Nigeria, other Sub-Saharan countries record gaps in applying extractive sector laws

An analysis by the Natural Resource Governance Institute (NRGI), a natural resources watchdog, of the extractive industries in 28 sub-Saharan African countries reveals that all but two – Botswana and Zambia – are failing to deliver the standards laid down in their laws.

The rest including Nigeria record low levels of compliance with their own extractive sector laws. As a result, these countries are failing to reap benefits from their wealth of endowments of oil and minerals fuelling poverty in the African continent that accounts for 30 percent of the world’s oil supply.

The NRGI created a Resource Governance Index (RGI) in 2017 to assess how 81 resource-rich countries govern their oil, gas and mineral wealth using three broad indicators of value realisation, resource management and enabling environment.

Sub Saharan countries have generally performed poorly on the RGI but this analysis now say some countries like Ghana have reformed and modernized laws governing the extractive industries. This has produced stronger, transparent and accountable rules than most other parts of the world, but there have been gaps in implementation.

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“If countries in sub-Saharan Africa closed the ‘implementation gap’ and fully implemented their own laws, they could generate greater income from natural resources. They could also better combat the negative human and environmental impacts of extraction,” said Silas Olan’g, Africa Co-Director for the NRGI said in a release.

With only 14 percent of the world’s population, Sub Saharan Africa is currently responsible for 24 percent of new births and on track to have 86 percent of the world’s poor by 2050, a recent study by the Bill and Melinda Gates Foundation found.

Yet more than half the exports of many countries in sub-Saharan Africa come from natural resources and as much as 90 percent in the most oil-dependent countries, making implementation of these laws critical to their economic-wellbeing.

Mineral reserves represent a large share of government revenues across the region and have the potential to become even more important in countries with recent discoveries, such as oil and gas in Tanzania and Uganda, and large reserves of strategic minerals such as cobalt in the Democratic Republic of Congo.

However much of these wealth cannot translate to value for over 1billion people in the region because governments are failing to fulfil the legal requirements to transfer revenues collected to local authorities and publicly disclose information on social and environmental impacts.

The researchers found that half of the 28 countries studied do not disclose environmental and social impact assessments, even though this is a legal requirement in many countries.

“Trust in government and companies erode when legal reform is not followed and citizens are left in the dark. Closing the ‘implementation gap’ is in everyone’s interests because ultimately it enables countries to reap the benefits that their mineral wealth should offer,” said Olan’g.

Nigeria’s poor management of commodity booms in the 1970s led to crippling structural policies in its macro economy, including currency devaluation because the boom years were accompanied by reckless spending resulting in budget imbalance and high public debt.

The same scenario is replicated in many Sub Saharan African countries because governments fail to comply with fiscal rules to stabilise public finance. This raises the question of whether these governments had established appropriate monitoring mechanisms or the rules were fit for purpose. Absence of transparency also impacts how compliance is monitored.

The researchers also found that governments in the sub-region tend not to respect rules for managing assets held in natural resource funds and for disclosing conflicts of interest, particularly where corruption is poorly controlled. Governance of state-owned mining and oil companies and natural resource funds were weak in countries like Angola, Gabon and Nigeria.

“Building capacity and allowing space for independent oversight is critical for holding government institutions accountable in resource-rich countries. Official audit bodies and non-state actors like the media play an important role here,” said Olan’g.

Olan’g said that if managed well, natural resources offer the potential for driving economic development. “Governments in sub-Saharan Africa are well-placed to build on the strong laws they have developed, but this review of the index shows how they now need to turn greater attention to implementation.”