EITI IMPLEMENTATION AND THE FEDERAL GOVERNMENT OF NIGERIA’S TRANSFORMATION AGENDA
Prof H. Assisi Asobie
Before 2003, when the Federal Government of Nigeria declared the intention of Nigeria to implement the Extractive Industries Transparency Initiative (EITI), several attempts had been made to reform the Nigerian economy. The results were generally insignificant, when they were positive, and in some cases they were even negative. In Nigeria, from independence in 1960 to 1997, the growth rate of real Gross Domestic Product per capita was very low, equalling an average of 1.45% during the period.
The decade of the 1980s, for Nigeria and Sub-Saharan Africa, was the worst decade; it was the decade of lost development opportunities. In Sub-Saharan Africa in general, per capita income declined at the rate of 2.2% per annum. In Nigeria, GNP per capita fell from US$710 in 1980 to US$270 in 1989. It should be noted that the middle to the end of the 1980s period witnessed the implementation in Africa of the IMF-sponsored Structural Adjustment Programme with emphasis on deregulation, privatization and liberalization of the economy.
In the 1990s, in the post-SAP era , the improvement was only slight. Annual real GDP growth rate averaged 1.8% between 1992 and 998. Between 1999 and 2001, it averaged 3.5%. And in 2002, it was 1.4%. Indeed, according to one source, in the period 1992-2002, average growth rate was 2.25%. With estimated population growth of 2.8% per annum, this implied a contraction in per capita GDP over the period.
Nigeria had been beset by serious economic crisis in the early 1980s. This was attributable to several factors, among which were: the collapse of crude oil prices; rise in international interest rates; and domestic policy mistakes. Ironically, the IMF-sponsored Structural Adjustment Programme (SAP) adopted in 1986 by the regime of Ibrahim Babangida, against clear domestic public opinion, expressed in the course of a national debate, worsened Nigeria’s economic condition as it did the economies of other African states.
A survey of the impact of the IMF Structural Adjustment Programme in Africa, conducted by Naiman and Watkins in 1999 showed that developing countries implementing the SAP, world-wide, experienced lower rate of economic growth than the countries that did not adopt the programme. It also showed that, in particular, the African countries that implemented the programme actually saw their per capita incomes decline; and that it would be years before their people recovered the per capita incomes they had prior to the implementation of the SAP. Moreover, in Sub-Saharan Africa, the external debts of those countries that implemented the IMF macro-economic policies and the debt relief regime rose as a share of GDP from 58% in 1988 to 70% in 1996. A study of the Nigerian experience showed that SAP had a serious deleterious effect on the manufacturing sector. In 1980, manufacturing accounted for 8.4% of the Nigerian GDP. The relative share rose to 9.9% in 1983, and was still 8.78% by 1986. However, with the adoption and implementation of SAP, the relative share of manufacturing in output began to fall, and reached a low of 5.29% in 1989. Services also appear to have been negatively affected as well. The relative share of services in total output was 33.8% in 1980; but it declined to 25.5% in 1989. Only agriculture seemed to have benefitted from the implementation of SAP in Nigeria. Deregulation of commodity prices and exchange rate policy resulting in effective devaluation of the Naira produced agricultural boom. The relative share of agricultural output of the GDP rose from a low of 20.6% in 1980 to a high of 40.6% in 1988. Over all, SAP produced a negative impact on the Nigerian economy: it resulted in de-industrialization and an increase in the external debt burden. SAP was never owned by Nigerians and in implementing it, the Government never earned the trust of the people.
The implementation of the National Economic Empowerment Development Strategy (NEEDS) was handled somewhat differently. It involved fairly wide consultation with labour unions, as well as different operators of the economy. Nevertheless, it was lacking in a bottom-up approach, as envisaged in the Nigerian 1999 constitution, and sustained public debate by the generality of Nigerians. Consequently, it was not strongly owned by Nigerians, and could not therefore be sustained beyond the tenure of the political leadership of the Federal Government that introduced it. Still, it recorded some progress: growth rate of 6.1% and 6.2% in 2005 and 2006 respectively.
Is there a parallel today with respect to the Federal Government’s Transformation Agenda?
