Expert Harps On Implementing Contract Disclosure To Boost Investment In Oil Sector
As the competition between countries to woo investments in the oil and gas sector gets tougher due to the impact of Covid-19, the Nigerian government has been urged to urgently take steps to implement contract disclosure framework in order to boost investors’ confidence and make the country a preferred destination.
This is even more exigent as contract disclosure has become a focal area by the Extractive Industries Transparency Initiative (EITI) in assessing member countries. The EITI is a global initiative which Nigeria signed up to in 2003 and is committed to implementing its principles
Speaking on framework for implementation of contract transparency in Nigeria’s oil and gas sector at a Webinar organized by Facility for Oil Sector Transformation (FOSTER II), Mr Leonard Ugbuaja explained that the initiative would enhance the confidence of investors and operators in the oil industry by making it easy for any investors or operators to see the terms under which other operators operates.
Also, it would help to curb corruption by empowering citizens to assess whether contractual obligations have been breached and who should be held responsible, in addition to facilitating legislative oversight in determining whether the government and companies are meeting their obligations under the various contracts.
Ugbuaja further explained that implementation of contract transparency in Nigeria will significantly improve tax collection and administration of fiscal regime as it would result in strengthened inter-agency collaboration.
The expert emphasized the need for government and relevant stakeholders to work together to ensure the adoption of an appropriate medium, preferably in form of an internet portal, for the disclosure and publication of contracts covered under scope of contract transparency in Nigeria.
“The portal would be accessible to the public in a searchable, using multiple parameters such as name of company, name of asset, etc, and machine-readable format,” he said.
He listed contracts which should be subject to disclosure to include contracts that fall within the EITI monetary threshold requirement; licenses and leases granting rights to a companies to operate in the upstream segment of the oil and gas industry such as oil prospecting license (OPL), oil mining lease (OML), Joint operating agreement (JOA) and Production sharing contract (PSC).
To address issues of confidentiality, Ugbuaja advised that only the key terms of the relevant contracts should be publicly accessible online, but with an option for any member of the public who so desires to apply to the relevant office, such as office of Attorney General of the Federation or the Attorney General of the relevant State Government, to be given access to the full version of the contract.
He explained ‘key terms’ as terms that in most cases would be of importance to specific stakeholders and the public such as the financial terms of the contract, including any material payments due to the State under the contract; any fiscal or tax concessions, the social and environmental obligations of the contracting parties, stabilization clauses and the duration of the contract.
“In implementing contract disclosure under this framework, allowance would be made for the redaction of confidential commercial sensitive information or data relating to the operations of the companies involved,” Ugbuaja stated.
Weighing the various legal avenues through which Nigeria can quickly implement contract disclosure regime, Ugbuaja said, while an Executive Order issued by the President directing the relevant ministries and parastatals to take actions within their respective mandates to ensure contract disclosure, will be effective, the most effective would be an Act of the National Assembly, expressly providing for mandatory disclosure of relevant contracts in the extractive industry.
Consequently, he tasked the Nigerian civil society and media to develop and implement a robust advocacy strategy for the quick implementation of contract transparency. He further stressed the need for them to use the information in the contracts and licenses that would be disclosed, when the framework is implemented, to monitor the activities of the various government and private sector operators in the industry.
“The overarching policy objective in pursuing contract transparency is to ensure accountability and transparency in the management of public resources derived from the extractive industries in Nigeria,” he stated.