report for August 2015, hinged on 5 Pillars which are: to reduce wastages and stop leakages; ensure end-to-end transparency; push for best practices in Operations; drive delivery and execution and maximize profitability. This had led to such actions as the restructuring in the NNPC with Directorates streamlined, cancellation of OPAs and expected commencement of Direct Sales-Direct Purchase for Crude and Products by end of January 2016. This effectively eliminates middle men from the exchange process and reflects one of our calls in August Statement. Just as the release of Monthly Financial and Operational Reports of NNPC transactions monthly beginning from September 2015.
Whereas these actions are commendable, it is our considered view that a clearly defined reform program for the sector with timeline will better serve investors and the Nigerian public. It will ease current uncertainties and inject predictability necessary to stabilise the sector. The current response in the sector, in our opinion appears haphazard, with the following consequences:
- Absence of details of specific policy, institutional and legal frameworks to institutionalise and achieve sustainable reform in the sector
- It is difficult to measure the impact and achievement of the response. The sector needs reforms that is SMART – Specific, Measurable, Achievable, Realistic and Time-bound.
- Citizens’ participation is ineffective and accountability is weakened in the absence of clear roadmap with timelines and expected outcomes. This explains for instance why the Key Interventions in the ‘Way Forward’ which attempted to indicate the progress recorded in September was repeated in October 2015.
Based on the above, we respectfully urge the GMD, NNPC (cum Minister of State and the President (cum Petroleum Minister) to urgently:
- Develop comprehensive reform program to stabilise the oil and gas sector, increase transparency and accountability and investor confidence. Reform agenda framed in short, medium and long term with SMART tangible deliverables within 4-year lifespan of this Administration and makes clear linkage of the sector reform to the overall development strategy of the Administration is most desirable at this time.
- Outline comprehensive institutional, policy and legislative frameworks, including timelines to safeguard the reforms and cut risk of reversal.
- Evolve a Consultative Process involving multiple stakeholders including operators, investors, sector professionals, international partners, civil society and the media for developing the roadmap in order to make it inclusive and reduce risk of resistance. This will enhance implementation and sustainability.
- Encourage inbuilt Monitoring and Evaluation framework to measure progress and improve accountability. We are aware that there is a Department in the National Planning Commission with the specific mandate to support this initiative.
- Review reports and recommendations of various commissions of inquiries and investigations into the sector with a view to incorporating them into the roadmap for reforms. Many of the reports were commissioned by the previous administrations at huge cost and they remained relevant today.
We remain optimistic that this period in the political history of this country presents a great opportunity to prosecute far reaching and impactful reforms in this all important sector and count on your commitment and experience of the sector to provide the much needed leadership.
In our Statement in August, we highlighted the continuous and seeming intractable problem of oil theft and called on the government to confront it decisively. The GMD had confirmed our concerns in September 2015 when he indicated that Nigeria recorded between 3,400 and 4,000 attacks on its various pipelines, losing over $7bn (about N1.4th) from June 2014 to June 2015. Whereas there has been increase in onslaught against oil thieves and illegal refineries by the Navy, this problems has persisted. We also not plans to introduce drones and associated technologies to fight this menace. However, considering the widespread belief that conspiracy and corruption is a major contributory factor to this malady, a more comprehensive strategy that strengthens statutory institutions will be most helpful, in addition to efforts towards strengthening pipeline security. 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. 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 remain convinced that illegal oil refining contributes only small levels to oil theft but the substantial culprits are the large scale off-shore players who ferry crude to the internal market.
We have followed efforts by the government to ensure that a Petroleum Industry Bill is passed. The initiative to break up the Bill into manageable bits for passage is commendable as long as, it can be managed to ensure that a lacuna is not created in any of the legislations when they eventually become law. The unbundling of the NNPC to separate its commercial and regulatory function to make it more efficient and accountable is a position we had canvassed in our August Statement. Therefore, its proposal in the proposed PIB is a welcome development. We call on the Federal Government to ensure that relevant stakeholders and citizens are provided with ample opportunity to engage the bill, make inputs and interrogate its provisions before it becomes law. The National Assembly, particularly, as the representatives of the people should ensure that this becomes reality. Civil Society is posed to constructively engage this process to ensure that the people’s expectations are captured in the Bill when it becomes law. We call on all relevant stakeholders to work towards ensuring that the passage of the law is expedited. We find the statement credited to the Minister for State Petroleum Resources, Dr. Ibe Kachikwu, that Nigeria is losing $15 billion (N3 trillion) annually due to non-passage of the Petroleum Industry Bill (PIB) into law, at a time when our nation desperately needs resources to finance development, very worrisome indeed. This should not be allowed to persist.
EITI Implementation in Nigeria
We consider the implementation of the EITI in Nigeria an added opportunity to deepen transparency and accountability in the extractive sector and institutionalize sustainable reforms. We note that since the dissolution of the NEITI Board, it is yet to be re-constituted. This has some limiting effects on the implementation of the NEITI in Nigeria. The annual Audit conducted require a Board Approval to be acceptable, The Annual Budget needed for the NEITI to discharge its mandate to the Nigerian people require board input and the process of procuring independent auditors to conduct subsequent audits all fall within the powers of the NEITI Board. Nigeria is due to undergo revalidation in January 2016 and several of these are mandatory requirements for the process. Furthermore, the implementation of remedial action from previous audit reports which constitute crucial reform actions require the driving force of a Board. We therefore again call on the government to expedite action on the formation of the NSWG of NEITI 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 again recall that the implementation of the reports was one of the campaign promises of the president and that the Vice-president had made a commitment to the Chair of the EITI International, Ms Claire Short during her visit the this Administration will make the implementation of the reports of the NEITI audit a priority.
We also call on the government to institute the process of incorporating outstanding elements of the new EITI Standards into the operations of the extractive sector in Nigeria. This will increase transparency and accountability in the sector. These include making a policy on contract transparency to facilitate the publication of contents of oil production contracts and list of all licensees. The Minister of State, Petroleum Resources had indicated that new contracts will be made public and present PSCs will be reviewed. We however believe that the Nigerian people also have a right to know the contents of existing contracts. The government should also make a policy on disclosing the beneficial owners of companies operating in the sector and follow through to commence its immediate implementation. In a case where countries like Liberia are disclosing the contents of contracts, the Giant of Africa and reputed best implementing EITI country should not lag behind. There should also be a Government policy for the installation of uniform metering infrastructure for the accurate measurement of crude and products in the upstream and downstream the oil and gas sector. This should be accompanied by a timeline for full compliance by all operators within an agreeable period taking into cognisance the attendant cost of such installation. The absence of a decisive government position and policy is permissive and creates an impression of nonchalance which is unbefitting of our national status and collective image, while undermining the drive for improved accountability in the sector. We also call on the federal government to intensify efforts at establishing a real-time, integrated financial system that will facilitate the automation of the NEITI audit process for increased accuracy, integrity, cost effectiveness and timely audits.
We note that the National Assembly has finally constituted its Committees. We call on the relevant Committees to be proactive and exercise diligent oversight over the process, the reforms and provide qualitative legislative input to ensure real changes and institutionalized reforms in the sector. They should be open to public and civil society engagement and work constructively with relevant agencies in the executive arm to ensure that natural resources impact the lives of citizens. We remind the Federal government that 4 years is not a long time as the time already ticks and the expectations of Nigerians from them remain high.
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