Critical Success Factors in Implementing a National Transformation Agenda
Certain critical factors constitute a prerequisite for successful implementation of a national transformation agenda. Deep and practical commitment to transparency and accountability is cardinal. Strong bond of trust between the government and the citizens, arising from citizens’ ownership of the agenda, is both complementary and consequential to a regime of transparency and accountability. But capping it all is the emergence of groups of persons, at all levels of the society, the economy and the state, who are trained and versed in the science and technique of transformational leadership. In the fifty-one year history of Nigeria, as a sovereign state, these critical factors, taken together, have been lacking in the reform agenda initiated by various regimes. It is not therefore, surprising that most of the initiatives did not succeed. And the few isolated cases of success could not be sustained.
Of the three critical success factors, two are intrinsically associated with the Extractive Industries Transparency Initiative (EITI). These are: transparency/accountability; and building trust by generating wide citizens ownership of the agenda. Implementing EITI actually confers immense benefits on implementing countries and their governments. The third critical success factor is also indirectly addressed in the sense of the ideal governance structure for implementing the EITI. But, training in transformational leadership needs to be addressed more directly.
In the affairs of nations striving for rapid development, transparency matters hugely. It is the indispensable basis for national transformation. It builds trust, prevents corruption and enriches debate on strategies for national development. It is a prerequisite for building the capacity of citizens and the legislature to hold their government to account in the use of natural resource wealth. Transparency and accountability constitute a key element of good governance.
Good governance is recognized in the final report on the Transformation Agenda of the Federal Government of Nigeria as a desideratum for rapid national development. However, in contemporary Nigeria, the gap between rhetoric and practice is gargantuan. The practice in both the public and private sectors of Nigeria today is bad governance. Even the Nigeria Extractive Industries Transparency Initiative (NEITI), the organizers of this conference, is still grappling with the challenge of avoiding the traditional bureaucratic trap of bad governance and moving into the realm of good corporate governance. So are many other Federal Ministries, Departments and Agencies. The Transformation Agenda final report itself acknowledges this reality. It explains that bad governance which has been largely blamed for Nigeria’s underdevelopment arises from “mismanagement of resources, especially through corruption, waste and economic crimes”.
In the report, it is asserted that, ” Nigeria’s inability to tackle most of the development challenges, such as poverty, unemployment, security, and the disheartening state of infrastructure has been largely attributed to bad governance…” Identified in the report as key elements of good governance are: Openness, Transparency and Accountability; Fairness and Equity in dealing with citizens; Efficient and effective service provision; Clear and transparent laws and regulations; consistency and coherence in policy formulation; respect for the rule of law; and high standard of ethical behaviour. According to the report, the importance of good governance is underlined by the fact that it ensures that corruption is minimized; that the views of minority groups are taken into account and that the voices of the most vulnerable in society are heard in decision making.
The report, as we shall see, recognizes, and acknowledges the key role that transparency can play in realizing the goal of good governance. It therefore places emphasis on the full implementation of the NEITI Act, 2007, as a means of combating corruption in the public service.
EITI Implementation and the Transformation Agenda of the FGN
The Extractive Industries Transparency Initiative is implemented in Nigeria because it is seen as an instrument for promoting both good governance and sustainable development. The cardinal doctrinal tenet of the EITI is that the prudent use of revenue accruing from natural resources is an important engine for rapid economic growth which contributes to sustainable development and poverty reduction. That prudent use involves managing natural resource wealth to the benefit of citizens, an action that is in the domain of sovereign governments. Prudent management of public revenue will be enhanced if there is public understanding of government revenue and expenditure over time, as this would enhance public debate and inform choice of appropriate and realistic options for sustainable development. In line with this philosophy, the EITI underscores the importance of transparency by government and extractive industry companies and the need to promote efficient and transparent financial management and accountability in the public sector. It also highlights the utility of having citizens participate freely, fully and effectively in setting the development agenda and in implementing it.
The EITI philosophy finds echo in the Transformation Agenda of the Federal Republic of Nigeria. In the final report on the transformation agenda, good governance is defined to be “participatory, transparent, responsive, effective and efficient, equitable and inclusive process, which above all, adheres to the rule of law. However, transparency is not what you say but what you do. So is transformation.
Transparency is what you do first and foremost to yourself, by yourself, for the benefit of the public. In the context of the EITI, it is disclosing honestly what you produce and earn or what you pump and pay, what you allocate, disburse and spend. It is putting information and data freely in the public domain, about you and your activities and operations. It also entails reconciliation of the data obtained from various sources, being frank and honest about any difficulties and challenges in achieving perfect reconciliation and disclosing the reasons for the discrepancies.
