IN this exclusive interview with The ICIR, the Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Orji Ogbonaya Orji, speaks on NEITI’s reports relating to the petroleum, oil and gas industry. Aside from revealing the amount incurred from oil theft, Orji also disclosed that the Nigerian government spent a whopping N13,69 trillion on the payment of fuel subsidies between 2005 and 2021. Excerpts:
What specific steps has NEITI taken to address the persistent discrepancies in oil revenue reporting by the NNPC?
This is an issue of major concern and our reports have consistently highlighted the need for credibility in the source of data. The industry reports we conduct are evidence-based and NNPC’s submissions are always subjected to interrogations.
If you go through our reports from 1999 till date, you will see that we have highlighted areas of consistency and timeliness in terms of reporting in areas like the Production Sharing contracts (PSCs), the areas of JVs as well as revenue generation and reporting. NEITI and NNPC have reached a common understanding that we must have a meeting point in terms of the credibility of data.
That is why when we design our templates for NNPC, we are specific on the kind of information that we require. We are equally specific about the type of information needed to be provided. We are also open and available for all engagements required for us to streamline the data and come to an agreement.
Our reporting process involves verification and meetings of data verification, and template workshops on the covered entities; one of which is the NNPC. In the past, the NNPC showed less commitment to these processes, but I can tell you that has changed.
We are running fast to ensure that by September 2024 we publish two reports; the 2022 industry report and the 2023 report, to bring our reporting to date. We have set September 24, this year, to release these reports. Also, we have almost commenced the procurement process for 2024 to ensure that by 2025 we are already doing the 2024 report.
To that extent, we wait to see what has changed in the reporting pattern of the NNPC for the 2022 and 2023 reports by the time we release our reports. For now, what has changed is that both NEITI and NNPC have changed their mode of engagement. Before now, if you called for a meeting, the NNPC might not show up or even if they did, they came with somebody who didn’t have the requisite authority to make a decision. All that has changed as NNPC now takes its engagements with NEITI more seriously, more so as a statutory member of our board.
How does NEITI plan to ensure that its audit reports lead to actual reforms and improvements in the extractive industry, rather than just identifying problems?
We have not just been identifying problems; our reports have led to impactful reforms. The Petroleum Industry Act (PIA) which is a fundamental law in the oil and gas industry was recommended by NEITI. It took 18 years to pass it in the National Assembly.
This was outside our scope of influence but that has been passed into law as a product of our report findings. What about the review of the Deep Offshore and Inland Basin Production Sharing Contract (PSCs) Amendment Act of 1993? The Act enacted in 1993 was designed to grant certain incentives in terms of royalty and tax reduction to encourage investments in deep offshore and inland basin.
The Deep Offshore and Inland Basin Production Sharing Contracts Act of 1993 provides for a review of the terms when prices of oil cross $20 in real term, and also a review of the terms 15 years after operation of the agreement and five years subsequently. It is, however, yet to be reviewed since then. The same law also prescribed when, why and how the law should be amended from time to time. But the provisions were never followed as at and when due since 1993.
But NEITI, working with the National Assembly and relevant agencies ensured that the law was amended and now Nigeria earns a lot of revenue from that intervention. The whole issue of the restructuring of the joint venture cash call is a product of NEITI reports.
What about the transition happening after the PIA was passed into law? Where did it come from? In the PIA, we provided that NNPC should be unbundled into a limited liability company. This is also a product of NEITI report. The NNPCL didn’t come easy. Not all our recommendations were implemented but many have scaled through. So, we are not just publishing reports; we are incentivising reforms and these reforms are available.
What about availability of data? Before, you couldn’t get data from the NNPC and any other entities. This question is a shared responsibility and we are doing our own bit. We are also working with the media, the civil society and the companies to also take up their responsibilities. It is the job of NEITI to provide the information in the public domain. But it is also the job of the other stakeholders to take that information and hold government and companies to account.
Have the companies you referenced been cooperating?
Yes, in order to ensure we engage the three stakeholders I mentioned, we have what we call the inter-ministerial task team which was inaugurated last month to look at all the issues we have identified in our reports and ensure that the agencies involved are classified, identified and held accountable to implement them.
It is a forum for government engagement and we have also established the companies’ forum which brings together all the companies that are in the extractive industry, relevant to our mandate. Mind you, we only deal with companies with a particular threshold that pay royalty in excess of USD 5million in the oil and gas industry and, for this year, we are dealing with 69 companies.
What is NEITI’s position on greater transparency in the Niger Delta region and how does it plan to address the ongoing conflict and environmental degradation in that region?
