The Nigerian National Petroleum Corporation (NNPC) is yet to remit an outstanding N1.25 trillion a review of remediation issues in the Nigeria Extractive Industries Transparency Initiative (NEITI) oil and gas sector audits has shown.
Chairman, Experts Advisory Panel, Nigeria Natural Resource Charter (NNRC), Mr. Odein Ajumogobia, highlighted this point while speaking at a roundtable to consider the outstanding remediation issues from the NEITI Audit reports.
The roundtable held in Lagos, was organised by the Nigeria Natural Resource Chatter (NNRC) to explore strategies for more effective implementation of recommendations arising from NEITI’s oil sector audits.
NEITI has conducted seven circles of audits of Nigeria’s petroleum sector over the course of 16 years from 1999 to 2015, which have identified systemic challenges and loss of revenues to the Nigerian treasury.
For example, “In 2014, it was reported that a value of $7 billion worth of outstanding payments were yet to be remitted to the Federal Government by the oil and gas industry, with both International Oil Companies (IOCs) and the NNPC being culpable.
A huge amount estimated at over N1.25 trillion is deemed outstanding by NNPC alone. This alone can fund a third of the proposed recurrent expenditure in the 2018 budget,” Ajumogobia said.
Furthermore, the reports highlighted the issue of crude oil losses due to theft and deferred production on account of vandalism and sabotage, which was put at $14.2 billion, while lost domestic crude was about $1.5 billion between 2009 and 2013, with six companies reporting crude oil losses of about $4.1 billion and domestic crude loss of $100 million in 2014 alone.
The reports also revealed losses associated with arrangements such as the ‘product for oil swap’, offshore processing agreements that cost the country about $518 million and $198.7million in 2013 and 2014 respectively.
Also the Report showed the failure of government to review the 1993 Production Sharing Contracts (PSCs) as demanded by Section 16 of the Deep Offshore and Inland Basin Production Sharing Contract Act which demands that the terms of the contracts be reviewed in ways that are economically more beneficial to the country when oil prices cross $20 a barrel.
“It is my understanding that the Ministry of Petroleum Resources sources recently put the loss incurred on account of the non-review of the PSCs at $60 billion. For a country where 70percent of her citizenry lives on about $1 a day, such humongous losses need to be curbed as a matter of urgency,” Ajumogobia emphasised.
Commending efforts by the NNRC in continuing to convey meetings to scale up the conversations, Ajumogobia, who was represented by Dr Oby Ezekwesili, said critical actors, especially citizens and civic groups, must come to the realization that they have to adequately understand their roles and play their parts in pushing for the needed reforms in the oil and gas sector.
“If Nigeria is to reap the expected benefits of the Extractive Industries Transparency Initiative (EITI) process, then the NEITI Reports must attract the needed implementation backing. Except and until remedial issues in the NEITI Reports are addressed, the public demand for impact will continue to be an illusion,” Ajumogobia emphasised.
According to him, without full implementation of the remedial issues, it will be difficult for Nigeria to achieve its desire for a dynamic and result oriented extractive industry.
He noted with concern that while the NEITI Act has provisions for the agency to conduct audits of the oil sector and disseminate it’s findings, there is no provision for remediation, “which is the most critical part of the job.”
This he said has led to recurring remedial issues in the seven circles of audits conducted so far, since Nigeria started implementation of the EITI process in 2004.
“It is for this reason that many lobby for remediation to be put in the NEITI Act, to ensure that all agencies responsible for implementing corrective measures will do what is right as well as empower the National Assembly in enforcing the recommendations of the Act.
Full implementation of recommendations in the NEITI Reports will facilitate wealth creation, sustainable revenue flows and national economic development.” Ajumogobia said.
He stated that the NNRC 2014 Benchmarking Exercise Report (BER) findings against Precept 2 easily confirms the challenges captured by the NEITI Reports.
“The findings of the BER of that year show that there were scarce and inadequate information, poor financial reporting and inadequate audit for public entities. That Report specifically noted that in 2013, Nigeria scored 38/100 on Oil Sector reporting, ranking 42 out of 58 countries.”
However, in the 2017 BER on Precept 2, Nigeria witnessed a slight shift from Red to Amber due to ongoing efforts by government to improve transparency and accountability of public institutions, and the availability of instruments to track public spending which are being implemented.
To further strengthen the gains, in order for Nigeria to maximise the opportunities in the oil and gas value chain, Ajumogobia stressed the need for government to urgently address some of the recurring remedial issues in NEITI’s audit reports.
For instance, he said, if recommendations such as the multi-phased, calibrated meters at the oil well-heads, flow stations and export terminals are adhered to, it would solve the challenge of what quantity of crude is exactly produced.
“The need to invest not only in metering infrastructure but also in digital command centres where regulating agencies can monitor the status of the oil assets in real time should therefore be encouraged,” he added.