Transparency is action that produces results; not the intention to act. It is not the setting up of committees to verify payments and receipts. It is the actual disclosure of receipts (by government) and payments (by companies) based on data from accounts audited to international standards. It is the wide and prompt dissemination and publication of such disclosures for all and sundry to see and examine and utilize to hold government and companies to account.
Transformation is, in like manner, a fundamental shift in the deep orientation of an individual, organization, government or society. It is an action-oriented departure from business as usual. It is a paradigm shift, a radical change in the conception and perception of social reality. It is a sea change in how the world is seen and interpreted, and in what is conceived as possible or impossible of attainment. When such a radical shift in the deep orientation of individuals, organizations, government and society takes place in any nation, the people begin to see the world in a completely different way; and new actions and results, which were previously thought impossible by them, now become possible in their vision and in their reality.
At the level of the individual, transformation is the process of becoming ready and willing to expand one’s view on what is possible for oneself, one’s organisation and one’s society. It is the process of engaging in a programme of profound growth, of developing a deep commitment to taking effective and urgent action to realize ones vision and dreams. At the personal level, transformation is the process of rapidly and radically changing and developing and becoming strongly committed to the development of others.
Transformation happens first and foremost at the individual, personal level. It is a radical change of feeling, thinking and action that takes place first in the hearts and minds of men. It is not, ab initio or primarily, a change that begins to occur in institutions, laws, the environment, people‘s circumstances, etc. However, transformation, that is fundamental shift in a people’s deep orientation, must be embedded in collective practices and social norms and institutions to be sustained and sustainable.
There is therefore an organic link between individual or personal transformation and national transformation. National transformation has four key components: spiritual, socio-cultural, political and economic. Since the current transformation agenda of the Federal Government of Nigeria focuses on the economic dimension, let us try to understand what national economic transformation connotes.
National economic transformation is a qualitative and quantum leap of an economy from its current global placement to a higher hierarchy. A national economy is transformed when it moves up from a rank of middle income economy to a high income economy or from the status of a low income economy to a middle income economy. Upward movement of an economy within the band of the same global ranking is not transformation. Underlying such a phenomenal growth is always the readiness to see things differently, to do things differently and to achieve new results.
The final report of the Nigerian Federal Government Transformation Agenda highlights four key areas on which Government will focus in the five-year period, 2011-2015. Public attention, energy and resources will be centred on Good Governance; Human Capital Development; Real Sector Development; and Infrastructural Development. These key priorities of Government shall be pursued in a manner meant to produce specific outcomes, namely: employment opportunities; poverty alleviation; better resource management; elimination of corruption; and sustained economic development.
In the report, good governance is regarded as critical because Nigeria’s “inability to successfully tackle most of the development challenges, such as poverty, unemployment, security and deplorable state of infrastructure, has been largely attributed to bad governance”. Governance is decomposed as consisting of political governance, economic governance, corporate governance and effectiveness of institutions. The areas of focus would be: security of lives and property; law and order; anti-corruption; public service reforms; and an enabling environment. In tackling the problem of reform in the public service, four key sectoral priorities were set out to be pursued during the period. These are: accelerated adoption of e-governance tools; development of performance management tools; establishment of a well-equipped and staffed department of monitoring and evaluation under the National Planning Commission; and fully implementing the NEITI Act to reduce corruption and loss of national revenue in the extractive industries sector. Thus, the NEITI is assigned a very strategic role in the national transformation agenda.
Is the NEITI in a position to catalyze a reversal of the long history of “bad governance” in Nigeria? Is its mandate robust enough for that purpose; and does it have the capacity to do so?
NEITI as a Powerful Transformational Machine
In practice and in potential, embedded in law, NEITI is far much more than a “glorious audit”. It has the potential of developing into an effective instrument for national transformation. This is clear from its ambitious mandate as enshrined in law. In reality, it has also made some notable impact in the last eight years. Let us first examine its impact.
First, NEITI has, through its work, generated an in depth critique of the process of governance of the Nigerian oil and gas industry as well as practical prescriptions of how to remedy the institutional and process deficiencies in the industry. It has also stimulated a mechanism for the supervision of the remediation of the identified deficiencies. This is the Inter-Ministerial Task Team (IMTT)
Second, it has produced reconciled data on the financial flows in the industry in a manner that commands credibility and is devoid of serious controversy and conflict. It has made widely available, to the global and national public, enormous data and rich information that can be relied upon for development planning and transformation agenda-setting. There is now available in the public domain a trend in crude oil production volumes and pattern of financial flows that could serve as basis for future forecast.