We are engaging with all the institutions in the Niger Delta deliberately created by the government to drive reforms and development in the region, including the Niger Delta Development Commission (NNDC). I must confess, however, that we have challenges relating to the NDDC but we are following this with some caution.
The Ministry of Niger Delta, the NCDMB (Nigeria Content Development Board), the various state governments and the host communities. We are also engaging with the governors within the region to the best that we can. In the same vein, we are engaging with the companies in terms of corporate social responsibility.
That is why I made reference to the PIA which has specific provisions for host communities’ development board. However, our experience has shown that creating many of these institutions does not necessarily drive change or account for development. Individuals who head those institutions and how the institutions function, their structure, character and nature are what can propel development, not the institutions themselves.
If you check the amount of money that has gone into the NNDC and measure the impact, you will be the one to judge. Remember before then, there was OMPADEC, there was also DFRRI and currently, you have NCMB as well as the Ministry of Niger Delta. Despite these, we still have huge challenges in the Niger Delta.
Therefore, NEITI believes that the proliferation of institutions hardly brings the kind of change we want; the character, competence and integrity of the human beings that head these institutions are as important as the structure of governance. Our reports in all these institutions, especially the NNDC, speak for themselves.
However, ours is to provide this information in the public domain. We believe that those institutions could have done better than they are currently doing. That is why we deliberately created what we call physical allocation and statutory audit that follow the money, to see how much of the accruing revenues are accounted for.
These reports target the nine oil-producing communities, and what our findings have done, has been misalignment of revenues, and misplaced priority of needs of the region with projects on the ground.
As I said, NEITI’s job is to provide information in the public domain and we expect citizens from the region to study our reports and use same to ask informed questions about projects lined up for implementation. The Niger Delta has been collecting 13 per cent derivation for several years now; there is no data on how much each state has earned from the derivation. Whether those states are collecting actually what they should get or they should collect more or less.
There is also no data on what specific projects the 13 per cent derivation has earned the states. NEITI has commissioned a report to provide data but we don’t want people to remain docile. The information in our data is not to incite, but to engage the citizens to identify gaps for remedy.
Do you have any collaboration with the anti-corruption agencies?
Yes, we do in terms of communication and MOUs (memoranda of understanding) which we have signed with the EFCC (Economic and Financial Crimes Commission), ICPC (Independent Corrupt Practices and Other Related Offences Commission), and the Nigerian Financial Intelligence Unit. These agencies are working closely with us to the extent that we exchange a lot of information and data.
How has NEITI contributed to overall government revenue generation and domestic resource mobilization?
NEITI has contributed to the government’s domestic resource mobilisation through the unearthing of huge sums of revenue from the oil and gas sector that have not been remitted into government coffers.
For instance, our latest reports for 2021 identified the sum of $8.26 billion as unremitted revenue/liabilities owed to the federation. Of this amount, NUPRC (Nigerian Upstream Petroleum Regulatory Commission) was to collect $ 8.25 billion, the FIRS (Federal Inland Revenue Service) was to collect and remit $13.59 million.
Forty-seven (47) companies account for $1.34 billion of the liabilities with the NNPC alone, accounting for $6.92 billion. The NEITI 2019 and 2020 reports also identified similar liabilities for which the House of Representatives set up an ad-hoc committee during the 9th Assembly to investigate and recover these revenues.
The removal of fuel subsidy by the Tinubu administration has attracted hardship and Nigerians have been groaning. What is NEITI’s position even as the government has confirmed that it has resumed the payment of subsidy which is an admittance that things are not too good?
The NEITI’s independent industry reports over the years have consistently raised red flags that the management of the fuel subsidy regime was anything but open, transparent and accountable and advocated for the removal of subsidy. From our records, we recommended the removal of the subsidy as a result of the huge burden the subsidy has imposed on the economy over the years.
But to remove and replace with robust visible and impactful welfare benefits for the citizens, the poor and the vulnerable in society. Our position remains remove and replace with welfare programme-based revenues that will be freed from subsidy removal.
Other measures we recommended include deliberate policy incentives to encourage private investment in refineries, repair of Nigeria’s four refineries etc. We documented our position in a policy brief we published and shared with the government which we called the Way Forward. The Policy Brief is available on NEITI website.
We think subsidy removal makes sense but we need to replace it with welfare programmes from potential revenues that we expect would accrue from the subsidy removal all things being equal. Data from NEITI reports show that over about $74.38 billion (N13.69 trillion) has been expended in the payment of subsidy between 2005 -2021.
