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Something positive is happening in the Nigerian extractive industry with the introduction of strategic policies and programmes that have reduced the wanton opacity and underhand operations that dominated the sector in the past.

As a result of the far-reaching reforms engineered by NEITI, transparency and accountability now drive the sector resulting in improved revenue for the government.

In this interview with Vanguard’s Northern Region Editor, Soni Daniel; Abuja Bureau Chief, Emma Ujah; and Head of Energy Desk Abuja, Obas Esiedesa, the Executive Secretary of NEITI, Dr. Orji Ogbonnaya Orji, elaborates on the reforms that have transformed the extractive industry in Nigeria and paint a brighter future for the industry.

Excerpts:

You have been involved with NEITI, first as an official and now as the Chief Executive. What value do you think NEITI has added to the development of the extractive industry in Nigeria?

Well, thank you very much and I would like to thank Vanguard for this support over the years, not just today. You have been sending very quality reporters to work with us and you have also been very constructive and analytical in reporting issues and events that shape the extractive sector, including NEITI reports.

Vanguard is very reputable in its comments and incisive in its editorials. The contribution of NEITI to the extractive sector should be benchmarked in four different areas.

The first one is on the legal framework. On the legal framework, because of Nigeria’s membership of the global EITI, with the establishment of NEITI, we now have a law on extractive sector resource governance, the NEITI Act of 2007. The implementation of this law has been quite impactful as interactions in this interview will show you.

The second one on the legal framework is the Petroleum Industry Bill, which is now the Petroleum Industry Act 2021. Unknown to Nigerians, it was NEITI that recommended the introduction of a new law in the petroleum sector, in the first report we published, 1999 to 2004. We re-emphasised this in the 2005 report and re-echoed it in the 2006 report. We began to mobilise opinions and support of agencies, institutional, state and non-state actors to support it from our other reports. The battle to get that law was over 18 years.

The media was involved, and the civil societies were involved, but it was NEITI that ignited that idea when we discovered that the only law in the petroleum sector was the Petroleum Act of 1959. Every other law was guidelines, regulations, or directives. There was no other law. So the PIA is actually the first law since 1959 and it was NEITI’s reports that discovered it.

Also within the legal framework, in the course of this, we discovered that there were several memorandums of understanding, MoUs, which Nigeria entered into with several companies in all the various funding arrangements that you can think of. Many of these MoUs expired, but we never cared to renew them. And they have huge implications on who gets what and how, in the share and allocations of revenues and crude and opportunities in the industry.

If you’re dealing with companies that are also in business, it’s not in their interest to go and tell you that the law has expired because if the MoU provided a certain rate of say $20 per barrel, I am giving an example, at the time you did the law. By the time it has expired it has risen to $40 or $70, it is your duty to say: Oh, this thing has changed.

NEITI identified all MoUs and agreements that have expired, threw them up to the public domain and insisted that the country get those updated. One of them is the inland basin law that we just recently got reviewed. That inland basin law said when the oil price rises offshore and gets to a certain level, it should be reviewed. It was done in 1995 but we never reviewed it until the last two years and Nigeria was losing revenue. So in terms of legal framework, we have done a lot. Not just for the NNPC but it also affected other agencies, including the Federal Inland Revenue Service.

The reforms you saw that FIRS went through are from NEITI’s intervention, under Ifueko Omoguiyi-Okauru who was a member of our board. Ifueko took what we recommended, magnified it and reformed FIRS. NNPC is now transiting, we recommended the unbundling of NNPC, but we knew NNPC cannot be unbundled without a law. The unbundling has started and NNPC is now moving toward a private enterprise. NNPC, for instance, never published its audited financial statement. Nobody knew what was transpiring; NEITI got NNPC to publish its audited financial statement for the first time in 43 years, two years ago. NNPC is also now a supporting company of the global EITI.

As a supporting company of the global EITI there are requirements, one of which the NNPC is now complying with: that is transforming into a limited liability company. When it comes to institutional reforms, I have mentioned FIRS, I have mentioned NNPC and all the other instruments including the Treasury Single Account and so many institutional reforms that NEITI’s reports have influenced.

Also, note that because of NEITI’s reports, there is a lot of information and data now available, and without information and data you can’t make informed decisions. Before NEITI came all this information was exclusively preserved by only the beneficiaries and state actors and the actors in the industry. So a lot of reforms in terms of access to information have happened.

What of resource mobilisation? Our reports have also led to the recovery of revenues. In the past, we have recovered money in excess of $3 billion. But just recently, there was a disclosure we made under my tenure about companies’ indebtedness. I can tell you over $3.8 billion have been recovered.

We didn’t do this alone, I must confess. But our report triggered a debate at the National Assembly and a public hearing was held.

