TODAY - NIGERIA’S EXTRACTIVE INDUSTRY AND ISSUES ARISING As part of a global fight against corruption, last month, the European parliament overwhelmingly voted in favour of legislation that compels oil, gas and mining companies to publish payments they make to governments and release information on their earnings in each country. Interestingly, the logging industry (forestry) is included in this new rule. The US had enacted a similar law (the Dodd-Frank act) last year. Between them, the EU directives and US law will cover about 70% of the value of the global extractive industries. This means companies would be obliged to report payments of over €100,000 (£85,000) made to the government in countries in which they operate (including taxes levied on income, production or profits; royalties and licence fees.) So, an oil company working in Nigeria, for instance, would have to disclose royalties paid to the Nigerian government relating to every project here. Shell and BP had lobbied for the laws to be relaxed on the basis that some countries forbid the disclosure of payments to governments in their criminal law. Oil industry lobbyists are also currently attempting to block the US law through a legal challenge filed by an oil industry trade association, the American Petroleum Institute. (Guardian.co.uk) There now appears to be a renewed push for greater transparency in Nigeria, as some stakeholders have called that a similar provision be made in the Nigeria Extractive Industries Transparency Initiative (NEITI) Act (2007) – which aims to ‘promote transparency and engender due process in the Nigerian Extractive Industries.’ NEITI conducts comprehensive audits of the sector, which it is expected to regularly publish (there was one from 1999-2004 & 2005 in the oil and gas sector alone; and a second audit is to be conducted in the Solid minerals sector, covering 2007-2010.) (Akpan Udeme, 2012.) The National Stakeholders Working Group - the governing body of NEITI - is responsible for formulation of policies and strategies. It is made up representatives of extractive industry companies, civil society, labour unions, various geo-political zones and experts in the industries. NEITI complained of non-implementation of its recommendations on accountability not too long ago. A report of the Revenue Watch Institute (RWI) measuring the quality of extractive industries’ governance in 58 countries across the world, ranked Nigeria 40th. IN MAY, NEITI’s Director Communications, Orji Ogbonnaya Orji released a statement saying independent audit reports had led to the Nigeria government recovering about N30 billion ($2 billion), and that inter-agency efforts were on to recover another outstanding sum of $9.6 billion from companies (discrepancies between taxes and levies companies claimed they had paid, and what government declared it received.) Last month, President Goodluck Jonathan pledged that government would re-examine the law setting up the NEITI, mentioning (specifically) inadequate funding and gaps between NEITI and certain major government bodies. *Interestingly, Nigeria was recently adjudged the best Extractive Industries Transparency Initiative (EITI) implementing country in the world at the global EITI conference in Australia. The proposed Petroleum Industry Bill 2012 hopes to address accountability issues. It states that all agencies and companies established pursuant to the act are to be bound by the Nigerian Extractive Industries Transparency Initiative Act. Some argue that building an educated, skilled (and diversified – for the long-term) workforce is one of the major challenges to overcome if Africa is to maximise the benefits that accrue from the extractive industry. Diversifying becomes even more crucial, considering that the resources in question are finite. In all, the need for local entrepreneurship, knowledge-sharing, and participation in the extractive industry value chain cannot be over emphasised. “The extractive industries are very capital-intensive, meaning that many millions of dollars must be invested in developing a project before any revenues are made…Communities have the best outcome in terms of human resource development when individuals are able to qualify and be hired for available jobs or when they develop activities that are complimentary to new extractive investments in their region…Communities are empowered when they are able to add value to the supply chain of extractive industry activities. Corporate social responsibility and community relations programmes within companies are the appropriate formats whereby community representatives can explore these possibilities in cooperation with the private sector…Local communities must be active, ambitious, and creative with their involvement in the extractive industries in order to get the most benefit and address their needs. Human capital is the true wealth of every nation…It should be a cause for national concern at the legislative level if companies systematically refuse to seek, recognise, and develop the capacities of the local talent pool to fill their job positions.” - Madeline R. Young “Policy strategies to achieve higher local content can be achieved by consciously building “local capability development”. It can be argued that this strategy is more of a “Pull” model that would involve considerable undertakings from the (companies), such as providing direct and prolonged assistance to indigenous firms to improve their quality and reliability. The limits of this model lies on the profit-oriented nature of the TNCs, mainly driven by the maximisation of their shareholders value…an effective local content policy should be driven by an optimal balance of both incentives and strict regulations, with the host government encouraging a multi-stakeholder approach to human capital development.” - Claudine Sigam, UNCTAD ́s Project Officer for Optimization of Natural Resources Management in Africa **THINK NORWAY** “As Gordon & Stenvoll (2007) observes, from the onset (1965), Norway created the environment that enabled it select the companies it was confident it could work with towards meeting the development objectives for its oil and gas industry. With preferred participants selected, a level playing ground was provided to promote competition, and that led to improvement of efficiencies. The system was then continuously monitored, and necessary adjustments were made to encourage growth, carried out in a timely manner. Capacity building was the overriding emphasis on the one hand, and a tax policy that did not stifle the competitiveness within a vibrant international environment, on the other.”
Posted on: Thu, 25 Jul 2013 07:04:02 +0000
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