A Review of the Nigerian Energy Industry

NEITI lauds Buhari over steps to cleanse oil & gas industry, NNPC

NEITI*Says implementation of remedial steps to save nation billions

Oscarline Onwuemenyi

17 August 2015, Sweetcrude, Abuja – The Nigerian Extractive Industries Transparency Initiative (NEITI) said it welcomes with hope and optimism the courageous steps taken so far by President Muhammadu Buhari to reform the oil and gas industry and to restructure the management and administrative organs of the Nigeria National Petroleum Corporation (NNPC).

NEITI also endorsed other major decisions by President Muhammed Buhari on sweeping reforms, including the recent directive on operation of a single treasury account system.

NEITI’s noted that it’s interest in this new policy is borne out of the fact that over 70% of the funds involved are directly or indirectly generated from extractive industries.

It said, “We find the single treasury account policy, a vital move and a major reform – driven decision that would help eliminate fraudulent practices created by multiple revenue accounts by government agencies.

“NEITI is therefore glad to identify with the work of the Adhoc Committee of the National Economic Council made up of five Governors under the chairmanship of Governor Adams Oshiomole.”

It added that, “The NEC adhoc committee set up by the President to investigate the inflows and outflows to and from the Federation account by revenue generating government agencies is a right step in the right direction.

“This decision is consistent with NEITI’s principles on efficient fiscal allocation, disbursement, value for money by prudent utilization of resources. We therefore appreciate the invitation and opportunity given to NEITI to make presentations to the Committee and to observe its proceedings. We found the sessions of the committee quite productive, open, participatory, interactive, revealing and engaging.”

NEITI also welcomed President Buhari’s decision to set up a Presidential Committee on Anti-Corruption led by Prof. Itsay Sagay, SAN. “The work of this Committee is not only timely but very useful. It is a good platform for all the 21 anti-corruption agencies co-ordinated by the
Technical Unit on Governance and Anti-Corruption (TUGAR) under the Chairmanship of NEITI to share information, and offer informed advice based on experiences over the years.

“It is our expectation that Prof Sagay’s Committee will provide NEITI and all the agencies under the Inter – Agency Task Team (IATT) an opportunity to make presentations.”

The watchdog agency said one important issue that NEITI will be bringing to the table if given opportunity is how the Committee can assist the government to recover over $7 billion owned by oil companies.

“These disclosures are contained in NEITI audit reports as cases of under payments, under assessment’s arising from subjective interpretation of MoUs and tax laws. We have no doubt that our contributions will add value to the work of the committee,” it noted.

It added that, “NEITI is encouraged that the measures taken so far largely inspire hope and confidence. The measures are also consistent with the findings and recommendations of NEITI in its various Independent Audit Reports. These Reports were ignored in the past,” the statement read.

It pointed out that as an agency set up by law to implement the global principles of Extractive Industries Transparency Initiative which Nigeria is a signatory, NEITI has a legitimate interest in the on-going sweeping reforms.

“We are therefore delighted that the much needed political will required to boldly implement the NEITI recommended reforms is now provided, available and accessible under the leadership of President Buhari.

“In this direction, NEITI applauds the recent appointment of Dr. Ibe Kachikwu, a renowned industry expert with the needed global exposure, competence and integrity as Group Managing Director of NNPC,” it said.

It added that, “The careful decision made to appoint Dr. Kachikwu is already evident in the on-going dismantling of the unwieldy structure of the NNPC that made it impossible in the past for the organization to respond to increasing public demands for reforms.

“It is our considered hope that new NNPC Group Managing Director and his new team will consider it a priority to carefully study the findings and recommendations outlined in NEITI independent Reports of the sector. This is with a view to implementing the pending remedial issues under a plan already developed by NEITI and the Inter Ministerial Task Team (IMTT).”

Among these recommendations, NEITI said, are the issue of inadequate metering infrastructure for accurate measurement of crude, the onerous JV cash call regime, inefficient cost determination, urgent resolution and review of pricing issues related to expired MoUs and legal agreements with oil companies that have huge revenue loss implications for the nation.

Others, it added, are huge costs of fuel subsidy, crude oil swap and products exchange agreements, repair of the refineries, oil theft, review of existing fiscal regime in the industry, automation of record keeping, and the politics of acquisition and assignments of oil blocks by discretion etc., saying NEITI is ready and willing to provide further details if required.

The watchdog agency said it was “particularly encouraged by the recent pronouncement of the Dr. Ibe Kachikwu on remittances of all NLNG dividends directly to the Federation account as required by law and demanded by all NEITI Reports.

“By implementation of this remedial issue alone, a total of $11.6 billion dollars disclosed by NEITI as paid by NLNG to NNPC but not remitted by the NNPC to the Federation account could be recovered into government coffers.

“We in NEITI are ready to offer any advise, support, partnership and cooperation based on mutual respect to the new NNPC that is emerging under the leadership of Dr. Ibe Kachikwu.
This is to ensure that the NNPC conforms fully to the requirements of transparency and accountability as enshrined in the NEITI act of 2007 and the principles of the global EITI,” the Initiative noted.

It said both the EITI and NEITI stand firmly with Nigerian citizens that revenues from oil, gas and mining should support national development and reduce poverty in our country.

Furthermore, in view of the huge potentials in the mining and solid minerals sector, NEITI urged President Buhari to extend the on-going reforms to that sector.

“From NEITI’s scoping study and independent audit reports, this sector has the potential to yield more revenues for the country than oil, if given the attention it deserves.

“One urgent step required now is to immediately check the activities of illegal miners many of whom are foreigners that have taken over the solid minerals sector without authorization.

“NEITI’s view remains that for these sweeping reforms initiated at the Federal level to yield results and impact on the economy, state governments need to be encouraged to find enough reasons to step down the on-going reforms at the state level.

“This is important because of the wider implications in the revenue sharing formula, resource allocation, and efficient utilization to meet the overall strategic national development objectives,” the statement noted.

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