Third, the positive impact of the NEITI processes and products extends beyond the petroleum industry, touching on and stimulating improvement in the financial management of the wider Nigerian public service. The requirement that the data on receipts from oil and gas companies disclosed by the government should be based on accounts audited to international standards perhaps helped to stimulate the passage of an Act on international financial reporting.
Fourth, the EITI’s (and correspondingly, NEITI’s) governance structure itself is a model in public/private/civil society partnership and cooperation in performing oversight functions on national public strategic agencies. The EITI brand of multi-stakeholder group or structure, and the associated consensus building in public decision making, is a novel but useful experiment in global and national public governance. It is something that can be beneficially replicated in other sectors, and should command greater attention at national and international levels.
Fifth, implementing the EITI in Nigeria has thrown up ample evidence, in terms of concrete data, to both validate and interrogate the theory of the resource curse as an explanation for the paradoxical poverty of the people of resource rich countries. NEITI’s work has shown that companies and government contribute significantly to depleting the public revenues available to the Government for national development. Companies do so through under-assessment and underpayment of taxes and royalty, and government agencies through their weakness in performing their regulatory roles. The result is that the financial base of resource rich countries is undermined by the acts of commission by companies and of omission by public regulatory agencies.
In terms of potential, NEITI is a powerful transformational tool of the future. The mandate of NEITI is encapsulated in the objectives and functions of the Initiative, as specified in the NEITI Act, 2007. The Act provides for five objectives and ten functions to be attained and performed by the NEITI. Ensuring due process and transparency in payments; monitoring and ensuring accountability in revenue receipts; ensuring transparency and accountability by government in the application of resources; and eliminating all forms of corrupt practices in the determination, payments, receipts and posting of revenue constitute the core of NEITI’s mandate. The key words in NEITI’s mandate are: transparency, accountability, due process and elimination of corrupt practices. It is also part of NEITI’s mandate to ensure conformity with the principles (and we should add, criteria) of the Extractive Industries Transparency Initiative (EITI).
The EITI is a global initiative that sets world standard in revenue transparency. In line with its core mandate, as reflected in NEITI’s objectives, a key function of the Nigerian EITI is to develop a frame work for transparency and accountability and disclosure, by all extractive industry companies, of revenue due or paid to the Federal Government. However, the mandate of transparency for NEITI extends beyond reconciling reported financial flows. By law, the NEITI is much more than “a glorious audit”. The total mandate of NEITI is very ambitious and hugely important for national transformation. First among the functions that fall within this larger mandate is the obligation of NEITI to monitor and ensure that all payments due to the Federal Government, from all extractive industry companies, including taxes, royalties, dividends, bonuses, penalties, levies, and such like are duly paid. Second, NEITI is to ensure that all fiscal allocations and statutory disbursements due from the Federal Government to statutory recipients are duly made. Third, NEITI is mandated to evaluate the practices of extractive industry companies as well as government regarding acquisition of acreages, budgeting, contracting, materials procurement and production cost profile in order to ensure due process, transparency and accountability. Fourth NEITI has the onerous duty of identifying lapses and undertaking remedial measures that shall enhance the capacity of any relevant organ of the Federal, State and Local Government having statutory responsibility for monitoring revenue payments paid by all extractive industry companies to the Federal Government. Fifth, the NEITI is assigned a role in respect of public investments. It is within the remit of NEITI to ensure transparency and accountability in the management of the investment of the Federal Government in all extractive industry companies.
There are three crucial questions that are often not posed by those who discuss the mandate of NEITI. First, has NEITI been legally endowed with adequate power to fulfil its mandate? Second, does it have the power to mobilize the resources to carry out its functions and attain its objectives? Third, has it confronted its challenges with confidence and creativity?
NEITI, Not a Toothless Bulldog
In terms of power, the NEITI is generously endowed. To realize its core mandate, the NEITI is empowered to obtain from any extractive industry company an accurate record of the cost of production and volume of sale of oil, gas or other minerals extracted by the company at any period. The NEITI is also empowered to request from any company in the extractive industry, or from any relevant organ of the Federal, State, or Local Government, an accurate account of money paid by, and received from, the company at any period, as revenue accruing to the Federal Government from such company for that period.
The power to request and obtain information and data from companies and government is reinforced by the power to audit their accounts. The Act provides that the NEITI shall cause the account of total revenue which accrued to the Federal Government from all extractive industry companies, its receipts, payments, assets and liabilities to be audited annually. This is to be accomplished not later than six months after the end of each year.
