The challenges of governing Nigeria’s oil sector are many. Years of corruption and theft – and now plummeting oil prices – present a tough mix for an economy largely dependent on resource revenues.
Despite such outsized obstacles, Nigeria’s robust civil society continues to measure progress in areas of extractive sector governance. For the second time since 2012, partners of the Natural Resource Governance Institute (NRGI) have assessed the country’s performance against the 12 principles or “precepts” of good practice for transforming natural resources for development, as set out in the Natural Resource Charter. The precepts are clustered as follows:
Social development and equity issues comprising socio-economic benefits, transparency and accountability, role of government and role of private sector company;
Sector issues comprising fiscal regime and contractual terms, award of contracts and sector roles, managing local impacts, and nationally owned oil companies;
Public finance management issues comprising investing for growth, stabilizing expenditure, efficiency and equity of public spending, and private sector investment.
The findings of the 2014 benchmarking exercise were released on December 9 in a new report. For this second 2014 edition, the Nigeria Natural Resource Charter (NNRC) partnered with the Lagos-based think tank, the Centre for Public Policy Alternatives(CPPA), which carried out the assessment under the guidance of an NNRC expert panel. The performance scores remained largely unchanged from 2012, but the panel noted four significant trend lines, among others.
First, the Petroleum Industry Bill (PIB), which seeks to reform the entire governance and regulatory framework of the oil and gas sector, still has not been passed. Currently in its third draft, major disagreement remains over the fiscal provisions, discretion in awarding oil blocks and contracts, and other regulatory issues with its proposed institutions.
Second, Nigeria’s oil rigs fell in number from 43 in 2013 to 33 by mid-2014. This may well be connected to the declining investment in the oil and gas sector in the face of a delayed PIB passage.
Third, Nigeria’s GDP, measured at $510 billion, shows new evidence of diversification within the economy, with oil and gas constituting just 13 percent of GDP. Still, the government remains hugely dependent on the sector for export earnings and revenues. Petroleum account for more than 90 percent of total value of exports and 75 percent of government revenues.
Lastly, falling oil prices have more recently raised red flags concerning Nigeria’s oil revenue savings. After 56 years of production, Nigeria’s Excess Crude Account and Sovereign Wealth Fund hold a combined $5.5 billion, the equivalent of just 9 percent of government oil revenues in 2014 alone.
The release of this report comes at an opportune time for contributing to policy discussion in the country. With the general elections early next year, the government’s performance in managing the oil sector should be at the forefront of public debate. Such dialogue will, as CPPA noted after the event, “impact policy platforms of political parties and candidates. So, although the launch is over now, research, advocacy, and collaboration with civil society will continue.”
The findings of this report are a good reference for setting the agenda for such engagement.
Max George-Wagner is NRGI’s governance program associate. Dauda Garuba is NRGI’s Nigeria program coordinator.