Why is there no transparency?
Transparency and accountability are critical in the extractives industry, which is the lifeblood the Nigerian economy. This is important to ensure the management of the revenue for development. While these issues are important, it is also the bane of the industry. There have been some attempts to address this by government but there are still major gaps to be addressed. Two reports released in 2014, the African Development Bank African Economic Outlook and the Nigerian Natural Resource Charter Benchmarking Report showed that the Nigerian extractive industry still has some lapses, which need to be addressed to achieve ultimate transparency and accountability in the sector.Learn more
Are we doing enough?
Notwithstanding the above, there have been some efforts by the Nigeria Extractive Industries Transparency Initiative (NEITI) to ensure transparency in the sector through its audit of the revenue information and receipts of oil revenue from oil companies to the government. While this process has acquired international acclaim, there are arguments that this process is only one step in the chain to achieve transparency as the audit focuses only on revenue transparency. Moreover, the process may not necessarily lead to accountability.Learn more
How is the industry run?
Nigeria currently operates two contract models to aid funding and exploration of oil and gas projects. These are:
- Joint Ventures (JV) under Joint Operating Agreements (JOAs) between international oil companies (IOCs) and NNPC, with NNPC representing the interest of the Nigerian government; and
- Production Sharing Contracts (PSCs) with IOCs.
The principal contract model for the purpose of exploration and production of resources was the joint venture arrangement.Learn more
What are Marginal fields?
Marginal fields are oil fields that have been discovered by major international oil companies (IOCs) in Nigeria in the course of exploring larger acreages and which fields have not been developed for more than 10 years. When identified, the IOCs may decide to farm out this field to another company to exploit it as a sole risk venture. This means the contractor would bear all the costs and risks of exploitation and also to earn the entire rewards from exploitation.Learn more
How does government lose money?
Pioneer status is an investment incentive, in the form of a tax holiday, which the federal government of Nigeria grants to qualified and eligible indigenous companies to promote local content development. Provisions for this are made primarily under the under the Industrial Development (Income Tax Relief) Act 2004, Nigerian Investment Promotion Council (NIPC) Actand now the Pioneer Status Incentive RegulationsLearn more
Are we burning our biggest asset?
Nigeria is a gas rich economy. Statistics show that Nigeria’s proven natural gas reserves are estimated at 174 trillion cubic feet (cf) and exist in higher quantities oil reserves and is expected to last for 110 years at least Despite this abundance, over 80% of these gases are flared while 12% is re-injected to enhance oil production. Consequently, Nigeria was ranked as having the 2nd highest level of gas flared in the world after Russia with about 23.0 billion m3 gas flaredLearn more
Are we saving enough?
The Nigerian Sovereign Wealth Fund (SWF), managed by the Nigerian Sovereign Investment Authority (NSIA), is established by an Act passed in 2011 with initial seed capital of US$ 1 billion. Following the disputes with states governments, the SWF is currently funded from federal government contributions. In 2014, an additional US$ 550 million was allocated to it, to be managed on behalf of Nigerian government NSIA partnered with the International Finance Corporation to increase the infrastructure projects Nigeria’s sovereign wealth fund made its first investment, handing over $200m to UBS, Credit Suisse and Goldman Sachs to manage a fixed income portfolio in 2013 By April 2014, the SWF had accrued an income of N 505.694 million over the course of 15 months of operationsLearn more
Who owns the oil and gas industry?
EITI defines a “Beneficial owner” as “…a natural person(s) who ultimately own or control more than 10% of the corporate vehicle…
The term beneficial ownership was coined by the necessity to reveal secret structures in companies that aid the commission of crimes. Financial crimes, including tax evasion and money laundering are encouraged through hidden structures, which many major companies and conglomerates adopt because of the sheer size of these organisations. In the Nigerian oil and gas industry, the non disclosure of beneficial ownership has been aided the awarding of licenses to companies or individuals who are highly connected to the government, hence encouraging unprofessionalism and in many cases also leading to the under-utilization of oil fields. A recent example is the Malabu case.Learn more