To strengthen the hands of the NEITI in the fulfilment of its mandate, sanctions are prescribed for dealing with cases of wilful and persistent non-cooperation with the NEITI. The Act provides for a fine of not less than N30 million against an extractive industry company that either gives false information or renders false report to the Federal Government or its agency or renders false statement of account or fails to render a statement of account as required. Similarly, an extractive industry company that delays or refuses to give information or report, or wilfully or negligently fails to fulfil any other obligation to the NEITI shall on conviction be liable to a fine not less than N30 million. Where a company is convicted, it will not only pay the prescribed penalty, it will in addition pay the actual amount of money due to the Federal Government. Furthermore, on the recommendation of the NEITI Board, the President of the Federal Republic of Nigeria may suspend or revoke the operational licence of any extractive industry company which fails to perform its obligations under the Act.
The liability or penalty for non-cooperation with the NEITI is even extended to the Directors and staff of the corporate body. The NEITI Act spells this out clearly. First, where a company commits an offence in contravention of the provisions of the Act, every Director or other persons concerned in the management of the company are presumed to have also committed the offence. On conviction, each of them is therefore liable to a fine of not less than N5 million. The Director or staff shall not be liable, however, if he is able to prove either that the offence was committed without his consent or connivance, or that he exercised all appropriate due diligence to prevent the commission of the offence. Second, a government official who renders false statement of account or fails to render a statement of account required of him under the Act, resulting in the underpayment or non-payment of revenue accruable to the Federal Government or other statutory recipients, shall be deemed to have committed an offence under the Act. On conviction, he is liable to not less than two years imprisonment or a fine of not less than N5 million. The official will be free only if he can prove either that the offence was committed without his consent or connivance or that he exercised sufficient due diligence to prevent the commission of the offence.
These sanctions have been adjudged inadequate: the amount prescribed as fine is said to be too small to serve as a deterrent to companies and government officials; and prescribing small amounts of fine as alternative to terms of imprisonment is regarded as rather lenient. To improve on the sanctions requires amendment to the NEITI Act; and the NEITI believes that this is necessary. Meanwhile, a creative judicial interpretation and application of the provisions as they exist could help to strengthen the hands of the NEITI. For instance the phrase “not less than N30 million” fine could be interpreted as a fine that is more than N30 million. Besides, for public officials, being convicted of an offence that includes falsification of statements of account and providing false information holds the unpleasant prospect of shortening the career of those convicted, irrespective of whether they are jailed or ordered to pay fine.
The NEITI is also empowered in terms of access to human and financial resources for the fulfilment of its mandate. The NEITI is empowered to source funds from the following avenues: annual budgetary provisions of the Federal Government, by way of budget submitted by the NEITI and appropriated by the National Assembly; grants, donations, gifts sourced directly by the NEITI (provided they are disclosed and are not in conflict with the provisions of the Act); as well as loans from Banks, with the approval of the NSWG.
Furthermore, the NEITI is authorized to mobilize human resources from diverse sources to enable it perform its functions and attain its objectives. It is, for instance, empowered to appoint independent auditors, in each financial year, for the purpose of auditing the total revenue which accrued to the Federal Government in that year, from extractive industry companies. This is to be done in order to determine the accuracy of payments and receipts. The auditors so appointed shall undertake physical, financial and process audits.
To ensure that the audits have positive impact on the economy, the auditors appointed by NEITI are placed under legal obligation to submit the audit reports to NEITI together with the comments of the Extractive Industries Companies. Besides, to supplement the power of NEITI in pushing for the implementation of the recommendations, in a manner that can improve governance in the sector, NEITI is directed, by law, to cause the audit reports alongside the comments of the companies, to be disseminated to the National Assembly and the Auditor General for the Federation and also ensure their publication. Moreover, the powers of the Auditor General for the Federation are now made to bear in supplementation of the powers of NEITI. The Act provides that the Auditor General shall, not later than three months after the submission of the report to the National Assembly, publish any comment made or action taken by the Government on the audit reports.
Thus, the NEITI is empowered in three important ways to make enduring impact in respect of the ways in which the extractive industries sector is governed and, by so doing, contribute significantly to national development. First, NEITI is made to benefit from the combined powers of the Auditor General and the National Assembly. The Auditor General has the constitutional power to draw attention to anomalies, misappropriation, mismanagement, embezzlement and other forms of corruption in public financial management. And the National Assembly has oversight function and power over public agencies, designed to enable it make laws to combat corruption. By the provisions of the NEITI Act, these powers have been extended indirectly to the activities of companies operating in the oil and gas sector.
