Business

Deepening Nigerian oil transparency index

The Nigerian National Petroleum Corporation (NNPC) has made the list of Extractive Industry Transparency Initiative (EITI’s) World Partner- Companies. Adeola Yusuf, in this report, examines the real implications of this new status, coming 43 years after the establishment of the NNPC

 

 

Group Managing Director of Nigerian National Petroleum Corporation (NNPC), Mele Kyari, has crossed a lot of hurdles to change the narrative about the corporation in the areas of transparency and accountability.

 

Aside publishing the audited account of NNPC for the first time in 43 years, Kyari got the name of the NNPC written among companies that have partnered the global industry transparency initiative, Extactive Industry Transparency Initiative (EITI) but with a caveat.

 

The corporation gives a nod to full and public disclosure of all beneficial owners and steps to identify the beneficial owners of Corporation’s direct business partners, including joint ventures and contracts.

 

Besides, the feat has also placed Nigeria higher on the ladder of global transparency index.

 

The deal and where it leads

 

The NNPC became an EITI partner company, joining a group of over 65 extractives companies, state-owned enterprises (SOEs), commodity traders, financial institutions and industry partners who commit to observing the EITI’s supporting company expectations.

 

Coming 43 years after the establishment of the NNPC, the new status, the corporation announced in a statement sent to New Telegraph, would require that NNPC publicly declare support for the EITI Principles and, by promoting transparency throughout the extractive industries, help public debate and provide opportunities for sustainable development; publicly disclose taxes and payments and to ensure comprehensive disclosure of taxes and payments made to all EITI implementing countries.

 

The status also requires that the NNPC publicly discloses beneficial owners and take steps to identify the beneficial owners of direct business partners, including joint ventures and contracts, and to engage in rigorous procurement processes, including due diligence in respect to partners and vendors.

 

Other requirements are that the corporation delivers natural resources in a manner that benefits societies and communities and to ensure that company processes are appropriate to deliver the data required for high standards of accountability.

 

Stakeholders’ views

 

EITI Board Chair, Rt Hon. Helen  Clark, welcomed the company’s commitment to the EITI, saying “NNPC plays a vital role in Nigeria’s economy. Joining the EITI as a supporting company is a welcome step in the NNPC’s journey towards achieving greater transparency and to help ensure that Nigeria’s citizens benefit from their natural resource wealth.”

 

Zainab Ahmed, Nigeria’s Minister of Finance, Budget and National Planning, and former EITI Board member, also stressed the importance of ensuring that natural resource wealth contributes to sustainable development, saying that “increased transparency of Nigeria’s national oil company revenues is contributing to improvements in our country’s domestic resource mobilisation efforts.”

 

Their comments were contained in a statement issued by Group General Manager, Group Public Affairs, NNPC, Dr. Kennie Obateru.

 

The NNPC and its feats

 

Established in 1977, NNPC has grown to become the largest asset holder across Nigeria’s oil and gas industry value chain. Traditionally an oil and gas entity, it is transitioning towards becoming an integrated energy company with an interest in power generation and transmission.

 

The state-owned company has recently taken measures to become more transparent. In June 2020, it published audited account for 20 of its subsidiaries. NNPC also publishes its financial and operations report every month on its website, national dailies and online media to keep the public informed about its activities as part of efforts to be accountable to Nigerians.

 

It is working with Nigeria EITI (NEITI) on an action plan to routinely disclose information and it currently publishes some of the data required by the 2019 EITI Standard on its website. These disclosures demonstrate NNPC’s commitment to its journey to become a more transparent national oil company.

 

The implications

 

Adherence to the EITI supporting company expectations will give further impetus to NNPC’s corporate vision of greater transparency and accountability. Three areas in which there is scope for advancing transparency are revenues and payments to government, contracts governing petroleum exploration and production and consolidated group-level financial statements.

 

What industry leaders say Kyari affirmed his company’s commitment to the EITI, stressing that “becoming an EITI supporting company aligns with NNPC’s corporate vision and principles of transparency, accountability and performance excellence.

 

“Our partnership with NEITI and EITI strengthens our commitment towards commodity trading transparency, contract transparency and systematic disclosure of revenues and payments. “We are on a journey towards greater transparency and look forward to deepening our collaboration with the EITI to further this work.”

