Oil is the lifeblood of modern economy. The discourse about how oil has made or marred the destinies of nations is intrinsically linked to its governance. Sadly, the Nigerian face of that discourse is located in the epitaph of the “resource curse” – a paradox under which countries that are rich in natural resources such as oil, gas and minerals experience less economic growth and poorer development outcomes compared to those without natural resources. Proposals for solving this paradox should be critical touchstones in Nigeria’s upcoming elections.
Despite producing oil for over half a century, Nigeria continues to post unenviable records of underdevelopment with relative poverty index rising from 54.4 percent in 2004 to 69 percent in 2010. The meteoric rise in oil rents has enlarged the country’s public expenditure estimated at over 80 percent oil-dependent, resulting in its inability to maintain fiscal discipline. It is little wonder that between 1961 and 2000, Nigeria ranked as one of the ten most volatile world economies as a result of pro-cyclical fiscal expenditure in government revenues, trade, real exchange rate and GDP growth. The “easy money” mentality created by oil has precipitated a reckless quest for political power, given the significant correlation between political power and access to state resources. The result has been high-level corruption, lack of transparency and accountability, coups and counter-coups, electoral fraud and prebendal behavior among past and present military and civilian rulers.
At the heart of Nigeria’s oil sector governance problem are weak institutional capacity and ineffective revenue management. So entrenched is the rot that Alex Gboyega et al argued that “every institution along the extractive industries value chain that potentially could prevent fraud is weak.” Efforts by the federal government to reform the sector through the Oil and Gas Implementation Committee in 2000 and 2007 led to the birth of the National Oil and Gas Policy 2004 and the Petroleum Industry Bill (PIB), but neither have been adopted, much less delivered benefits to the state or citizens in general.
The result is that Nigeria has continued with the highly problematic Nigeria National Petroleum Company (NNPC), which is unable to withstand global competition or operate in compliance with international best practices. In 2012, a study of 12 national oil companies by the Natural Resource Governance Institute (then known as the Revenue Watch Institute) established that the NNPC was the most poorly governed. This happened at a time when the dust raised by the January 2012 nationwide protests against fuel subsidy scam had not fully settled.
Similarly, the 2013 Resource Governance Index ranked Nigeria 40th among 58 countries analyzed, with a weak overall composite score of 42 points, highlighting cases of incomplete revenue disclosure, lack contract transparency, bypassing of processes and procedures and incomplete reporting by the Ministry of Petroleum Resources on upstream licensing. The index also highlighted opacity in fiscal and production arrangements, contracts, environmental impact assessment and operational data, as well as failing government monitoring and substantial conflict-of-interest disclosure requirements in the use of discretionary powers in the award of oil block licenses. The NEITI Fiscal Allocation and Statutory Disbursement (FASD) audit report covering the 2007-2011 period also reveals that neither national nor sub-national transfers have been effectively and efficiently managed for the promotion of public good.
All of these are serious issues that beckon debate as Nigeria goes to the polls. In the run-up to the 2015 elections, the issue of natural resource governance, particularly of the oil and gas sector, has become a critical part of public discourse. The Nigeria Political Parties Discussion Series (NPPDS) is the platform provided by the Centre for Democracy and Development (CDD) for political parties to engage the Nigerian public. Aiming at the promotion of issued-based politics and democratic accountability, the NPPDS provides a platform for debating and enlightening the Nigerian electorate on party policies and programs.
As part of the series, the ruling Peoples Democratic Party (PDP) and its main challenger, All Progressives Congress (APC), recently met in Abuja to discuss natural resource governance with specific focus on oil and gas sector. Among the wide range of questions that guided the debate were:
What is the link between democracy and natural resource governance?
How will that be reflected in the 2015 elections in Nigeria?
How do APC and PDP intend to assert and improve democratic accountability in oil and gas governance with a view to securing citizens’ confidence and trust?
What reform promises are on offer to secure stabilization of long-term investment in the sector?
What should the electorate expect in terms of full disclosure of information on the governance of the sector from both competing parties?
What are the signs to watch out for to know parties are drifting from promises made when eventually elected?
How do the parties propose that citizens hold them to account on the basis of these promises?
APC national publicity secretary Lai Mohammed and PDP representative Katchi Ononuju offered their perspectives at the well-attended event. Both representatives acknowledged that a significant correlation exists between democracy and good natural resource governance, given the prominent place of citizens’ welfare in democratic governance. To this extent, the focus of any responsible government should be to serve the general interest of the citizens, including the effective management of the oil and gas sector.
At the height of oil and gas governance discourse in today’s Nigeria is the PIB, aimed at redressing monumental corruption in the sector. Both the APC and PDP debaters were in agreement that the PIB requires a speedy passage, but differed on what is stalling it in the National Assembly. Ononuju and Mohammed each implied that the other’s party was to blame. The latter critiqued the mixing of NNPC’s commercial, operational and regulatory roles, pledging his party’s intention to unbundle the corporation and make it publish its balance sheet for public scrutiny like any other agency of government.
“The NNPC is too powerful and self-regulatory,” Mohammed said. “There is no way the NNPC can regulate itself. It should concentrate on operations. Speaking on corruption in the sector, Mohammed said that the PDP “… government is reluctant to keep off from the oil industry because the entire political structure is fueled by corruption.” He thus promised that within 12 months of an APC-led government, the party will ensure the passing of the PIB and push for reforms that will transform the oil and gas sector, including neutralizing the overbearing powers of the Minister of Petroleum Resources and the NNPC. He also said that an APC government will encourage elected officials indicted for corruption “to put aside their immunity, even for the sake of their names.”
Opposed to the APC plan for guided deregulation of the oil and gas sector, PDP’s Ononuju argued for his party’s commitment to ensuring the reform of the sector through the PIB. Throughout the session, he promoted PDP’s policy of deregulation of the oil and gas sector, arguing that the party stands for total removal of the fuel subsidy. This, he said, will free resources hitherto lost to corruption and ensure that many Nigerians are engaged in the sector.
“We will continue to fight to liberalize the oil industry,” Ononuku said. “We are very happy to state today that there are a lot of Nigerians involved in oil and gas.” He added that the PDP believes in “using what you have to gain the advantages that you seek rather than the old strategy of the military government of conquering and blundering.”
Many promises were made at the debate, but it is the responsibility of the electorate to watch out for signs that the victors are drifting from campaign promises. Signs of such failures would include non-deployment of a clear policy after swearing-in, non-funding of a new policy where it is deployed, or the missing of identified targets. Citizens must hold their rulers to account for their natural resources. To this extent, the statement by Mohammed that the “hallmark of democracy is not just to provide infrastructure for the people but the power of the people to show a red card to a government that is not performing” becomes apt and imperative. That same red card should be shown to any opposition party that fails to convince the electorate that it can do better. It is to this extent that citizens have a collective responsibility to help deepen the roots of Nigeria’s democracy and strengthen oil and gas governance by remaining vigilant and engaged.
Dauda Garuba is NRGI’s Nigeria program coordinator.