NEITI demands probe of N3.2 tn on oil subsidy in two years

June 12, 2015 – Nigeria’s Extractive Industries Transparency Initiative (NEITI) has called on the Federal Government to halt opaque or discretionary methods of awarding oil blocks to interested parties and result to open bidding, stressing that the current practice contradicts the principle of due process and transparency.

“The non-adherence to these principles has resulted in loss of huge revenues to the Federation and denies Nigerians value from natural resources”,   Chairman Civil Society Steering Committee of NEITI, Mr. Faith Nwadishi NEITI said in a communique after a five day workshop in Abuja.

According to  NEITI,  “corruption, of massive proportion, in the oil and gas sector, particularly the abuse of the petroleum subsidy regime and all oil and gas audit remediation issues, should be urgently and thoroughly investigated and addressed by the Federal Government.

“The CSSC find it unacceptable that in two years (2011-2012) over N3.2Trillion was paid as subsidy as revealed by NEITI audit reports. We also call on all the NEITI Inter-Ministerial Task Team (IMTT) members to show more commitment in addressing all remediation issues including the unremitted $11.6bn dividends paid by the Nigeria Liquefied Natural Gas (NLNG) to NNPC on behalf of the federation”, NEITI said.

It called for special Presidential intervention on the nagging issue of the failure of the IMTT to carry out its mandate on remedial issues outlined by the NEITI audit reports.

It noted that the daily allocations of 445,000 barrels of crude oil to NNPC should be reviewed downwards in view of the fact that the four refineries operate around 20 percent capacity utilization.

“The allocation of crude oil beyond the refineries capacity to refine and which is subsequently exported and re-imported under swap and offshore processing arrangements, constitutes huge economic losses as it creates room for abuse and corruption”, it said, and called on government to create an enabling environment for private investment in building refineries.

It also called on government to carry out the necessary turn-around maintenance of all refineries to make them operate at their optimum capacity and efficiency.

NEITI also queried the National Assembly for failing to pass the Petroleum Industry Bill after 8 years of legislative efforts and incurring billions of Naira.

“We therefore call on President Muhammadu Buhari and the 8th National Assembly to demonstrate their patriotism and political will to promote transparency and accountability in the oil and gas sector by ensuring that the bill is passed and signed into law within the first 100 days of the life of this administration, to set a solid legal foundation for the new transparent fiscal and operational regimes of Nigeria oil and gas sector”,  the communique said.

It called on FG to implement a phased divestment of its shares in the upstream oil and gas Joint Ventures.

“Part of the proceeds from divestment should be strategically channeled to the development of infrastructure, agriculture, power, transport, solid minerals, education and health sectors while the remaining should be reserved for future generation”, NEITI said.

 

See full communique below.

COMMUNIQUE ISSUED AT THE END OF A FIVE-DAY CAPACITY BUILDING WORKSHOP ON OIL AND GAS SECTOR GOVERNANCE BY THE CIVIL SOCIETY STEERING COMMITTEE (CSSC) OF NIGERIA EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE (NEITI), HELD FROM 8 – 12 JUNE, 2015, AT CHELSEA

 

Preamble:

In continuation of the NEITI-CSSC work on oil and gas remediation issues from the NEITI audit (1999 – 2012), the World Bank in collaboration with the Nigeria Extractive Industries Transparency Initiative (NEITI) held a five-day capacity building workshop for the members of NEITI Civil Society Steering Committee from 8th to 12th June 2015 at Chelsea Hotel, Abuja. The workshop which was aimed at enhancing the capacity of CSSC members to strengthen their participation in the NEITI process, NEITI audit remediation issues on oil/gas sector and advocacy, attracted Civil Society Organizations (drawn from media, women groups, professional groups, academia, labour, youth groups, PWYP, Host communities, etc) from the six geo-political zones of Nigeria, who are working on issues of transparency, accountability and due process in the management of extractive industries in Nigeria.

The training featured several presentations on: Introduction to oil and gas industry in Nigeria; Understanding NEITI oil and gas audit reports; Exposure to simplified 2012 NEITI oil and gas audit report; NEITI remediation status update; Trend analysis and interpretation of NEITI oil and gas audit reports (1999-2012). Other presentations at the workshop includes: Understanding remediation issues in the NEITI oil and gas report; and enhancing stakeholder’s capacity skills on advocacy.