 

Commending NNPC’s move to support the EITI, Executive Secretary, NEITI, Waziri Adio, said: “NNPC joining the EITI as a supporting company is a major inflection point in the quest for transparency – for the company, for Nigeria’s oil and gas sector, and for the country as a whole.

 

 

“This is so given how critical NNPC is to the sector and to the country. NEITI welcomes this bold commitment. We will continue to work and walk with NNPC to translate its espoused commitments to transparency and accountability into concrete and sustained actions and results.”

 

Also, recently, Governor or Akwa Ibom State, Mr. Udom Gabriel Emmanuel, while welcoming the NNPC Board members to the state in Uyo, said his membership of the National Economic Council had exposed him to the activities in the oil and gas industry, affirming that the council had noted the positive impact the crop of the management and board of NNPC is making in the economy of the nation, particularly in respect of adherence to transparency and accountability in the Petroleum Sector.

 

Benefit ls of new status Becoming an EITI supporting company can help state-owned companies make progress on the journey to transparency. A recent example is Qatar Petroleum, which has been an EITI supporting company since October 2019 and has now published its annual and sustainability plans for the first time.

 

EITI’s mission is to promote understanding of natural resource management, strengthen public and corporate governance and provide the data to inform greater transparency and accountability in the extractives sector. By becoming a member of the EITI, 54 countries have committed to disclose information along the extractive industry value chain – from how extraction rights are awarded, to how revenues make their way through the government and how they benefit the public. Through participation in the EITI, countries agree to a common set of rules governing what has to be disclosed and when – the EITI Standard.

 

NNPC and financial probity

 

Many Nigerians agree that NNPC is a household name in Nigeria because of its dominant role in the areas of energy sufficiency and economy of the nation. The corporation represents Nigeria government’s interest in the oil and gas industry.

 

With the petroleum sector accounting for about 90 per cent of foreign exchange earnings of the country, the imperative of entrenching transparency and accountability in the national oil company and, indeed, the Nigerian oil and gas industry as a whole, cannot be over-emphasised.

 

At the very least, financial probity in the NNPC is capable of boosting the nation’s domestic resource mobilisation efforts towards ensuring social economic development of the country. It can also have the domino effect with other critical agencies of government imbibing the ennobling virtues in corporate governance. Conscious of this fact the current leadership of NNPC has committed itselft to conducting the corporation’s businesses in a transparent and accountable manner, deploying Artificial Intelligence (AI) to boost the accounting processes of its corporate headquarters, subsidiaries, companies and corporate services units (CSUs) and making public its books to cast away the toga of opacity associated with extractive industries generally.

 

It has sustained the publication, every month, of its financial and operations reports in the national dailies, its website and in other online media. The corporation moved its commitment a notch higher on June 11, 2020 when it caused to be published, the 2018 audited financial statement (AFS) of 19 of its subsidiary companies nationwide.

 

It was the first time the national oil company came clean to let the general public have unhindered access to its audited accounts. Speaking after the public disclosure of the accounts, Kyari promised to expedite actions on the corporation’s preparation and subsequent release of its 2019 audited financial statement.

 

Evidently, the release of the Monthly NNPC’s Financial and Operations Report as well as its 2018 AFS and other measures to ensure that it is living up to the set agenda of transparency, accountability and performance excellence across the corporation have not gone unnoticed.

 

A compass for economic transparency

 

The increased transparency in   NNPC’s revenues was already contributing to improvements in Nigeria’s domestic resource mobilization efforts. NNPC’s new status is a soothing balm to Nigeria image both at home and abroad in view of the centrality of the corporation to the Nigerian national economy. Analysists say, when the behemoth oil company gets it right, a lot of milage is derived from the Nigeria’s moves towards openness and ease of doing business.

 

They also assert that sustaining the feat is the issue, saying that this can be achieved by putting in place appropriate checks in the corporation’s operations, even as they also note the impetus of the administration of President Muhammadu Buhari has exemplified commitment to the ideals of openness in public service delivery in the last five years.

 

There is no doubt that the current leadership of NNPC is up to the task as it has shown within a year of assumption of office that it can walk the talk.

 

Last line

 

However, for the upward trajectory of NNPC in respect of transparency and accountability to be meaningful in the larger Nigerian business environment, other critical segments of the economy need to embrace these virtues of openness and accountability.

 

This should be done in order to boost the country’s image among the comity of nations and, more importantly, to ensure that the national treasure effectively benefit the more than 200 million Nigerians who are the stakeholders of the national oil company.

 

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