Adio: Nigeria Does Not Have Independently Verifiable Metering Infrastructure for Oil Production Figures

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The Nigeria’s extractive industry, over the years, has not been able to deliver the benefits to the people deservedly, owing to its opacity and corruption. However, the advent of NEITI has changed the narrative, opening up the industry and enforcing disclosures, but a lot of grounds still need to be covered. The NEITI Executive Secretary, Mr. Waziri Adio, who speaks with Kunle Aderinokun, addresses issues bordering on accurate volume of the country’s crude production, transparency in the operations of the Nigerian National Petroleum Corporation and the perennial non-remittance of monies by the corporation to the treasury as well as  sanitising the solid minerals sector

There is a common notion and it has become a worrisome fact that Nigeria does not know how much crude or the accurate figures of crude that is pumped; it’s even  more worrisome that the IOCs are the ones giving whatever figures that are out there as the official figures because they’re the ones that have the instruments for measurement – they dictate to DPR what the figures are. Is NEITI not worried that the federal government does not have control over the amount of crude that is pumped?   Has NEITI ascertained the correct figures?

 This is an issue that should bother all Nigerians, not just NEITI. And this is not simply because of the right, the need and the duty to know, but more because of the wider revenue, welfare and security implications. The very first NEITI audit report flagged this issue. The NEITI audit report for 1999 to 2004 stated unequivocally that, Nigeria knew only the volume of oil it was selling, not the exact volume it was producing, that we did not have a comprehensive and independently verifiable metering infrastructure in place, that we depended only on the say-so of the operators for our production figures. More than a decade after that first report was released, and despite that NEITI consistently flags this issue in report after report, nothing much has changed. At some point, DPR said it had ordered operators to install multi-phased meters not just at the point of custody transfer and at the terminals but also at the well-heads and the flow-stations. That is yet to be done. The operators always say they are ready once government decides on how to proceed and the issue of how to handle the cost is sorted. We believe them. So the government, as the sovereign, should decide on what next. We are losing a lot to theft and vandalism. According to NEITI audit reports, the value of federation share of crude oil lost to theft and deferred production on account of sabotage was $16.7 billion between 2009 and 2013. As I have said repeatedly, these are losses at almost industrial scale. Imagine the difference that the money could make to all tiers of government and to welfare of citizens. Imagine also the security implications for the country. The House of Representatives is investigating an issue of stolen crude amounting to over $17 billion between 2011 and 2013. This is the value of the discrepancies between what vessels declare to our authorities here and what they declare as originating from Nigeria at their destinations. So we need to sort out not just the issue of metering but also effective monitoring of our oil assets from end-to-end. I am sure you have seen that CBS clip of the command centre of Saudi Arabia’s ARAMCO where they can monitor and account for every drop of crude oil in their country. There is no point why we should not have such. NEITI is doing a comprehensive study on this metering issue. We will continue to talk about it until action is taken. But this is an issue for all Nigerians, not just for NEITI alone.  

 

Over the years, there were cases of missing billions of Naira in crude oil revenues that came in through NNPC as a result of discrepancies in the figures between the corporation and Revenue Mobilisation Allocation and Fiscal Commission and later between the corporation and the CBN led by the former governor, now Emir of Kano, Sanusi Lamido Sanusi. Have these discrepancies been resolved? Is NEITI on the same page with NNPC in terms of oil revenue accruing to the treasury? 