After extensive deliberations on the state of affairs in the oil and gas sector, and in line with Mr. President’s invitation to civil society in his inaugural speech to support, understand and cooperate with him in his intention to reform the petroleum sector, the workshop rose with the following resolutions:

1. The federal government should implement a phased divestment of its shares in the Upstream oil and gas Joint Ventures. This call has become necessary in view of the huge cash call debt obligation which the JV arrangement has imposed on the nation’s lean resources. This divestment will open the arrangement for private sector participation and enhance increased inflow of revenue to the federation. Above all, it will reduce the corrupt practices, wastes and other leakages associated with the management of the JVs over the years. Part of the proceeds from divestment should be strategically channeled to the development of infrastructure, agriculture, power, transport, solid minerals, education and health sectors while the remaining should be reserved for future generation.
2. That corruption, of massive proportion, in the oil and gas sector, particularly the abuse of the petroleum subsidy regime and all oil and gas audit remediation issues, should be urgently and thoroughly investigated and addressed by the Federal Government. The CSSC find it unacceptable that in two years (2011-2012) over N3.2Trillion was paid as subsidy as revealed by NEITI audit reports. . We also call on all the NEITI Inter-Ministerial Task Team (IMTT) members to show more commitment in addressing all remediation issues including the unremitted $11.6bn dividends paid by the Nigeria Liquefied Natural Gas (NLNG) to NNPC on behalf of the federation. We therefore call on special Presidential intervention on the nagging issue of the failure of the IMTT to carry out its mandate on remedial issues outlined y the NEITI audit reports.
3. That the daily allocations of 445,000 barrels of crude oil to NNPC should be reviewed downwards in view of the fact that the four refineries operate around 20 percent capacity utilization. The allocation of crude oil beyond the refineries capacity to refine and which is subsequently exported and re-imported under swap and offshore processing arrangements, constitutes huge economic losses as it creates room for abuse and corruption. . Government should create enabling environment for private investment in building refineries. Meanwhile, Government should carry out the necessary turn-around maintenance of all refineries to make them operate at their optimum capacity and efficiency.
4. On the issue of PIB, CSOs are concerned that after 8 years of legislative efforts to pass the bill into law and after incurring billions of Naira, the bill has not been passed. We therefore call on President Muhammadu Buhari and the 8th National Assembly to demonstrate their patriotism and political will to promote transparency and accountability in the oil and gas sector by ensuring that the bill is passed and signed into law within the first 100 days of the life of this administration, to set a solid legal foundation for the new transparent fiscal and operational regimes of Nigeria oil and gas sector.
5. That CSOs request the President to begin the implementation of remediation issues identified in the NEITI audits in line with his campaign promises. It was noted that the non-implementation of remediation issues puts Nigeria at risks of being sanctioned by EITI in January 2016, when Nigeria is due for validation.
6. That the idea of “pioneer status and certification” as an incentive policy to new businesses should be reviewed in the divestment of already producing OMLs, to curb the present abuse in the oil and gas sector which results in revenue losses to Nigeria.
7. That the opaque and discretionary process of awarding oil blocks as currently being practiced by the Federal Government should be discouraged and made to go through normal bidding process which was discontinued since 2007 . The principle of discretionary award of oil blocks contradicts the principles of due process, transparency and competition captured in the NEITI Act 2007. The non-adherence to these principles has resulted in loss of huge revenues to the Federation and denies Nigerians value from natural resources.
8. That the Department of Petroleum Resources (DPR) should as a matter of urgency develop and enforce a regulatory framework for the installation of uniform metering system at all oil well-heads in Nigeria in line with international best practices.
9. That Mr. President should immediately direct NEITI to conduct the Fiscal Allocation and Statutory Disbursement (FASD) audit in all the 36 states and 774 LGAs. This audit will reveal how states and LGAs are spending their allocations from Oil and Gas sector.
10. Federal Government should show more commitment to the implementation of EITI in Nigeria by increasing the budgetary allocation to NEITI to realize its mandate
11. The NEITI Law should be reviewed to incorporate the new EITI standards which will promote more openness and accountability in the Nigeria oil and gas sector.
12. We urge Mr. President to start his Administration’s change agenda from the oil and gas sector and at the same time diversify the economy with full support and involvement of the Civil Society Organizations working on the extractive sector.

The Civil Society Steering Committee of NEITI is committed to the following:

1. Support, understand and encourage Mr. President in all his efforts to reposition and rid Nigeria oil and gas sector of corruption.
2. Work with relevant agencies to address all remedial issues especially with the IMTT by effective monitoring of the process.
3. Protection of EITI principles in Nigeria and the recertification by EITI in 2016 by holding the government accountable for its implantation to ensure that revenues from the extractive sector is prudently managed to support national development and poverty reduction..
4. Create awareness by providing Nigerians with oil and gas sector information at our disposal.
5. Protection of common interest of Nigerians in the oil and gas sector. Signed Faith Nwadishi Chair, Civil Society Steering Committee (CSSC) of NEITI 12 June, 2015

Signed

Faith Nwadishi

Chair Civil Society Steerin Committee (CSSC) of NEITI

12 June, 2015