Nigeria: Report exposes monumental revenue loss to ill-managed oil and gas sector

Nigeria: Report exposes monumental revenue loss to ill-managed oil and gas sector 

Poor management of expectation by the government coupled with weak oversight capacity of the Legislative Committees and other agencies have been identified as contributory setbacks to the management of natural resources wealth for the benefit of current and future generations.

These disclosures are contained in a published 233-pages study entitled ‘2017 Benchmarking Exercise Report’ of the Nigeria Natural Resource Charter in collaboration with Civil Society Legislative Advocacy Centre (CISLAC), Centre for Public Policy Alternatives (CPPA), Centre for Study of the Economies of Africa (CSEA), Centre for Social Justice (CSJ) and Social Action (SA).

The Report, through 12 broad principles evaluates the existing effort and capacity by the government in the management of natural resources wealth for the benefit of current and future generations; and bemoans the unfavourable oil and gas fiscal regimes to Nigeria regardless of complexity of the agencies administering taxes in the sector.

It observes total weakness in oversight activities of Legislative Committees and other government Agencies owing to their non-independence, lack of capacity to monitor and enforce compliance on the operators and conflict of interest by politically exposed persons.

“Monitoring of operation across operations across every stage of projects is ineffective as the government agencies responsible are deficient in technical capacity and not well resourced. Oversight institutions are weak, inefficient and in some cases, compromised.

“The Fiscal Regimes remain unfavourable to Nigeria with the International Oil Companies benefitting more.

“The taxes in the sector remain complex with multiple agencies saddled with responsibilities of collecting diverse types of taxes and streams of revenue and the ability of revenue authorities to collect what is due [is] in doubt due to inadequate capacity and resources.

“Government continues to employ costly incentives which result in revenue loss and there are insufficient anti-tax avoidance mechanisms both in policy and in practice. Government take PSCs for Nigeria remains among the lowest in the world and deep-water oil royalties remain at zero percent.

“Outdated contracts and expired MOUs are still in force resulting in under assessments and under-payments subsequently leading to loss in revenue to the government,” the report laments,” the report reveals.

The study notes absence of strategic impact assessment and poor disclosure of exploration and licencing information, adding that the power of discretion for licensing award still subsists with lack of transparency in bidding process.

Acknowledging the steps taken by the government to improve transparency and accountability of public institutions through implementation of instruments to track spending and deployment of information management system across agencies, the report however, bewails delay in prioritising proactive disclosure of public information by public institutions.

As related to the host communities, it observes deliberate neglect by the government and absence of appropriate policies to ensure meaningful participation by the communities in the assessment of severity of projects development with weak grievance mechanisms at local and national levels.

The practice which remains unabated has hitherto given oil and gas companies the groundless power to ridiculously undermine the host communities in decision making process as it affects the communities’ health, environmental, socio-economic wellbeing.

It laments government reluctance to domesticate the global requirement for free, prior and informed consent with citizens potentially displaced by project developments of the oil and gas companies to give or withhold free, prior, and informed consent concerning projects that affects them; as requires by the United Nations Declaration on the Rights of Indigenous People, giving the companies excessive power to operate without the legal consent of the people in the oil regions.

“There is no proactive communication that spans the different stages of project; exploration, development, operation and closure. Also, companies are not actively encouraged by the government to communicate with the affected communities throughout the lifecycle of a project.

“This poor management of expectation on government’s part has left communities with little awareness of the adverse effects that resource projects may have on their environment until they occur on one hand with a high expectation of benefits from resource projects on the other hand,” the report adds.

Apart from the identified laxity in policy environment in ensuring appropriate mainstreaming of the concerned communities, the report observes that “none of the regulatory standards in the oil and gas sector concerning affected communities covers grievance mechanisms at either the local or national levels, outside normal public complaints, arbitrary and judicial processes”.

“Besides, the host communities’ perception of the credibility of local judicial processes is poor. Particularly, the fair, impartial, and timely resolution of grievance by the local courts is often in doubt. This explains the push by many local communities to seek redress abroad, although such cases are view relative to those in local courts.”

According to the report, despite existing legal provisions such as the Associated Gas Re-Injection Act 1985 and the Environmental Impact Assessment (EIA) Act 1992 mandating oil companies to submit documents indicating prior consideration of potential social and environmental impacts prior to the issuance of licences and onset of the activities, effective implementation of the provisions has suffered inherent weak enforcement mechanisms in the system.

Similarly, the report faults non-existence of enabling legislation covering security related challenges of the host communities, adding the existing measure like Nigeria Security and Civil Defence Corps (NSCDC) is put in place only to secure oil and gas infrastructure and installations with zero concern for security of the communities.

More importantly it laments lack of existing legislation requiring government to conduct Strategic Impact Assessments (SIAs) given its importance to the decision making process, especially in evaluating whether a new project aligns with government needs and objectives or ascertain the institutional readiness to manage resource extraction including premeditated delay infused in the disproportionate compensations given to the affected communities.

Abubakar Jimoh is the Head of Communications at Civil Society Legislative Advocacy Centre (CISLAC) Email: [email protected]