Reforming NNPC: NRGI report

The Natural Resource Governance Institute (NRGI) recently released a report which provides an insight into Nigeria’s National Oil Company (NNPC) oil sales. This report reveals the various ways NNPC has mismanaged Nigeria’s main revenue stream. It also reveals how unaccountable NNPC has been in the management of Nigeria’s oil revenues. The report makes interesting recommendations on reforming the operations of NNPC that would ensure more transparency and enable Nigeria manage its oil wealth prudently.

Key Issues and Recommendation from the report

Issue	Recommendation
Domestic Crude Allocation	Eliminate Domestic Crude Allocation
Revenue retention by NNPC and its subsidiaries	Government should develop  clear revenue collection framework to control discretionary spending by NNPC
Oil for Product Swap Agreements	Oil for Products Swap Agreement should be phased out. Future swap deals should be competitively awarded refined product exchange agreements with stronger terms
The abundance of middle men	NNPC should stop the sale of oil to unqualified companies both Nigerian and Foreign and improve its due diligence
Corporate Governance, Oversight and Transparency	Government should lead a programme of transparency and accountability in NNPC and empower scrutiny by oversight actors

Click to view NRGI full report

In addition to the recommendations made in the NRGI report, the new government should consider the following to enhance transparency and accountability in NNPC’s operations:

• The process for allocating oil blocs should be made clear and more transparent
• The names of those awarded oil blocs licenses should be made publicly available
• Oil contract terms and conditions should be made publicly available.
• The representation on NNPC board should be broadened to include key oversight institutions such as CBN, Ministry of Finance, Federal Inland Revenue Service as well as representatives from credible civil society organisations
• It should be compelled to publish full independently audited accounts annually and required to answer questions from its shareholders, the Nigerian People.
•  NNPC should adhere strictly to the Freedom of Information legislation and respond to any queries from the public on their operations.

The Nigerian government has started taking steps to reform NNPC. It has dissolved the NNPC Board, appointed a new Group Managing Director and sacked all the group executive directors. There are plans to split NNPC operations into two (investment and regulator arm).  The NRGI report makes good recommendations which the new government should consider implementing. The new GMD has a great task ahead. He should implement these reforms that will save Nigeria’s oil revenues from being lost to corruption and other wasteful practices.

Can financial autonomy to local government chiefs improve service delivery in local communities?

The Kaduna State governor, Mallam Nasir El-Rufai recently set the stage for reforming Nigeria’s local governments. He has ended the joint account systems between the state and local governments in his state. In addition, the governor made a commitment to give 10% of internally generated revenue to local governments in his state. Many local government chairmen blame poor service delivery at the local levels on state governments not releasing funds to them. Therefore, financial autonomy for local government chairmen is a good first step towards achieving effective service delivery at local levels.  

However, financial autonomy alone is not a guarantee for successful delivery of services at the local levels. It should be accompanied by accountability measures to ensure that local government chairmen do not mismanage or abuse public funds. These accountability measures should be upward (to the state government) and downward (to citizens/beneficiaries in communities). Kaduna state government has also led the way in this area by partnering with a civil society group (yourbudgit) to create a platform for citizens to access budget records, monitor progress and provide feedback. This is a welcome development and should be replicated by the other 35 states.

Beyond Kaduna State, here are some accountability measures that can be introduced or strengthened by other states at the local level to ensure effective management of funds in the delivery of public goods and services. These measures can be categorized as follows:

Upward Accountability –to the state governments

1. Performance contracts between state governors and the local government chairmen

State governors should introduce annual performance contracts between state governments and the local government chairmen. The performance contract will state the expected performance standards for each year. It will list the public goods and services that the local government chairman is expected to deliver for that year. Performance will be reviewed at the end of the year by the state government and community representatives. Appropriate action should be taken when the local government chairmen fail to deliver. This contract should be made publicly available.

2. Publish all budgetary allocations

The state governments should ensure that all local government chairmen publish their monthly budgetary allocations.

3. Conduct independent audits of local government accounts 

The state auditor general office should conduct regular audits on local government accounts. These audits should be made publicly available.

4. Transparency in the procurement processes

Local government chairmen should be made to publish all contracts awarded in the provision of public goods and services. For example, building of rural roads, provision of water, building schools, hospitals etc.

5. Establish complaints handling mechanisms

State governors should establish an avenue for citizens to report or complain about poor service delivery. It could be in the form of hotlines based in the governor’s office. This will also aid in monitoring the delivery of local services.

Social Accountability- to the citizens    

                                 

With the support of non-governmental organisations (NGOs)/community based organisations (CBOs), citizens in local communities should do the following:

1. Monitor the procurement process

The process for awarding and implementing contracts should be closely monitored by citizens. NGOs/CBOs can make a great difference in in this area.

2.  Monitor service provision

Citizens in the communities should track and monitor the delivery of key services. Feedback from the monitoring should be made publicly available and presented to the state governor and the local government chairman.

3. Establish service charters for various local services

The citizens in local communities should advocate for the establishment of service charters for various services in the local communities. E.g. service charter in hospitals, schools, registration of births, refuse collection, agricultural services etc. The service charter is a social contract between the service provider and service beneficiaries that lists the expected services and standards and provides information on how citizens can make a complaint if these standards are not met. Service charters are useful tools as it will help communities in monitoring the delivery of public services.

4.  Conduct annual social audits

Social audits is another form of community monitoring that can be conducted to compare the budgetary allocations and expenditures with the actual goods and services procured. The results from the social audit can be presented and discussed in a public hearing.

Financial autonomy for local government chairmen is a necessary first step in improving service delivery at the local levels. However, financial autonomy alone cannot improve service delivery in local communities. It should be accompanied by accountability measures (both upward and downward) to ensure the effective provision of local goods and services.  These accountability measures can only be effective with the cooperation from state governments.

Letting the beast loose!

With five ex-governors being arrested by Nigeria’s top anti-corruption agency (EFCC), the key question is will the cases be seen to completion? Will any of these prosecutions be successful? Is Nigeria’s judiciary ready for this new challenge? According to records on the EFCC website, there was only one conviction linked to the misuse of public funds in 2014, that conviction took 9 years from the day of being charged to court through to conviction. The length of time taken to secure convictions is too long.

The conviction of corrupt politicians or government officials will send a message to current political office holders that it is no longer business as usual. The judiciary system will need to be reformed to ensure that there is an increase in the number of convictions particularly those that involve corrupt politicians or anyone caught misusing public funds. The current government should fast track corruption cases that involve current or past political office holders. This may involve setting up special courts for handling corruption cases. An effective judiciary is crucial to the fight against corruption. Letting the beast loose is a good first step but we need to make sure that the beast has teeth.

For those interested, please see link to EFCC’s 2014 convictions:

https://efccnigeria.org/efcc/images/2014_Convictions.pdf