All the stakeholders were summoned, including government agencies. NEITI was there and we provided backroom information in our presentation because he who alleges must show proof, as the lawyers will say. I was asked to come forward and name the companies, I named them. Prove how you arrived at what they owe, we proved and then the companies were named. None of those companies, no one ever disputed our reports.

The House of Representatives at the weeklong session insisted that payments should be done. The preliminary report we got from our consultants and technical team shows that $3.8 billion have been recovered so far. The 77 companies we disclosed owed $6.8 billion from the 2019 report. We have published our 2020 report and the number dropped from 77 to 51.

As we speak, many companies are still making payments, because we are now saying that after we publish our report in 2021 and companies still owe from the 2019 report, we will no longer call it indebtedness. It is now an economic or financial crime. There are agencies that are empowered to deal with such issues and NEITI has a memorandum of understanding with them. They are trying to move in but we said no. These companies are very important to us.

They are doing genuine business in Nigeria. It is just that we want them to be more responsible. The way they pay taxes in other jurisdictions, they should also pay here. They don’t pay it to NEITI. For the taxes, whether it is education tax, petroleum profit tax, VAT, they pay to FIRS. The ones that are royalties and concessions, they pay to the former DPR, now Nigerian Upstream Petroleum Regulatory Commission, NUPRC. NEITI reports trigger these but we go home empty-handed. We don’t collect any money but the only benefit is that the government will be able to have money to fund our operation which comes through allocations.

In the solid minerals sector, which has a low investment drive, there are a lot of debts too, in excess of N2 billion. This is owed by over 2,000 companies which refused or failed to pay licencing fees. We have triggered that and we are now working with the Revenue Mobilisation, Allocation and Fiscal Commission. They came to us and we are providing information to them. From next week, there will be nationwide visits and drives to recover the money. During my tenure, one of the areas NEITI is focusing on is using our reports to recover money, and revenue generation. You can see now that government doesn’t have money and it’s looking for ways to borrow money to fund operations meanwhile, people owe within the country in our sector. We said no, it shouldn’t occur.

Would you then say that NEITI has removed the opacity that was prevalent in the system and that we now have transparency across the industry?

I will not be able to make that kind of assertion at this moment because it is a process. When we started, as I said, the industry was closed, and now it is open, but no one can tell you that we have reached our destination; no. The road is still far, it is a journey.

We’ve not been able to reach there but trusting that by working with the media, civil society, development partners, companies and government we will be able to make more inroads. There are still a lot of boundaries that we need to push and the PIA will help us to do that. You can understand that our board which is the National Stakeholders Working Group has just approved a five-year development plan, which can be described as groundbreaking. Maybe after the implementation of that five-year strategic plan, which NEITI will be commencing in full next year. After that five-year development plan, I will be in a position to assess how far we have gone.

The industry cannot be seen to be completely transparent; a lot of jobs need to be done. One, you can see the challenges in oil theft. A transparent industry cannot have oil theft. You can see the challenge we have with metering. We’re still battling to have a system that helps us to know how much oil we are producing. Yes, some jobs have been done by NUPRC but we are still not there, we still need more. We are not there until we are able to monitor one barrel of oil from production to the point of sale.

In retrospect, why do you think that it took so long to enact the PIA?

Divergent interests: From citizens’ point of view and from NEITI’s professional point of view, divergent interests. In that legislation, there were key issues in contention. One of those issues is the fiscal regime. Then you also have the issue of legislation. You have issues of ownership. You have host communities. You have governance issues. So, for instance, companies want a law that allows them to make more profit.

The government wants a law that generates more revenues. Citizens want a law that provides services and makes them benefit from the natural resources in their country. Then there are others that are standing: the investors that are neither government nor industry players but are interested because they mobilise money or facility and give to industry players. The international communities where we export our oil to are interested, and there are also those who have benefited from the opacity of the industry over these years.

Those people who have enjoyed the opacity and all of the sudden you are bringing a law that will say no, they can’t sit down and watch. You have to manage these interests in a manner that at the end of the day you have a law without losing them. This is because you need the government, the investors, the citizens, and the host communities. What the PIA has done over the years is to manage these divergent interests

With what you have said so far, NEITI is more of a whistleblower or a watchdog which cannot really do much

Our law does not allow NEITI to collect money directly. What our law allows us to do is to provide information and data that will empower the citizens to hold the government and companies accountable. These citizens include the legislature (and they have done that by using the reports to call for a public hearing), the civil society that also incentivised and amplified our voice and the media that took the message beyond our office have all participated.

We are also happy with the companies’ response because that has shown us that once there is somebody to blow the whistle, people will rush to the bank to do the needful, but we do not want a situation where companies operate in our country, and wait to be reminded to do what they ought to do. We need them to be much more responsible and responsive. We cannot be complaining of lack of electricity, water, security, etc and you owe taxes.

