24 October 2017, Sweetcrude, Abuja – The Vice-President, Prof. Yemi Osinbajo says Nigeria is still suffering the consequences of the lack of transparency involved in the award of OPL 245 to Malabu Oil and Gas Ltd in 1998.
Osinbajo, who was speaking in Jakarta, Indonesia, on Monday at a conference on Beneficial Ownership organised by the Extractive Industries Transparency Initiative (EITI), said Nigeria and other resource-rich countries must commit to ending the era of secret corporate ownership of assets in the extractive industry to curb the huge losses associated with such illegal activities.
He said it is important to underscore the fact that opacity in one section of the globe undermines openness in the other. We need to break down this wall together as we are all at risk of the evil effects of opacity in business ownership.
Citing Nigeria’s experience with the Malabu Oil scandal, Mr. Osinbajo said the country was still grappling with the negative consequences of the use of secrecy by senior government officials and their cronies between 1993 and 1998 to award themselves juicy contracts in the extractive industry.
According to him, “Nigeria is still grappling with the negative consequences of the use of opacity by senior members of government and their cronies between 1993 and 1998 awarding themselves juicy contracts in the extractive industry.
“One of such incidents involving a company called Malabu Oil and Gas has been and is still subject of criminal and civil proceedings in many parts of the world involving huge legal costs while the full benefit of the natural resource remains unexploited for the benefit of the people of Nigeria to which it belongs.”
He added that, “We must be careful not to frame this campaign as a zero-sum between society and business. While governments and citizens stand to benefit from increased revenues, better law enforcement in this area should improve citizens’ welfare as a result of more ownership transparency.
“Many big businesses are equally concerned because most are legitimate and many have signed on to business integrity protocols such as EITI and the UN Global Compact.”
The vice president remarked that legitimate businesses benefit not only from the better business climate that results when governments better serve their citizens but also from knowing who they are doing businesses with or competing against, they benefit from a level playing field, lower costs of doing business, and from reduced reputational risks.
Osinbajo also said hidden corporate ownership poses “real and present danger” to most countries, especially the developing ones such as Nigeria.
He noted that the sad story of Africa’s underdevelopment and other developing economies was masked or hidden under the wall of secret corporate ownership of assets in the extractive industry.
Mr. Osinbajo made reference to the 2015 High Level Panel report on Illicit Financial Flows from Africa chaired by former South African President, Thabo Mbeki, which revealed that Africa lost over $1 trillion over a 50-year period and more than $50 billion annually to illicit financial flows.
“So for us in the developing world, and especially in Africa, breaking the wall of secret corporate ownership is an existential matter. It is for us literarily a matter of life and death,” the Vice President declared.
“Anonymous corporate ownership could serve as vehicles for masking conflicts of interest, corruption, tax evasion, money laundering, and even terrorism financing,” he added.
Highlighting the global risks and dangers posed by anonymous corporate ownership of assets, the vice President said the Panama Papers investigation, illustrated the monumental scale and threat of the menace.
Osinbajo said, “It is important to underscore the fact that opacity in one section of the globe undermines openness in the other. We need to break down this wall together as we are all at risk of the evil effects of opacity in business ownership.
Commending United Kingdom, Norway, Netherlands and Denmark for leading the initiative to establish public registers of the real, human owners of companies in their countries, the Vice President urged other G8 and G20 countries to follow, by initiating actions to end corporate secrecy at home and their dependencies.
With a global register of beneficial ownership already recording entries on about two million companies, Mr. Osinbajo said existing legislative measures must effectively discourage or totally prohibit non-disclosure agreements by governments with corporations.
He also asked countries to re-evaluate the use of secret trusts to hide beneficial ownership from the prying eyes of the law.
Nigeria, he noted, fully subscribed to EITI and the ownership transparency principles, as they not only aligned with the country’s national priorities, but also boost the electoral mandate of the present administration to fight corruption, combat insecurity and grow the economy.
Apart from being one of the first set of countries to join the EITI, and one of the 12 implementing countries to pilot beneficial ownership disclosure, he said Nigeria was also one of the few to have disclosed beneficial ownership details in three audit reports.
Specifically, he said President Muhammadu Buhari during the May 2016 London anti-corruption Summit made a commitment to establish a public register of the beneficial owners of all companies operating in the country.
In December 2016, the country also joined the Open Government Partnership (OGP) and submitted a National Action Plan that prioritises the establishment of a public register of the beneficial owners.
“These are commitments that we made not because we are seeking applause or commendation, but because we are convinced they are in our best interests,” he said.
Other measure adopted to reinforce the country’s commitment to the EITI, the vice president said, included presentation of a draft Money Laundering Prevention and Prohibition Bill to the National Assembly in 2016 to correct the deficiency of the 2011 Act Money Laundering (Prohibition) (Amendment) Act No. 11, 2011.
The Malabu oil deal otherwise known as OPL 245 was revoked in 2001 by President Olusegun Obasanjo and awarded to Shell same year, but was revoked again in 2006 and returned to Malabu following an out-of-court settlement.
President Goodluck Jonathan finally restored the block to Malabu in 2010 in a $1.3 billion deal.
An estimate says OPL 245 holds reserves of 9.3bn barrels of crude oil and gas reserves.
But the deal has become a subject of litigation as Shell and ENI paid $1.1 billion to acquire the field from Malabu and $210 million to the federal government as signature bonus.
Both payments were made to a federal government account, leading to suspicion that Shell and ENI did not want to be directly involved with Malabu because of corporate governance issues.
Italian prosecutors believe Shell and ENI executives knew government officials were going to be bribed from the payments for their roles in getting the deal approved.