NEITI’s frustration is in the amount of money spent on fuel within these sixteen years. This amount if available for development was more than enough to address Nigeria’s energy/power sector challenges, repair the refineries, or even build brand new ones to make the country a net exporter of refined petroleum products.
For instance, to accommodate the increase in subsidy expenditure, a whopping sum of N4 trillion appropriated in the year 2022 budget was suddenly slashed from the budgets of health, education, planned investment in infrastructure, intervention budgets in the Niger Delta and from the North-East Development Commissions budgets etc to pay for subsidy.
One major challenge in the oil and gas industry is the issue of oil theft, illegal refineries and pipeline vandalism. What has NEITI done to address these issues?
NEITI in 2018 produced a policy brief on crude oil theft and held a policy dialogue on the issue. On December 6, 2022, former President Muhammadu Buhari set up a panel of investigation on oil theft and losses and I was a member of that panel chaired by Maj. Gen Barry Ndiomu.
The nine-member panel was coordinated by the former National Security Adviser (NSA) and NEITI was the only anti-corruption agency to serve on the panel among other reputable Nigerians carefully selected for the assignment.
The report of the panel with specific, insightful findings and recommendations was presented to the former National Security Adviser Maj General Babagana Mungono (rtd), on March 28, 2023. The report is current and comprehensive in content with specifics on what needs to be done.
NEITI has since in its policy advisory to President Tinubu made a case for the implementation of the findings and recommendations of that report. An assemblage of a dependable team to develop an implementation plan with modalities and timelines to implement the report.
NEITI is available to offer any additional information and data to guide this process. Our legitimate interest in the report is in view of the terrible damage oil theft has done to the country on revenue loss, environment, terrorism financing, stealing of Nigeria’s crude, transparency and accountability in the oil and gas industry.
I therefore use this opportunity to renew our appeal for the implementation of that report. Oil theft has done more damage to the oil and gas industry than any other. NEITI’s audit reports covering 2009-2020, a period of twelve years, show that Nigeria loses an average of more than 140,000 barrels of crude oil per day. Nigeria lost about 619 million barrels valued at $46.16 billion or N16.25 trillion.
The losses are more than the size of Nigeria’s entire foreign reserves and almost 10 times the size of the country’s oil savings (excess crude) account as of 2022. A further analysis shows that on average, Nigeria lost $10.7 million daily, $320 million monthly every year for 12 years between 2009 and 2020.
The average yearly value of crude oil loss is nearly one-fifth of the amount Nigeria earned from the sector in 2020. In fiscal terms, the average annual loss (N1.77 trillion) represents 135% of the total proposed, infrastructure spending on works, housing, power, transport water resources and aviation for 2023.
With the world moving away from fossil fuel to green energy under the energy transition, what would be the hope of countries like Nigeria that depend on oil for sustenance?
President Ahmed Bola Tinubu has just constituted a National Council on Climate Change and focal persons appointed. Nigeria has also developed a plan for ET and identified its transition energy component to be gas.
Nigeria has the largest gas reserves in Africa and the ninth largest in the world. NEITI reports put our country’s gas reserves at over 200 trillion cubic feet (tcf). NEITI’s position is consistent with the provisions of the Petroleum Industry Act (PIA), which provided the most significant progress for the gas sector in strengthening governance and providing fiscal frameworks for the growth of the sector.
We have also advocated that Nigeria’s next steps on ET should be focused on the country’s unique context and reality in terms of sustainability and country specifics. For the gas utilisation policy to work, there is a compelling need for deliberate ambitious investment in its infrastructure.
This includes specific connectivity across upstream facilities to processing and power plants and other end uses. The network code provides a framework through third-party access to resolve some of the connectivity issues but to a large extent, achieving the desired gas expansion will require an estimated $20 billion annually to bridge Nigeria’s gas infrastructure.
The PIA’s midstream and downstream infrastructure fund (MDIF) provides an avenue to fund the gas infrastructure if a robust transparency mechanism can be put in place to closely monitor the process.
Your latest industry reports in the oil and gas and solid minerals industry published last year were for 2021. Why are your reports behind?
We had some challenges but those obstacles have been fixed. Our 2022 and 2023 industry reports are ongoing as we speak. We combined the two years to close the gap. Our National Stakeholders Working Group (NSWG) met in Lagos from the 15th to 19th of this month to discuss and review the extent of work already done. We are hoping to publish the 2022 and 2023 industry reports in the oil, gas and mining sectors on September 24, 2024. We set this date from the onset to underline the need for speed and accuracy.