The second way in which NEITI is empowered to bring Government to account is through the instrument of mobilizing public opinion in support of the findings and recommendations emanating from the audit process. The Act provides that, for the purpose of realising its objectives, the NEITI shall disseminate, by way of publication of records, reports or otherwise any information concerning the revenues received by the Federal Government from all extractive industry companies, as it may consider necessary. No limits are placed with regard to the media that the NEITI could use in exercising this power or performing this function. In reaching the public, the NEITI may utilize, as it deems necessary, all types of traditional media, as well as more current ITC-based social networks. Furthermore, the Act empowers the NEITI to ensure the publication of the audit reports, including its findings and recommendations, along with the comments on the reports by the Extractive Industries companies. Thus, through its work, the NEITI is expected to generate a hugely important, healthy and well-informed debate on the quantity of oil, gas, and other minerals produced in the country, the revenues generated by them, what is paid to the public treasury and how it is disbursed and allocated, and how what is allocated to different tiers of government is applied to improve the welfare of the citizens and develop the economy. The debate is also expected to cover what is lost or stolen in quantity of commodity and quantum of finances, the cost of producing the oil, gas and other minerals, the accuracy of what companies claim to have paid vis a vis what government agencies claim to have received, the process of regulation of company payments, and management of government receipts and investments, including any corrupt practices detected in the process.
The idea of such debate is to have the Nigerian people participate actively in setting the national development agenda. It is beyond simply empowering civil society to hold government to account. It is expected that the public debate that is generated by the work of NEITI will focus on such issues as: how the huge sums accruing from the extractive sector are used; the priorities of government expenditure versus the expectations and needs of majority of the citizenry; the proportion of the sovereign wealth that is spent by the present generation and what is reserved, saved and invested for the future generation, bearing in mind that extractive resources are mostly non-renewable; paths to or strategies for national development, etc.
The third way in which the NEITI is empowered to move beyond revenue transparency and directly stimulate the process of holding government to account is by equipping it with a uniquely structured governing body. The Board of NEITI, the National Stake-holders Working Group (NSWG) is expected to be composed in a manner that is representative of diverse interests, including especially, different arms of civil society. The Act specifies that the President shall include, among the persons to be appointed members of the Board, the following: representative of extractive industry companies; representative of labour union in the extractive industries; representative of civil society; and experts in the extractive industry. In addition, provision is made for the appointment of one member from each of the geopolitical zones, thus providing opportunity for representation of more persons from the private sector and civil society. Clearly, the composition of the NEITI Board provides a strong basis for reaching out to different arms of the Nigerian society and different parts of the country. The purpose is to equip NEITI, at the policy and strategic direction level, with a wide array and rich reservoir of human resources that would enable it to mobilize support and ideas for the fulfilment of its mandate. In particular, the multi-stake-holder group is expected to serve as the engine for both promoting transparency in the sector and holding government and companies to account in the management of natural resource revenue.
At the level of continuous implementation of policies and strategies designed to lead NEITI to the attainment of its objectives, the NEITI is also empowered in two other ways that are very significant. To begin with, the NSWG is authorised to recommend the appointment of an executive secretary to see to the day to day administration of the affairs of the initiative. The NSWG is also empowered to create departments and engage the services of such staff as it may consider necessary for the performance of its functions. Furthermore, the NSWG is mandated to engage such consultants as it may consider necessary.
The NEITI Act goes even further to equip the NEITI with a measure of autonomy, especially in human resource recruitment and incentive structure. According to the Act, the NEITI “shall be an autonomous self-accounting body which shall report to the President and the National Assembly”. Accordingly, it is empowered to engage its own staff and consultants on such terms and conditions that its own governing board may determine. Besides, the Act provides that the “NSWG shall fix the remunerations, allowances and benefits of the staff and consultants of the NEITI”.
