Three years into the administration of president Mohammadu Buhari, who came to power vowing to end corruption, Nigerian is yet to publish its petroleum contracts, a critical requirement to make the oil and gas sector transparent and end corruption in the sector.
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, giving undue advantage to the competition and violate contract terms.
However, an analysis of 23 upstream and downstream contracts in Nigeria, including 10 model contracts, by Rob Pitman and Anne Chinweze, analysts at the Natural Resource Governance Institute (NRGI), an extractive sector transparency non-profit found that contracts in Nigeria 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 oil or gas the companies must share with the government.
“Downstream, sales and swap agreements determine how much the country receives for the oil it sells. In 2015, for example, petroleum revenue from taxes, royalties, oil trading and other payments accounted for 53 percent of total government revenue. Of these revenue streams, oil sales made by NNPC alone accounted for 39 percent,” said the NRGI analysts in a briefing published on its website last year.
Ayodele Oni, partner at Bloomfield Law firm said there is need to balance morality and Nigerian law. Oni cited section of 5 of the Petroleum Profits Tax Act, which states:
“Every person having possession of or control over any documents, information, returns or assessment lists or copies of such lists relating to tax or petroleum operations or the amount and value of chargeable oil won by any company, who at any time communicates or attempts to communicate such information or anything contained in such documents, returns, lists, or copies to any person- (a) other than a person to whom he is authorised by the Minister to communicate it; or (b) otherwise than for the purpose of this Act or of any Act or law, relating to a tax upon income, in force in any part of Nigeria, shall be guilty of an offence.
He further said, “But I agree, the people who own the oil have a right to know the terms of the contracts their government signs with oil companies.”
The Petroleum Act 1969 empowers the Minister of Petroleum Resources to award oil companies licenses for exploration, prospecting and production rights of crude oil in Nigeria. Successful companies are required to pay statutory fees – 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 do not know what their government is getting from these deals.
The Federal Government has also failed to honour commitments it made to open up these deals. In 2015, Ibe Kachikwu, minister of state for Petroleum Resources and then group managing director of the Nigerian National Petroleum Corporation (NNPC) announced that contracts will be made open to the public.
One year later, Nigeria released a statement at the Anti-Corruption Summit held in London that 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 however is becoming a best practice globally. African countries including Liberia and Ghana have opened up their contracts allowing citizens, parliamentarians and oversight actors to monitor and analyse the public benefit from contract deals.
Some legal experts argue that confidentiality agreements and commercially sensitive information in these contracts do not favour disclosures. The NRGI says these are myths.
“Governments and companies can always agree to publish contracts and they can agree to modify the confidentiality clauses to allow contract transparency. 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. Thus, governments can require contract transparency by law,” the NRGI said in a briefing note.
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.
“Another factor is that often, the information that is commercially sensitive is not in the main contract that activists seek, but in other documents, such as environmental management plans and costs… Furthermore, any information that is highly sensitive can always be redacted prior to disclosure,” said the NRGI.