Our work is actually about ensuring there are no discrepancies between payments by companies and receipts by government. If you have followed our more than dozen audit reports, you will notice massive improvement in level of discrepancies. But this does not mean there are no outstanding issues. You will recollect that we published a policy brief in March on monies unremitted or owed by NNPC and its subsidiaries, particularly NPDC, totaling $21.8 billion and N316billion. We published the breakdown, ranging from NLNG dividends of $15.8 billion between 2000 and 2014, the consideration for 12 federation assets divested to NPDC from the Shell JV and the NAOC JV, NPDC’s legacy liabilities, refund of cash-calls mistakenly paid on divested assets, and outstanding refund from domestic crude sales. We are aware that some people in NNPC are not happy that we are raising these issues. But our job is not to make people happy. We have been accused of naivety by and obsession with NNPC. But it is not about us or even about the people attacking us. By the way, such attacks go with the terrain. Attacks on NEITI used to be more pronounced, more direct, and more aggressive because they knew they had political cover. As I was saying, we need to focus on what this is about. It is about our country and our common wealth. It is about doing right by our country and our compatriots. It is about ensuring that things are done properly. It is not personal and should not be personalised. Some of these issues are legacy issues; they did not happen under the current management of NNPC. But an institution is a continuum. We need to come to closure on the outstanding issues and ensure that we have a robust mechanism to prevent relapse. It is possible some issues have been addressed, that some refunds already made. It is possible we are not right in every material particular. We look forward to sitting down with the affected agencies to iron out the issues. The Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, has offered to get all the parties to sit to look at all the issues. We thank him for the initiative and we look forward not just to the meeting but also to a comprehensive resolution of the issues. Our job is to resolve issues. We also think the onus is on those managing public resources to give account publicly. NNPC has started doing that, and we have commended them for it. We look forward to the day our reports will not have question marks about past or present issues in NNPC. But until then, I am sorry, we cannot look the other way.  

  

Could you rate the transparency levels of the NNPC in its transactions and operations – DSDP, JV cash call exit, etc? Have they met certain transparency marks you expect? 

As I said earlier, there is a new spirit in NNPC. They open up more. They cooperate more. They engage more. You could also sense an attempt to take corrective measures. The DSDP, direct sales direct purchase, was introduced to address the opacity and losses around Offshore Processing Arrangements (OPA) and Product for Oil Swap. NEITI’s 2013 audit report showed that Nigeria lost $518 million to OPA and SWAP. So it is good that DSDP has been introduced to address such uneconomical arrangements that we got into because of the state of our refineries. It is also good that an attempt is being made to address the issues around cash-calls. But on both DSDP and the reported cash-call exit, there is need for more information about the details of these arrangements. Without enough details, it is difficult to comment on these issues in an informed manner. But having said that, we are impressed with NNPC’s monthly disclosures. The same NNPC that used to be the very definition of opacity is opening up, doing pro-active disclosure and on a monthly basis, and is even far ahead of us in terms of period covered. We welcome that. But we also call on Nigerians to take more interests in the disclosures and interrogate the data. We did a joint report with BudgIT on a year of NNPC’s disclosures. BudgIT also tracks the disclosures month to month. We need to encourage NNPC to do more by giving them feedback on the disclosures and showing there is active demand for that important stream of work.  

 

Is NEITI involved in any of the oil sector-related probes and prosecutions, and to what extent, if at all? 

Yes, to a large extent. We have been approached for invitation and interpretation by both the executive and the legislative arms. In fact, we are constantly deluged with requests by the National Assembly. We spend a significant amount of time responding to their requests or appearing before them. We welcome this. We need the legislative arm to be more engaged to be able to perform its oversight, legislative and representative functions better. Also, we are consulted for information and clarifications on most of the prosecutions going on around issues in the oil and gas sector.

 

NEITI has in addition to its annual audit reports, included quarterly reports of extractive industries expenditure and earnings – these are lots of information, yet the industry is still challenged with transparency as recently confirmed by Minister Ibe Kachikwu. Are you bothered about this? 

Yes, we are. But we also have to acknowledge that there is a sense of progress. We would love the changes to be faster and better institutionalised. It also depends on your preferred mode of change. Do you subscribe to the big-bang theory or to the incremental theory? I think it will be unrealistic to think the desired state will come overnight. And if it happens overnight, it is probably not sustainable. At the same time, if you opt for the gradualist approach, you need to ensure that you are building on and sustaining the gains. Change is going to be a work in progress, but you need to ensure that there is both work and progress. To go back to your question, it is precisely because we have not had as much progress as we want that we asked ourselves what we need to do differently and what new things to take on board. We have a new strategic plan now. And as part of that plan, we made the deliberate decision to play more in the policy space. That is why we have introduced the quarterly review that you mentioned but also the policy brief and the occasional paper series. We still do our audits. But in addition to the audits, we have created these three policy instruments that allow us to focus on critical issues around prudent, optimal and accountable use of our extractive resources.