From the above review of the mandate of NEITI, certain key points emerge. First, as has been acknowledged by several external observers of the NEITI, the mandate of the EITI implementing organ in Nigeria is very ambitious indeed. Some analysts regard it even as unrealistic and unrealisable. It is certainly a strategic and hugely important mandate that has been placed on the shoulders of the NEITI. However, I do not consider it as either too ambitious or unrealistic. The present regime of Goodluck Jonathan is right in its belief that the role of the NEITI is critical for the success of the transformation agenda. As the final report of the Agenda sees it, full implementation of the NEITI Act, 2007 will have a tremendous positive impact on the national economy. Specifically, the overall impact will be to “reduce corruption and loss of national revenue in the extractive industry sector”.[T.A. Final Report, pp.61]
The second point that emerges from the review above is that the NEITI has, in fact, been endowed with adequate powers and resources (or sources for their mobilization) to perform its functions, achieve its objectives, and therefore, realize its mandate. This point is often missed by some observers who claim that the NEITI has no teeth; therefore, while it can bark, it really cannot bite. This assessment is not based on the facts. The NEITI does have teeth and can bite. However, prudence demands that persuasion is first used before coercion. For eight years, the NEITI has used persuasion; it is now on the verge of activating sections 16 and 17 of the Act, involving the coercive powers of the Initiative.
The third point that emerges from the review is that the NEITI, like the global EITI, of which it is a sub-set, does have a clear theory of development which informs its activities, even if this theory has not been explicitly and elaborately articulated. The philosophical premise upon which the NEITI is founded is that the rate of economic growth and the level of national development will be enhanced to the extent that the mass of the citizenry is organized and mobilized to participate actively in the process of governance. The problem with this theory is that it conflates good governance, defined in terms of transparency and accountability, with democracy. Further, and worse, it confuses democracy, in its classical sense, with liberal democracy. In its classical sense, democracy is people’s power, or put more starkly and accurately, direct rule by the poor. Liberal democracy is rule by the propertied class. What EITI, and therefore, NEITI are straining to achieve is to provide a popular base for rule by the propertied class. It dubs this good governance, symbolized by the promotion of the principles of transparency and accountability. In reality, rule by the propertied class is a negation of democracy; and it cannot be salvaged or reformed by lending it a popular face. This is the fundamental philosophical issue; the issue is not that the EITI or NEITI does not have a theory of development. It has, but that theory is flawed.
An Overview of the Performance of NEITI
We should, however, examine the NEITI within its own terms. The NEITI was created in February, 2004. It has now existed for seven years. How well has it performed? This question can be broken down into several components. First, what has been the output of NEITI; and how does this compare with the output of other organizations in other countries implementing EITI? Second, what has been the result or outcome of the activities of NEITI in these eight years; has NEITI produced tangible and significant results over the years? Third, what has been the impact of NEITI, first on the direct stake holders and then on the wider Nigerian society?
To answer these questions satisfactorily, will require empirical research. Since, I have not conducted any such research, my comments are based on participant-observer knowledge. In terms of output, the NEITI has performed very well indeed. It has produced three audit reports spanning ten years. These audit reports are wider in scope and richer in content than those of any other country in the world implementing EITI. Its financial reports are also disaggregated; and its process audits, in a class by themselves, are very revealing of the structural and governance weaknesses among the public agencies in the sector. The audit reports of NEITI, therefore, provide a firmer basis for in-depth debate on the role of extractive industries in national development than those produced by any other EITI implementing country.
The result or outcome of the activities of NEITI has been tangible and significant. One outcome of the activities of the NEITI is the wide array of doctoral dissertations, masters degree theses, special studies, and books written on the NEITI, or which are based on the experience of the NEITI. Related to this are books and studies on Nigeria’s extractive industries which were stimulated by the activities and publications of the NEITI. We may list just a few of the publications here: Confronting the Resource Curse-The NEITI in Perspective, by Abutudu and Garuba, 2011; NGO’s Alternative Report on EITI Implementation in Nigeria, by Publish What You Pay, Nigeria, December, 2010; “Nigeria’s Extractive Industries Transparency Initiative: Just a Glorious Audit?”, by Nicholas Shaxson, 2009; “Nigerian Extractive Industries: an evaluation of the nature and the character” ( Volume 1-Oil and Gas and volume 2-Solid minerals, Coalitions for Change, 2010.
The work of the NEITI has had significant positive impact on its immediate stakeholders. The immediate stakeholders of the NEITI include the regulatory agencies such as the Office of the Accountant General of the Federation, Federal Inland Revenue Service, the Department for Petroleum Resources and the Nigerian National Petroleum Corporation. Each of these has used the outcome of the audits of the sector by NEITI to improve its operational processes, either in terms of improving its capacity to perform its functions or in terms of sharing information with other agencies and with the public on product volumes and revenue flows. One direct concrete result of NEITI’s activities has been the identification of underpayments by some oil companies, leading to actual repayment of the underpaid sum by some companies. A far more important outcome of the work of the NEITI is the opening up of a previously very opaque sector to public scrutiny and public knowledge. Clearly, much more is known about the operations of the oil and gas sector today and also about how much revenue it contributes to public treasury than was the case seven years ago. Therefore, debates on the place of the sector in national development are much better informed and, therefore more enlightening. The work of the NEITI contributed immensely to this development.