With the recent transition of NNPC into a commercially-driven company, what kind of contribution do you expect it to make in bringing transparency into the industry given that there are calls for its shares to be sold to the private sector?

I think we should start by commending the process that has taken place so far.

I have commended the courage of the administration to enact the PIA. The Act is specific that within this period, certain things should happen. And that is what has triggered the transition of the NNPC. We must also commend their management for submitting to that process because I served on the Presidential Steering Committee on PIA implementation.

And I am aware of the robust, very difficult decisions that we have made in this area of transition. Divestment of assets, divestment of interests, changing from here to there; it was very tasking and enormous work that they did but the taste of the pudding is in the eating. If we do all that work and the actual implementation does not translate to the question you are asking, Nigerians see visible differences in terms of openness, revenue generation and remittances, we will still be where we are. 

NEITI is watching and we do not need to go too far to look for example. We have a company in that sector that is doing well. The Nigerian Liquefied Natural Gas, NLNG, is in this environment, facing the same business environment, but it is able to pay its dividends and pay its loans because that company was set up by federation funding with a view that when they sit up they will repay the loans, be paying dividends to the government; they have been complying.

So we want NNPC to operate within that model. But there are also global benchmarks that PIA Steering Committee has recommended to the NNPC which the company is to benchmark its operations. There are many examples such as the State Oil Company of Saudi Arabia, Qatar Petroleum, Petrobras of Brazil, and Petronas of Malaysia. Shell, here in Nigeria, and ExxonMobil are also good examples to learn from. What we recommended is a culture of competition.

Let’s focus on the solid minerals sector for a moment. We have seen a lot of illegal mining activities going on there, most times facilitated by foreigners. How can government salvage that sector?

The solid mineral sector is suffering from poor investors’ patronage because the law in the sector is confusing. The law there is not very clear.

In the Land Use Act, minerals are domiciled in the land; the land is in the hands of the state governments whereas the Federal Government owns the minerals. Unlike the oil and gas sector where, for instance, oil is most times offshore, and if you want to struggle inside the ocean the extent to which you can go is limited. There has to be an understanding between the states and the Federal Government in looking at how the law can be looked at to allow investment flow that will be beneficial to all. I am not a lawyer but it is something that requires a lot of legislation but I do believe that in a constructive legislative debate a middle ground would be found.

Secondly, the solid mineral sector requires a leading company as we have in the NNPC in the oil and gas sector. The sector is now like a football team without a captain. No matter how you talk about the NNPC, no investor comes to invest in Nigeria without landing in the NNPC, not the Ministry of Petroleum Resources. There is no leading company in the solid mineral sector.

I would not know what informed the liquidation of the Nigerian Mining Corporation, but NEITI is recommending that we should have a leading company that we could use to galvanise and draw investments both small and middle into the sector. For now, that sector is flat, with no leader. We do think that in trying to look at the law, the same constraint somehow exists in the oil and gas industry but it did not stop investment. Oil and gas on the land belong to the Federal Government, but it does not stop the states from owning the land. What actually stopped investment there was legislation which we have dealt with.

 If we take part of the template of the oil sector and go into the solid mineral sector to have a middle ground between the state and the Federal Government in terms of legislation, I don’t have the solution, I don’t know how that will work out but we need to do something. Then float a company in the sector that will lead the sector. The company should be privately floated but supported by the government to drive investment in the mining of coal, columbite, gold and so forth. The Federal Government also needs to fund the Ministry and the allied agencies in the industry to play their role, and equip the sector with professionals.

What are the challenges faced by NEITI in its operation?

One of the limitations we are dealing with now is the law. Our NEITI Act of 2007 is old and obsolete. When that law was developed, our focus was only on oil and gas. Now the implementation of the EITI has moved to solid minerals, environment, and gender and we are now working on beneficial ownership disclosure. Nigeria is now a signatory to Open Government Partnership and we are working on data mainstreaming.

The PIA has made it impossible for us to continue to rely on that old law. So what our board has done is to initiate the process of amendment to the NEITI Act. It has just started and our hope is that we should be able to conclude this before the end of this administration. The Secretary to the Government of the Federation and the Office of the Attorney General of the Federation are giving us support.

They are also benchmarking what we need to do with agencies with similar mandates which have also amended their laws. We hope to have a draft bill on the amendment before the National Assembly. If that happens and we are able to get our law up to date then there could be opportunities for us to generate and keep revenues to lessen our dependence on government. We need powers of enforcement so that those who take our interventions for granted will have some consequences. Now we rely on sister agencies to act, but the EFCC, ICPC and NFIU are our key partners and we are working very closely with them.

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Comments expressed here do not reflect the opinions of vanguard newspapers or any employee thereof.