 

There is still a lot of work to do in accounting for operations in the solid minerals sector, NEITI seems not very upbeat on this, and this is a sector that is easily accessible to average Nigerians. Why is this so? Are you lacking capacity for proper accounting for the sector? 

We have actually been focusing on the solid minerals sector. We have done five audit reports on solid minerals. We usually present the reports together with the oil and gas reports. It is understandable if people miss them because of the amount of money involved and the low contribution of the sector. We have always advocated that Nigeria should focus more on the solid minerals sector because of the potential of the sector for job and wealth creation and diversification of our export, revenue and forex base. We have always made recommendations about what needs to be done to clean up and open up the mining sector. It may interest you that the Minister of Mines and Steel Development, Dr. Kayode Fayemi, is the chairman of the NEITI board. The ministry has a roadmap for the development of the mining sector and some of the inputs came from our reports/recommendations. We are aware of and happy with efforts by the ministry to have a one-stop regulatory commission for the sector, de-risk mining, provide accurate geological data, build a portal that can be accessed all over the world, provide incentives for operators, states and host communities, encouraging processing and value addition, improving security and aggressively marketing Nigeria as viable mining destination.

 

The NEITI Act gives certain room for prosecutive actions for economic sabotage, how far have you explored this? 

The NEITI Act criminalises certain offences. But they are mostly around not giving us accurate information or not giving us such information on time. There are fines and prison terms. But the law did not give us prosecutorial powers. That’s why we are sometimes called toothless bulldog; that we can only bark and not bite. We have been trying to amend the Act to address this and other issues. As part of that process, we will soon hold a roundtable on 10 years of the NEITI Act. We will look at what we need to add, delete or reword. But power to prosecute is not everything. We also have the power to persuade, to engage and, some will not like this, to name and shame. These are soft powers, but they can be as potent, or even more potent, that the hard power. Recently, we introduced a public ranking of companies and government entities in terms of the timeliness and completeness of their template submission. We could have threatened them. We could have even taken them to court but the matter could be tied up in court forever. Besides the fact that there is no predetermined outcome, some of these entities are better resourced than we are. So what did we do then? We took them to the court of public opinion, providing implicit incentives and sanctions for compliance. You need to see the reaction. Next time we ask for information and give a deadline, I can assure you we will have a better response as those that came tops will want to remain on top and those who fell behind would want to do better. Sometimes, you might not be as powerless as you think, especially if you have clever way of impacting reputation and potentially bottom-line. Another power that we have is the power of partnership. Since we cannot bite, we look for those who can bite. So we are partnering EFCC and others to see how they can use our outputs as inputs for their work.  

 How is the cooperation and coordination between NEITI and inter-government agencies/ natural resources-rich state governments? 

We work well with other government agencies under different platforms. I will mention two: the Inter-Ministerial Task Team (IMTT) and the Inter-Agency Task Team (IATT). The IMTT is the platform for remedying the institutional gaps highlighted in our audits; while the IATT is coordinating platform for all agencies that have something to do with anti-corruption. We coordinate IMTT and serve as the secretariat of IATT. We engage with state governments on a case-by-case basis. But we are also working with the Nigeria Governors Forum on issues of common interests.  

 

What is the place of NEITI in the global EITI? 

NEITI is the Nigerian chapter of the Extractive Industries Transparency Initiative (EITI), a coalition of governments, companies and civil society groups for the promotion of prudent, transparent and accountable management of extractive resources. Nigeria joined EITI in 2003 and we started implementation in 2004. Nigeria is seen as one of the leading countries among the 51 EITI-implementing countries that include the US, UK and Germany. Nigeria actually won the best EITI implementing country in 2013. Many countries have come to Nigeria to understudy our EITI implementation. But we are not resting on our oars.  We still have a lot of work to do. We joined EITI to ensure that we use our natural resources more prudently, avoid the negative dimensions of resource dependence, which is widely known as resource curse, and ensure that the generality of our people benefit from these resources. So it is not a public relations stunt. So until we are all able to work together using EITI as one of the instruments to bring about shared and sustainable prosperity to Nigerians, our work is not done.