A more difficult area to measure is impact. There is no doubt that the contents of the original version of the Petroleum Industry Bill, especially, the sections dealing with enshrining the principle of transparency in its governance processes and the structure of the fiscal regime, were influenced by the findings and recommendations contained in the NEITI audit reports of 1999-2004. It is also likely that the slight improvement that was noticeable in the placing of Nigeria of the Corruption Perception Index in 2008 is attributable, at least partly, to the work of both the anti-corruption agencies, especially the EFCC and ICPC as well as the activities of the NEITI. Beyond that, it is risky to venture. While the inflow of direct foreign investment into Nigeria increased significantly from 2005 onwards, it is not clear how much of this can be attributed to perception of increased transparency in public revenue management in Nigeria and even then what can be attributed to the NEITI. The same applies to the improvement in Nigeria’s GDP per capita which also recorded significant improvement during the same period. However, the fact that Nigeria has been designated an EITI Compliant country with effect from March 1, 2011, is indicative of Nigeria’s significant progress in the journey to comprehensive revenue transparency. It is also an acknowledgement, by the international community, of the strong efforts and long strides of Nigeria in that direction.
In the last eight years, Nigeria, through the NEITI, has moved steadily upwards, in status, within the comity of EITI implementing countries. Between 2004 and 2006, it was an unclassified implementing country; nevertheless, it was in the vanguard of the movement. In 2007, it became designated as a Candidate country. In 2010, it was designated a Candidate country that was ‘close to compliance’. Then in 2011, it was designated an EITI compliant country. It will retain this status for the next five years, provided it carries out the responsibility that goes with the status to the satisfaction of the EITI Board. In appreciation of the performance of the NEITI, the country has, so far, been accorded the honour of being continuously represented on the global EITI Board since its inception.
The NEITI has performed well despite the fact that its mandate is much wider in scope than that of any other EITI implementing country. This has been possible because the NEITI has been endowed with adequate powers and given the right to access to adequate resources to attain its objectives. It was also possible partly because, without being explicit about it, the political leadership of the NEITI applied some of the principles of transformational leadership. The challenge for NEITI is to develop the will to mobilize all the resources that it has the right to access and to exercise the enormous power endowed on it by the Act. The option is not to shirk some aspects of its legal mandate, or to defer them in the guise of setting priorities. The option is to produce a strategic plan for performing all the functions, exercising all the powers thrust on it, and achieving all the objectives specified in the NEITI Act. This is precisely the option being pursued by the current leadership of the NEITI.
In order to make enduring impact on the Nigerian society, economy and polity, the NEITI should, in collaboration with other public agencies, lead Nigeria to perform very well in six key areas of transparency and transformation. First, NEITI Board and management should be specifically trained not just in EITI and EITI implementation, but also in transformational leadership. Second, there should be greater clarity of roles and responsibilities, especially, among the regulatory agencies including, in particular, the FIRS and the DPR. The early enactment of the Petroleum Industry Bill into law will help here. Third, the Government should work for better performance in budget and audit transparency, with the National Assembly playing a central role. Fourth, there should be significant improvement in public availability of information not only in the extractive industries but also in respect of other sectors. Fifth, the NEITI should endeavour to enhance the effectiveness of the Office of the Auditor-General for the Federation, a key ally, ensuring that it is treated as a respected institution and that its annual reports are studied and acted upon by the National Assembly and the Federal Government. In addition, NEITI should work very closely with Economic and Financial Crimes Commission and the Judiciary in implementing section 16 of the NEITI Act. Sixth, the NEITI should cultivate the National Assembly as well as the State Houses of Assembly as strategic allies in holding government to account, at all levels, and bring civil society, broadly defined, into that strategic partnership. Finally, the NEITI must transform itself to the point where it is exceedingly transparent, accountable, completely incorruptible, highly able to deliver its products timeously and capable of having the provisions of its Act enforced consistently.
In all spheres, transformation must begin with the self before it can be effectively applied to others. The transformers must first transform themselves. In transformation leadership training, the first lesson learnt is: “The Answer lies within”.