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.

Nigeria Freedom of Information law: what does this mean for Nigeria?

The Nigeria Freedom of Information (FOI) law will usher in a new era. If well implemented, it will change the way government conducts its business. Some key provisions in the law would mean the following:

• Anyone has the right to access public records. This would empower all Nigerian citizens to effectively track government activities. It would enable Nigerians to hold government accountable when necessary particularly in the event of misappropriation of public funds or failure to deliver public services.

• Government agencies are required to keep records and publish all information regarding its activities, operations and business. They are also mandated to widely disseminate this information through various means including print, electronic and online sources. This would compel government agencies to publish and widely disseminate information such as its accounts (budgetary allocations and expenditures) thereby making government agencies to be more accountable to the people. It would also ensure more transparency in the management of oil revenues such as the Sovereign Wealth Fund;

• Anyone has the right to challenge any government agency that refuses to grant access to information and have it reviewed by the court. More interesting is the punishable offence given to any public officer or public institution that wrongfully denies an applicant access to information. Such an officer or public institution would be liable to pay a fine of N500, 000 (about $3,200 USD) if convicted; and

• Prohibits any public officer or public institution to purposely destroy or falsify public records. It is a criminal offence and if convicted by the court, would be subject to a minimum of 1 year imprisonment.

The time limit for granting access to information was missing from the Act obtained from the National Assembly website [http://www.nassnig.org/nass/acts.php?pageNum_bill=9&totalRows_bill=151]. Hopefully this is a mistake and the provisions should not have changed much from the earlier harmonised version of the bill. The harmonised version of the bill states that information should be made available to applicants within 7 days of making the application. If this is the same as the signed copy or if a definite time limit is present in the signed copy of the Act, then the FOI law would be a very strong law. 

Step Up Nigeria: President Goodluck Jonathan

As President Goodluck Jonathan is inaugurated today, he needs to prioritise and focus on reforms that will yield poverty reducing growth and lift millions of Nigerian citizens out of poverty. Improving governance would be a first step towards achieving this and it should be a key priority for the government. The following measures should be considered:

Public service delivery

1. It should no longer be business as usual for public sector institutions.  Public institutions tasked with the responsibility of delivering essential services to the people such as electricity, roads, education and health should be more transparent and accountable to the people. It would be necessary for these agencies at the beginning of the financial year to clearly state realistic targets and results they intend to achieve during the financial year. This should be published. This will create more awareness amongst people on how public funds are being spent. It will also make it easier to monitor and evaluate the performance of government agencies responsible for providing these key services. The new government should also make it a key priority to tackle the issues of slow budget implementation (more of this to follow in later post).

Enhanced transparency and accountability in budgetary allocation and expenditures

2. The president should re-introduce and enforce the regular publishing of monthly budgetary allocations to all tiers of government in widely read newspapers and on their websites. This should be accompanied by the publishing of its expenditures on a quarterly or annual basis.

Power Supply

3. The state has not been able to provide adequate power supply despite the billions of dollars that has been ploughed into the sector. The government has started in the right direction by privatising the power sector. The government should ensure that the privatisation process is transparent.

Management of oil revenues

4. The president should ensure that the Sovereign Wealth Fund is efficiently managed in a transparent and accountable manner. It should ensure that it strictly adheres to the Santiago Principles [http://www.iwg-swf.org/pubs/gapplist.htm]. Every investment and its returns should be publicly disclosed (see post on ‘How to make the Nigerian Sovereign Wealth Fund Transparent’).

Tackling Corruption

5. The new government should focus more on tackling the root causes of corruption. Patronage politics is one of the major causes of corruption in Nigeria. Reforming election practices will be a good start particularly on the issue of campaign financing. It will be good to have stronger legislation to prevent excessive spending by political parties and candidates during elections. Political office aspirants tend to spend a lot during elections and often rely on ‘god fathers’ whom they have to pay back using public funds when they are in power. The government should introduce measures such as allocating equal amount of free broadcasting airtime to each major political party during election campaigns. This will help towards reducing expenses during elections and the dependence on ‘god fathers’ which is a major cause of grand corruption in Nigeria.

In addition to tackling the root causes of corruption, the agencies charged with the responsibility of tackling corruption should also be strengthened through creating laws that would give them the independence needed to operate objectively.