By Juliet Ukanwosu
Nigeria’s oil and gas sector scored poorly in the 2021 Resource Governance Index (RGI), placing it in the “weak” performance band, according to the Natural Resource Governance Institute’s (NRGI) recently released report.
Despite an 11-point score increase since the 2017 RGI, petroleum resource governance has largely stagnated in that time, with the bulk of the increase driven by the first-time inclusion of the Nigeria Sovereign Investment Authority (NSIA) in the assessment, the report said.
Barring this inclusion, significant governance challenges remain, with deep-seated and long-standing issues hampering possible improvements. The report emphasized that Nigeria’s oil and gas governance is weak and falls short in key transparency and accountability measures
Highlighting the major issues in the sector, the report listed the governance of licensing as “failing,” due to an absence of a centralized cadaster and rules governing the pre- and post-licensing process and contract disclosures.
It added that the lack of disclosure of public officials’ financial interests in extractive companies and limited disclosure of significant beneficial ownership information remain a concern, while Nigeria’s “poor” enabling environment hinders its petroleum resource governance, with subcomponents related to control of corruption, political stability and government effectiveness all receiving “failing” scores.
However, the report stated that governance of state-owned Nigeria National Petroleum Corporation (NNPC) improved by 25 points since the 2017 RGI, driven mostly by enhanced commodity sales disclosures.
Also, the Nigerian Sovereign Investment Authority (NSIA) was assessed for the first time, and placed in the “good” performance band for sovereign wealth funds due to strong rules and disclosures governing the fund.
To reverse the negative scores, the NRGI recommended that the articles of association for any new NNPC entities created by the PIA contain binding obligations to publish audited financials and detailed commodity sale data.
It also urged all relevant entities to disclose more information on the climate risks and impacts of the country’s existing and planned oil and gas sector operations, while also advising that a multi-stakeholder task force with representatives from relevant government bodies, civil society organizations, research institutions and communities, be set up to develop an evidence-based, consultative energy transition plan for Nigeria.
the NRGI also recommended that the Federal Government consolidate its stabilization mechanisms, utilizing the NSIA which has proven to be more effective than its predecessors.
Extractive360 reports that the 2021 RGI assesses how 18 resource-rich countries govern their oil, gas and mineral wealth. The index composite score is made up of three components. Two measure key characteristics of the extractives sector – value realization and revenue management – and a third captures the broader context of governance — the enabling environment.
These three dimensions of governance consist of 14 sub-components, which comprise 51 indicators, which are calculated by aggregating 136 questions.