NEITI calls for tracking of Nigeria’s crude swap deals

. Seeks expedited action on Glencore bribery case

The Nigeria Extractive Industries Transparency Initiative (NEITI), yesterday, called for a transparent tracking of the country’s crude swap policy, currently managed by the Nigerian National Petroleum Company Limited (NNPC).

This is particularly important seeing as Nigeria has lost over N30 trillion to its controversial petrol subsidy policy, oil theft and non-functional refineries.

The Executive Secretary, NEITI, Dr. Ogbonnaya Orji, made the call during the “Policy Dialogue on Utilisation of Beneficial Ownership Information on Crude Oil Swap Deals in Nigeria,” held in collaboration with ‘Policy Alert,’ in Abuja.  

He said the dialogue was meant to share data and analytical insights on Nigeria’s crude oil swaps and to close identified gaps, noting that the “resource curse” can be addressed through regular disclosures of extractive information in the sector.

Present at the forum were officials from relevant government agencies, oil and gas industry regulators, civil society and the media.

Orji recalled that oil swap dates back to the 445,000 barrels per day (bpd) Domestic Crude Allocation (DCA), when the NNPC received daily crude allocation from the government for the four refineries to refine for domestic consumption.

However, the collapse of the refineries meant that the NNPC could not refine but exported most of the crude and then depended on imported refined products for local consumption, which ran the country into huge debts with attendant products scarcity and long queues at retail stations nationwide.

Oil-for-product swap

To mitigate the impact, Orji noted that the government had to find innovative and less expensive ways of making refined petroleum products available to the people, which birthed the oil-for-product swaps in 2010, which again was revised in 2016 due to operational glitches.

Accordingly, he charged the civil society groups to step up their advocacies and set an agenda for the incoming administration particularly along four major areas, including the removal of fuel subsidies and the full deregulation of the downstream petroleum sector to permanently end the conversation around oil swaps.

He said: “NEITI’s latest policy brief titled: ‘The Cost of Fuel Subsidy: A case for Policy Review,’ revealed that Nigeria expended over N13 trillion ($74 billion) on fuel subsidies between 2005 and 2021.

“The figure in relative terms is equivalent to Nigeria’s entire budget for health, education, agriculture, and defence in the last five years, and almost the capital expenditure for 10 years between 2011‑2020.”

He said fuel subsidies have cost Nigeria so much economic losses including slashing allocations for the health, education, and technology infrastructure sectors and deterioration of the downstream sector and declining refining capacity of zero production in 2020.

He added that subsidies have discouraged private sector investment in the down and midstream petroleum sectors, leading to low employment generation on account of offshore refining amid worsening national debt.

Additionally, subsidies led to declining balance of payment, increased foreign exchange pressures and depreciation of the naira, product losses, inefficient supply arrangements, scarcity and attendant queues.

Fuel subsidies have cost Nigeria so much economic losses including slashing allocations for the health, education, and technology infrastructure sectors and deterioration of the downstream sector…

Petroleum Industry Act

Orji further noted that the Petroleum Industry Act (PIA), was expected to change all of these, and a Presidential Steering Committee was set up in 2021 to coordinate its implementation.

“Not much is in the public domain on the progress of the committee’s work. Civil society should step up advocacy for the conclusion of the Committee’s work and submission of its report to the President before the expiration of this administration with clear recommendations to the next administration on what has been done and outstanding work,” he stated.

Similar to the global Extractive Industries Transparency Initiative (EITI), which NEITI implements, Orji said the PIA 2021, also mandates the Nigeria Upstream Petroleum Regulatory Commission (NUPRC), to publish the texts of any new license, lease or contract, or amendment immediately following the granting or signing of such texts.

He also drew the attention of stakeholders to the Glencore bribery scandal, uncovered by the United States Department of Justice (DoJ), that the oil traders had paid bribes in various sums spanning over a decade to some Nigerian government officials and the NNPC to secure crude oil contracts and other business advantages.

“Through our mandate and our commitment, NEITI drew the attention of the federal government to the Glencore bribery scandal through the Office of the Secretary to the Government of the Federation.

“NEITI also while engaging on the issue drew the attention of civil society and the NNPC to their roles and demanded investigations into the Glencore bribery allegations and if confirmed prosecute offenders.

“This will send strong signals to Nigerian partners, especially the international community that such acts of brazen corruption will not be condoned, shall be dealt with and sanctions enforced.

“Update on the issue showed that the case is before the EFCC for further investigations and action. I, therefore, call on the EFCC to conclude investigations and prosecute culprits where they are found culpable,” he said.

The Executive Director, Policy Alert, Tijah Bolton-Akpan, noted that the PIA has imposed additional obligations in the areas of contract openness and beneficial ownership transparency on the NNPC and the NUPRC.

He said this has also thrown up many questions regarding: “How can we leverage these provisions to ensure that hidden company ownership is not exploited to shield corrupt industry players and their collaborators in government from accountability while they continue to bleed our country dry?

“How can the NNPC get back on track on some of the impressive strides it had begun making on mainstreaming proactive disclosure, but which have recently been rolled back, almost creating a dent on its credentials as an EITI supporting company?

“With the beneficial ownership reforms under the CAMA 2020, how can the CAC increase the quality of beneficial ownership disclosures to ensure that such data becomes more useful for accountability actors such as civil society, law enforcement and the legislature in tracking transactions such as the crude swap deals?

“How can this conversation improve the scope and quality of NEITI’s subsequent audits but even beyond that the progress on remediation issues? How do we situate this whole conversation within the context of a rapidly unfolding energy transition which appears to be leaving Nigeria behind with a huge governance baggage from the fossil fuel era?

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