Last month, the Nigerian National Petroleum Corporation (NNCP) published its subsidiaries accounts but withheld the critical Corporate accounts, a key disclosure that presents the true picture of its financial affairs, denting its transparency efforts.
The NNPC business operations are managed through Strategic Business and Corporate Services Units (SBUs/CSUs) in diverse locations across Nigeria and its group accounts presents a complete picture of its financial affairs. As state-oil firm, the NNPC manages Nigeria’s oil on its behalf, in the interest of probity, the public needs to see the accounts.
Fallen oil prices have impacted investments into the sector and the countries that attract investments are transparent. The NNPC which manages Nigeria’s oil assets and involved in many joint ventures and other shared production arrangements with local and international oil companies needs to be open.
The NNPC may argue that it publishes a monthly financial and operations report but these documents have not passed through the rigour of an audit and cannot be relied upon with the same confidence as an audited financial statement. Even the corporation sticks a disclaimer on them.
Beyond publishing its group accounts, the NNPC should also make public petroleum contracts Nigeria signed with oil companies to be truly transparent. The best weapon against corruption is transparency.
Petroleum contracts set out the legal framework for oil and gas projects. When they are published, it allows for public scrutiny but previous governments have balked at disclosing them claiming it could expose company secrets, give undue advantage to the competition and violate contract terms.
But these reasons are not tenable. These contracts contain several terms for which a strong public interest case can be made for disclosure. Fiscal terms contained within contracts can have an enormous impact on public finances. In the upstream sector, exploration and production contracts and associated agreements contain clauses that dictate the amount of money that the country receives in taxes and royalties and how much companies must share with the government. Also, technology advances have rendered most of those technical details obsolete anyway.
We call on the national assembly to quickly pass the Petroleum Industry bills and repeal some antiquated laws including section 5 of the Petroleum Profits Tax Act, which prohibits public disclosures of documents relating to the sector without the minister’s consent.
The public should know how much oil companies are required to pay as statutory fees including application and renewal fees, rents and royalties. Oil mining leases (OMLS) attract additional non-statutory fees including, bidding fees, data inspection fees, signature bonus and reserve value fees. Nigerians often do not know what their government is getting from these deals and this cover allows corruption to fester.
At different forums, the Nigerian government has promised to be transparent including at the Anti-Corruption Summit held in London 2016 where it said it was “working towards full implementation of the principles of the Open Contracting Data Standard focusing on major projects as an early priority.
In 2017, Nigeria formally joined the Open Government Partnership—a multilateral initiative to strengthen governance. In the country’s first National Action Plan, Commitment 3 on fiscal transparency contains language committing to “disclose oil, gas and mining contracts in the area of exploration and production, exports, off taking and swap on a publicly access portal in both human and machine-readable formats.”
Prodded by the World Bank, Nigeria began a framework for disclosing public private partnership projects on the Infrastructure Concession Regulatory Commission (ICRC) website to be accessed by the general public. It contains information about project title, type, government agency responsible; name of private concessionaire, contract sum and progress reports but petroleum contracts which Nigeria relies upon for fiscal planning was not included.
Contract disclosure is now global best practice. African countries including Liberia and Ghana have opened up their contracts allowing citizens, lawmakers, and oversight actors to monitor and analyse the public benefit from contract deals.
The excuse that petroleum contracts contain confidential and commercially sensitive information is no longer valid. Even when the parties do not agree to make any information public, confidentiality clauses in extractive industries contracts almost always include an exception for disclosures that are required by law. So, lawmakers can mandate contract transparency by law
In oil contracts information including financial terms, work obligation commitments, and environmental protection and mitigation measures to be undertaken often subsumed under commercially sensitive are already well known in the industry and highly sensitive details can always be redacted according oil sector transparency advocates.
Unlike his predecessor, the NNPC under Mele Kyari seems keen to do what is right for the country, but it must not be half-hearted. If the recent corruption scandals have taught us anything, it is that opacity creates the best environment for corruption to thrive.
