The Civil Society Legislative Advocacy Centre (CISLAC)/ Transparency International Nigeria (TI-N) hosted a one day workshop within the framework of the project tagged, “Promoting sustainable reforms in the Nigerian Extractives sector”, with support from OXFAM. The workshop was aimed at addressing financial leakages in the Nigerian oil and gas industry, towards intensifying advocacy to address the metering challenges in the sector.
The objectives of the meeting included but were not limited to, identifying primary causes and quantifying oil and gas losses, their implications and possible ways to advance solutions to address them in line with Nigeria Extractive Industries Transparency Initiative (NEITI) Audit report recommendations and Extractive Industries Transparency Initiative (EITI) Standards.
It also aimed to improve public understanding on key remedial issues to inform and strengthen public advocacy and devise strategies for driving advocacy for implementation of identified courses of action.
The workshop began with self-introductions of all participants, which included representatives from the Nigeria Extractive Industry Transparency Initiative (NEITI), Weights and Measures Department of the Federal Ministry of Industry, Trade and Investment (FMITI), Civil Society Organizations and the Media.
At the meeting, Auwal Ibrahim Musa (Rafsanjani) Executive Director, CISLAC, gave the welcome/opening remarks. He identified huge loses within the Nigerian oil and gas industry – an industry which forms a huge part of the nation’s budget to the tune of 65% of government revenue and regretted the absence of a modern accounting and reporting process from Royalty, Taxes, permit, crude oil sales, amongst others.
Goodwill messages were given by representatives of OXFAM, Henry Ushie; Director, Department of Weights and Measures, FMITI, Hassan Ejibunu; Director, Communications and Advocacy, NEITI, Obiageli Onuorah; and Chairman and CEO NigerCo ltd, Engr. Yabagi Sani.
The technical session presentation titled ‘Legal Metrology Implementation to Eliminate Financial Leakages in the Nigerian Oil and Gas Industry’ was made by NigerCo Team represented by Engr. Yabagi Sani – Chairman and Chief Executive Officer and Mr. Valentine Okelue – Programme Officer. The objective of the paper was to help participants understand the socio-economic costs of leakages in extractives communities in Nigeria and policy recommendations.
The meeting also featured a panel discussion on the topic: Dimensions and Appraisal of Losses in the Oil and Gas Industry in Nigeria – Role of CSO and Media. The Panel moderated by the Executive Director of Dataphyte Nigeria, Joshua Olufemi, was tasked with appraising losses in the oil and gas sector in Nigeria and identifying opportunities for CSO and media campaigns.
After exhaustive deliberations on the evolving issues the following observations, resolutions and recommendations were made.
Nigeria has faced significant challenges in managing the oil and gas sector and maximizing its revenue potential for various reasons including the impact of the COVID-19 pandemic and the attendant fall in crude oil prices and drop in demand for petroleum products.
Inadequate hydrocarbon measurement infrastructure, oil theft, spillage, corruption, gas flaring and gross mismanagement and maladministration of extractive resources have posed serious fiscal challenges to the nation.
There is no direct correlation between physical production and the financial flows because the amount of oil produced at the wellhead is not reliably known.
Nigeria lost 42.25 million barrels of crude oil valued at $2.77 billion to oil theft in 2019.
State actors and analysts have attributed the country’s recent slide into recession to adverse developments in the oil and gas sector.
Financial information systems are not adequate for the purpose of controlling financial flows from the sector.
The flow of information currently consigns the Accountant-General of the Federation to a reactive role, where he is unable to exercise any effective control or authority.
There is poor collaboration among Government Agencies and poorly defined rules of engagement which encourages duplication of duties and rivalry.
Domestic Crude Allocation has become a main nexus of waste and revenue loss from NNPC oil sales.
There is poor policy to encourage construction and growth of new refineries in Nigeria through privatization and private sector participation.
Collaborative strategies needed to drive reforms capable of turning the tide to the benefit of Nigerians.
Need for reporting templates and models that permit state actors and civil society to effectively assess the size and nature of Nigeria’s hydrocarbon production, consumption, import and export volumes.
Civil society and media should simplify information for better understanding by citizens and policy makers.
Reports of losses and other revenue data should have human face and social implications dimension.
Civil Society and media should partner to strategically promote investigative data-driven journalism and whistle-blowing.
Media should heighten demand for government commitment to access to information and press freedom.
Deliberate efforts by civil society and media to empower citizens with actionable information to directly demand accountability and social service delivery.
Increased training for media on research, data reporting and advocacy journalism on the issues of metering infrastructure and oil revenue losses.
Having exhaustively deliberated on the issues of revenue leakages in the sector, the meeting made the following recommendations to the relevant government authorities:
Multi-phased flow meters with remote monitoring and control systems should be installed in all wellheads onshore and offshore Nigeria.
Modern check meters should be installed upstream of all fiscal meters at custody transfer points in the hydrocarbon flow in the oil and gas industry in Nigeria.
Enforce implementation of Contract Transparency and similar commitment on Beneficial Ownership.
NNPC should cease reliance on Joint Venture (JV) partners’ determination of production cost.
NNPC should provide better clarification and justification for first line deductions.
Weights and Measures department presently under the Ministry of Trade and Investment should be upgraded to a Commission to adequately perform its statutory function of calibration, certification, verification of all measuring and weighing devices/instrument used in Nigeria’s oil and gas industry.
Reliance on decentralized, paper based systems should be replaced with suitable IT systems.
Additional metering should be installed on identified pipeline hotspots to highlight unidentified losses and enable rapid response to a precise location.
Revenue retention by NNPC and its subsidiaries should be discontinued.
Greater use should be made of IT systems to improve controls, eliminate inconsistencies and improve transparency by making possible a wider sharing of data.
Government should eliminate Domestic Crude Allocation which creates more problems than it solves.
Government should develop an explicit revenue collection framework for NNPC that facilitates financing and reigns in discretionary spending.
There should be severe sanctions or revocation of license where applicable, for non-compliance to metering regulations or deliberate act of sabotage.
Quick passage and assent of the Petroleum Industry Bill to address the funding requirements and other difficulties in a transparent and accountable manner.
For communiqué drafting team:
Bassey Udo – National Coordinator, Media Initiative on Transparency in Extractive Industry (MITEI)
Juliet Alohan Ukanwosu – Executive Director, Extractive 360
Mike Alagbe- Lagos state platform host, Tax Justice & Governance Platform
Ope Akintayo- Member, National Association of Energy Correspondents (NAEC)
This Communiqué was issued at the end of a One-day Sensitization Workshop on Addressing Oil and Gas Revenue Loss in the Nigerian Extractive Sector: Issues, Implications and Recommendations, organized by Civil Society Legislative Advocacy Centre (CISLAC) at Joygate Hotel, Lagos, on Tuesday August 10th, 2021