The Executive
By WAZIRI ADIO
The extractive industry in Nigeria is one of the most opaque industries, often shrouded in secrecy. A recent announcement by NEITI that it will make public names of big players in the oil and gas sector may put an end to the opacity by opening a beneficial ownership register. NEITI’s Executive Secretary, Mr. Waziri Adio, speaks to that in an interview with Nosa James-Igbinadolor
NEITI announced it will open a beneficial ownership register for the oil and gas industry as soon as mid-December. What exactly does the register entail?
The register is designed to ensure ownership transparency. The quest for transparent and accountable governance of extractive resources has moved beyond just the focus on revenue transparency to other areas, including expenditure transparency, contract transparency and ownership transparency. Beneficial ownership disclosure is about knowing who owns what, which has practical implications for checking tax avoidance and evasion, money laundering, abuse of positions, corruption, drug trafficking and terrorism financing. Anonymous or hidden ownership is not always illegal. But as we have seen from the revelations from the Panama Papers and the Paradise Papers and even certain things within our own environment, hidden ownership can be used to mask many things and can be used as vehicles for denying the society of much-needed revenues and even putting the society at risk. The register will provide information about the real owners of assets and companies in the extractive sector covered by the NEITI Audit and will be expanded later to even those not covered by our audits.
We are working with the Department of Petroleum Resources (DPR) and the Mining Cadastre Office (MCO) on the much-expanded register for the extractive sector. Also note that the Corporate Affairs Commission (CAC) is working on the Beneficial Ownership Register for all the companies operating in Nigeria. We are starting with the extractive sector not just because of the strategic importance of that sector but also because we have been collecting ownership information from entities covered by our audits for the past four audit cycles. What we are doing now is put it in the public domain and have a mechanism for improving on and updating it. This register aligns with the commitments that President Muhammadu Buhari made at the 2016 London Anti-Corruption Summit, and in commitments that Nigeria has under the Open Government Partnership (OGP) and the Extractive Industries Transparency Initiative (EITI). What we are unveiling on the 12th December is an open register of owners of entities covered under the NEITI audits, which can be searched by names of individuals, companies, and assets.
The register is expected to contain names and information of actual owners of extractive industry companies. What is the business case for this?
There is a strong business case for this. Businesses strive in stable environments where the government has adequate revenues and uses that for the benefits of the people. In terms of direct benefits, investors and companies need to know who they are doing business with. This will help with their due diligence. It is also good for shareholder value. Crises arising from hidden ownership pose reputational risks and reputational risks impact the bottom line and shareholders’ value. Shortly after the Panama Papers were released, companies mentioned or that had relationship with companies mentioned saw their share prices plummet, with value erosion in hundreds of billions of dollars. Also, transparency is a key tenet of corporate governance.
How will shining light on such ownership add value to the economy and support the work of NEITI with respect to transparency in the industry?
It will help tremendously. As stated earlier, knowing who owns what is the next frontier of transparency. Without knowing who the real owners are, many unsavoury things could be hidden in plain sight.
It will be helpful not just to make things more transparent and to point to possible, ongoing sharp practices that will need further investigation but also in preventing abuses and sharp practices. As said earlier, ownership transparency is a very useful tool to prevent or reduce tax evasion, corruption, money laundering, drug trafficking and terrorism financing. It will also help the media, civil society and citizens at large to know who owns what. It is thus a trust-building and accountability mechanism too.
What would you consider the current state of the extractive industry with respect to corporate governance especially in the oil and gas industry? How well is NEITI supporting the behemoth NNPC to ensure transparency in its operations as well as with respect to NNPC’s public reporting of receipts and expenditures?
I can tell you there is more openness by both the companies and the government agencies than in say 2004 when NEITI started. The companies and the government agencies collaborate more with us and willingly cooperate with our staff and consultants. And this include NNPC that had a frosty relationship with us for a long while, despite being a member of our board. So now, there is more compliance and collaboration and eagerness to join up to solve common problems. As you know, we inaugurated a joint committee with NNPC to resolve the corrective actions recommended to NNPC in our past audits and to draw up a roadmap for systematic disclosure by NNPC. That is some progress. But this doesn’t mean that our work is done or that we have the desired governance state or outcome in the sector. Far from it.
There is still much more to be done. And that is why we are moving from the initial focus on transparency of payments and receipts to new frontiers of transparency in terms of ownership, commodity trading and contract transparency.
The goal is to continue to push the limits until transparency becomes second nature to operators in the sector and until all Nigerians, irrespective of their stations in life, benefit from Nigeria’s extractive resources.
