By Divine Jude Okeke
It has become apparent that resource rich and resource dependent countries could significantly benefit from the effective management or governance of petroleum resources in achieving economic growth and mitigating the resource curse.
In this regard, transparency has been touted as a significant contributor to achieving an effective resource governance regime. These conversations has led to the emergence of accountability initiatives like ‘Publish what you pay,’ ‘The Kimberly Thought Process’ and most popular amongst them, the ‘Extractive Industries Transparency Initiative’ (EITI). These initiatives were set up to encourage the publishing of financial transactions between a country’s government and oil multinational companies.
Nigeria voluntarily joined the global EITI in 2003 and inaugurated the Nigeria Extractive Industries Transparency Initiative (NEITI) to promote prudent management of revenues from its abundant natural resources to reduce poverty and ensure sustainable development. NEITI in that regard posed itself to be the Nigerian national sub-set of the global EITI.
The NNPC towers had long cut the image of an opaque, dingy glass house where corruption had become institutionalised. The KPMG, back in 2012, investigated finances of the corporation and exposed massive financial malfeasance and monumental corruption. Understandably, many had given up on the possibility of salvaging the corporation from the firm grip of financial iniquities and operational lethargy, such that public cynicism had always greeted every appointment or reorganisation in the corporation.
Since its establishment, NEITI was construed to act as a watchdog in attacking the oil corporation and ensuring maximum levels of compliance with the transparency initiatives. However, the harmonisation and compliance NEITI has set the corporation to comport itself to, has left most stakeholders bewildered. Since the appointment of the GMD, Sir. Mele Kyari, it has been no surprise to see that the government has set out to transform the operations of the oil corporation.
But since his appointment positive changes have become noticeable. Large-scale institutional reforms which rolled the NNPC into seven independent business units to make it a more efficient corporation; The business environment was also liberalised, and it became an enabler for the introduction of new business models which drastically reduced the losses recorded by the NNPC in the past. These reforms in the petroleum sector in the last four years has yielded over $30 billion foreign investments and commitments aimed at growing the sector.
These reforms also yielded positive results in the area of personnel integrity, and nowhere is this demonstrated more than the emergence of a management staff as the GMD of the corporation. Kyari personifies the fruits of those reforms and his sub appointments was a grandeur endorsement of the current management of the NNPC as professionals who work to make operations in the oil and gas sector more transparent and accountable.
Some of these notable achievements were seen when, the Federal Government through the Minister of State for Petroleum Resources; Chief Timipre Sylva, Sir Mele Kyari and Sir Adokiye Tombomieye inaugurated the crude oil cost optimization programme which was one of the top priority areas given to the Ministry of Petroleum Resources under the Next Level agenda of Mr President in ensuring reduction of the price of the crude oil extraction costs. Additionally, the domestic gas consumption got a boost as the NPDC completed its gas plant, and grand above all was NNPC BECOMING AN EITI SUPPORT COMPANY.
Despite the above achievements of the NNPC, there are some criticisms. One of such criticisms is that while the EITI relies on government and companies to report financial transactions, it is unable to ‘monitor or track illicit financial flows – that is money that benefits a select group of elites’. This means that it does not have the mechanism to identify and report illegitimate transfers that are diverted for private benefit. Also, another perceived weakness of the EITI is its voluntary nature. The Federal Government and companies are only encouraged to adhere to the EITI principles but are not under any obligation to do so.
Another criticism is that, although there is increased transparency, the overarching societal expectation that improved transparency will lead to greater governance and socio-economic transformations remains unachieved. It is therefore suggested that while EITI implementation fosters transparency, accountability remains a concern. Hence, the reason why corruption persists. It therefore implies that ‘the EITI or the NEITI being its subset on its own cannot completely be said to be a panacea for good governance and sustainable development’ of petroleum resources for oil-rich countries.
Strengthening Transparency: Moving Towards a Robust Petroleum Resource Governance Framework
While countries remain the entities with significant governance authority, there are several actors with equally important roles. Some are Non-governmental organisations (NGOs), corporations and international organisations and even the citizens. The interactions between these complex interlinkages at an international, national and local level could lead to positive solutions.
There are several requirements to ensuring a robust petroleum governance framework and the role of transparency cannot be over emphasised. As a response to the challenges caused by the opacity of the petroleum industry, some analysts propose that perhaps “shining the light” could be beneficial. The idea was that through transparency, institutional mechanisms that make government more accountable will be strengthened.
This was further strengthened by the idea that perhaps through the transparent management of natural resources, government corruption, institutional erosion, civil conflicts and economic challenges will be resolved. Unfortunately, several years after, these concerns persist despite the popularity of transparency initiatives like the NEITI. It is therefore suggested that while efforts are made to further strengthen the NEITI, there should be a shift towards a broader petroleum resource governance framework. It is in this regard that the Natural Resource Charter is instrumental.
The Natural Resource Charter could complement the efforts of the NNPC’s implementation of the NEITI’s policies in achieving a comprehensive natural resource governance framework. The Charter provides a practical advice for governments, societies and the international community on how best to manage resource wealth. The Charter contains twelve precepts.
The first 10 precepts provides guidance on how a government might manage its natural resources while the last two other precepts such as extractive companies are those responsible for international governance. These twelve precepts are expected to assist governments develop a governance regime that could assist in transforming extractive wealth to sustained prosperity as government will be able to make and implement good policy decisions with support and oversight from citizens and international community.
The NEITI and NNPC must be commended on the basis of its core objective of providing reliable extractive industry financial information so as to provide a platform for dialogue and an opportunity for citizens and NGOs to hold governments accountable. But the idea that transparency alone can somehow lead to greater governance, accountability and strengthened institutions, which will in turn lead to resource prosperity, is unsustainable.
As shown above, key advocates of the NEITI are beginning to acknowledge that such over-expectation is only unrealistic. It is for this reason that scholars are advocating for a shift to natural resource governance which led to the development of the Natural Resource Charter. The concern is that even such commendable gestures remain a challenge to fragile countries that have been plagued by conflicts and weak institutions. In this regard, greater responsibility is placed on the governments to muster the necessary political will that can lead to the change and growth they seek. Otherwise, all these discussions will be nothing but fruitless academic exercises. This means that the responsibility rests with governments to adopt and implement these initiatives.
Divine C. Jude-Okeke Esq., an Oil & Gas Law Governance enthusiast is an Abuja based lawyer. He can be reached on: 08126667321
