The Dangers of Losing EITI’s Validation
The benefits that Nigeria stands to lose from her potential delisting as a complaint member of the global Extractive Industries Transparency Initiative are quite significant, writes Chineme Okafor
Having failed to meet the December 31, 2015 deadline to publish its 2013 audit report on the oil and gas sector, Nigeria will know her stance with the global Extractive Industries Transparency Initiative (EITI) at the end of next month, according to the Nigeria Extractive Industries Transparency Initiative (NEITI).
NEITI had failed to meet the deadline to make the mandatory submission because its board was dissolved alongside all other federal government boards last year by President Muhammadu Buhari.
However, the EITI is due to meet in Peru on February 24 and 25, where a decision on Nigeria’s situation would be taken.
But even in the face of the possibility of a downgrade from a complaint country to just an observer country owing to such delay in adhering to EITI rules, the Acting Executive Secretary of NEITI, Dr. Orji Ogbonnaya Orji said he was optimistic that Nigeria would not lose her EITI complaint status.
If Nigeria loses its compliance status, it would be added to the list of countries, which only observe but do not commit fully to advancing transparency in the management of its natural resources.
This indifference in adherence to global best practices could cost her huge goodwill that subsequently translates to financial fortunes and societal openness.
Orji explained to journalists shortly after a meeting with a delegation from the International Monetary Fund (IMF) in Abuja that Nigeria understood this position and had sought a six-month extension to its reporting deadline, which was yet to be granted.
“Nigeria is very solidly on ground in the EITI. We are in a very good standing. We are expecting our board to be reconstituted very soon. A lot of consultation has gone into it and once the board comes in place, its first business will be to approve the two reports that are ready.
“The first report would be the 2013 oil and gas audit report and the other is the solid minerals report. Both reports are ready and we are expecting that any moment from now our board will be reconstituted,” said Orji.
The EITI as a global body, which promotes the principles of openness, transparency and accountability in the operations and management of revenues earned from the mining of oil, gas and solid minerals resources by its member countries.
The global body demands that governments of these countries open up their books for its citizens to see and request for proper use of same to their benefits.
Through the EITI principles, countries are able to open up to public scrutiny, the operations of people and companies that mine their natural resources and make fair revenue claims from them.
Governments are also pressed by its citizens to make the most of these revenues to fund and provide social goods such as health care, education, roads and other beneficial infrastructure.
Signing up to this initiative in 2003 through former President, Olusegun Obasanjo, who began its implementation in 2004, Nigeria became the first country out of the 46 in the world body to support the process with a specific law, the NEITI Act of 2007.
The country has since gone on to leverage on this platform to push for greater transparency and accountability in the mining of her natural resources.
The NEITI was set up and funded by the federal government to serve as the country’s implementing body, and Nigeria was eventually adjudged an EITI-compliant country in 2013.
This compliance status is now due for validation in January 2016, and the country is struggling to meet up with.
Accordingly, the EITI validation exercise is conducted on compliant countries every three years by the global body as a quality assurance mechanism to ascertain the continued level of compliance of member countries to the EITI principles.
Also, government’s political will and commitment to the EITI process, respect to openness and accountability in the management of oil, gas and mining revenues for the benefit of the citizens are assessed by validators sent from the EITI to each of its member countries.
The validation exercise will equally consider the frequency of publication of relevant audit reports by the NEITI, with contextual information that publicly discloses full government revenues receipts from extractive industry, payments by companies in term of taxes, royalties, rents, signature bonuses, amongst others.
The exercise will in addition, assess the level of transparency and accountability compliance by oil, gas and mining companies as recommended by NEITI.
Similarly, the exercise will examine how independent audit reports by the NEITI have helped to promote public debate, access to information, facts and crucial data required by the public for constructive engagement with the government and companies in such a manner that leads to credible reforms that could engineer positive changes in the way citizens benefit from their natural resources.
What Nigeria could lose According to the EITI, benefits that accrue to countries which implement its principles include an improved investment climate in which clear signals are provided to investors and international financial institutions on the commitment of the host government to greater transparency in doing business.
An EITI compliance status in this regards assists in strengthening accountability and good governance of countries’ mineral resources. The status also promotes greater economic and political stability as citizens are well informed of what their governments take from the industries, as well as what companies pay to them, this, in turn contributes to the prevention of conflict often found in accounting for mining of natural resources.
Nigeria has in the last years of NEITI publishing its audit reports, placed in the hands of her citizens, tools with which to dig and demand for accountability from managers of the sector as well as the government with regards to what it earned from the mining of the country’s natural resources.
Through NEITI’s reports, all sorts of investigations by the state, organisations and individuals have emerged to further push for transparency and accountability in the management of the country’s extractive sectors. An EITI delisting could mostly obstruct the momentum already built on this path.
Within the perspectives of companies and investors, a country’s compliance with such transparency and accountability framework, gives to them the comforting sense that their businesses are covered from the political and reputational risks that are associated with poor management of state revenues from extractive resources.
Indeed, such risks are often triggered by opaque governance which remains a clear threat to investments. In extractive industries, where investments are capital intensive and dependent on long-term stability to generate returns, reducing such instability is beneficial for business.
EITI in this regards explained that transparency of payments made to a government can also help to demonstrate the contributions that business investments makes to a country’s development as citizens see and follow through the process of disbursement and use by their governments.
This objective amongst others propelled NEITI’s publication of the fiscal and statutory allocations which states and government agencies got from the country’s oil and gas earnings, and from which citizens got to know what their respective states got within the period.
If Nigeria is delisted by EITI, her citizens through the help of relevant civil society organisations would be unable to assess information and data to hold the political class to account. The development could condense the expanding space for public debate on accountability and reforms in natural resources mining and sales.
NEITI says Nigeria is on course NEITI however insists that the country will make it without falling short of its demands. Its acting Executive Secretary, Orji explained that the country cannot afford to lose its status with EITI.
He said that the government would constitute the required board to look into and sanction the audit report which he said had been prepared and ready for submission.
Orji stated in this regards: “Now we were given 31 December as deadline to publish that report but when we look at the processes we had to go through to put the board in place, we wrote the EITI and made a case for extension of our reporting deadline.”
“We requested for six months reporting deadline to be able to meet all the requirements. Our request was informed by the fact that even if our board is in place right now, we will need some training for the board and we will need the board to go through some induction courses and retreat to be able to familiarise themselves with the EITI and its multi-stakeholder framework. So, we thought it was necessary to make that request for extension,” he added.
He noted that the, “request is with the global EITI and it is being considered but no decision yet on the request has been communicated to us.”
“At the EITI meeting in Kiev, Ukraine, we made the presentation and it was well received by the board. We are hoping that by the time the board meets again in Lima, Peru during the 7th Global Conference that a decision would have been made to us.
“Right now NEITI is currently in good stead. The EITI is aware that our reports have been done and we did that with their support”, Orji added.