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.
Beneficial ownership is also encouraged by the provision of the law that allows the discretionary awards of licenses by the government
To improve the level of revenue transparency in the oil and gas industry, the Extractive Industries Transparency Initiative (EITI), in 2013, expanded it standards to include the disclosure of beneficial owners of companies This would aid better scrutiny of activities in the industry by stakeholders. Hence, the EITI now encourages the implementing countries to maintain a publicly available register of companies that operate in the extractives industry and of government officials that are beneficial owners in any of these companies
Are the people involved?
Nigeria has opened the doors to the exploitation of its natural resources for over fifty years. The major participants in this activity have been the international oil companies mostly because they have the expertise and finances to exploit in a capital-intensive industry. Though the Nigerian National Petroleum Corporation (NNPC) has some stake in the development of oil resources through the joint operating agreements, the company is hardly involved in the exploration and is mostly a “figure-head” partner. The promotion of local content development in the oil and gas sector became increasingly necessary to stem capital flight, foster local participation, and technological transfer of skills, harness resource wealth to reduce poverty and promote national development.
The Nigerian Oil and Gas Industry Content Act (NOGIC) Act of 2010 is the comprehensive framework for local content in the oil and gas sector. This law was promulgated to encourage local content in the development and utilization of the Nigerian oil and gas industry
Local content was defined in the Act as “…the quantum of composite value added to or created in Nigeria through utilization of Nigerian resources and services in the petroleum industry resulting in the development of indigenous capability without compromising quality, health, safety and environmental standards”
The current draft of the Petroleum Industry Bill (PIB) before the National Assembly also contains some provisions for increasing local participation of Nigerian companies and workers in the industry.
The NNRC Benchmarking report notes marked improvements in the industry after the promulgation of local content in Nigeria. Some of the results noted are addition of more jobs and increased participation of indigenous companies especially following the recent onshore divestments of assets in the Niger Delta in 2014. The report further notes some reduction capital flight.