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NEITI Audits – Why Remediation Processes Are Slow – Executive Secretary

NEITI Audits – Why Remediation Processes Are Slow – Executive Secretary

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Despite nine cycles of oil and gas as well as seven solid minerals sectors audits, the Nigeria Extractive Industries Transparency Initiative (NEITI) says not much progress has been recorded in resolving key remediation issues in the reports.

The NEITI Executive Secretary, Waziri Adio, said for the agency’s mandate, the lack of progress was due to its flawed legal structural foundation.

Mr Adio was speaking on Monday in Abuja at the one-day national conference on “Resolving Remedial Issues in the NEITI Industry Audit Reports.”

The official said NEITI performed creditably well on two of its primary responsibilities, namely conducting the audit and disseminating information on audit reports.

He said the annual audit report was for people to know whether the companies are paying to government what they should be paying, or whether government is receiving all it should be receiving from the sector.

He said the report usually highlights the processes to give government maximum benefits from the sectors, including the utilisation of the revenues.

Mr Adio said NEITI also carries out remediation, by identifying gaps and the requirements to bridge them, whether structural and systemic issues, to guarantee maximum benefits to government of the revenues received.

“Although remediation is the most critical part of our mandate, sadly it is also the weakest. Despite the progress in conducting the audit and communicating its findings in the report, not much progress has been made on resolving remediation issues and bridging the gaps in the audits,” Mr Adio noted.

He traced the background of remediation to NEITI’s first report in 2005, which threw up reports on missing monies or those not reconciled by the companies.

The discrepancies were as a result of either inadequate measurement infrastructure, limited interface between the different government agencies or lack of records keeping, he said.

“Apart from the issue of money, there were also issues of processes, good governance and the need for government agencies to come together to identify the gaps and reconcile the discrepancies that prevented government from getting what it should be getting, or gaps preventing the sector from operating optimally.

“That was how remediation started in 2006, even before the NEITI Act of 2007 that provided the legal basis for remediation,” he said.

To handle the NEITI audit remediation process, he said an Inter-ministerial Task Team (IMTT) was constituted, with NEITI as the secretariat and chairman.

The IMTT consisted of the Central Bank of Nigeria (CBN), Nigerian National Petroleum Corporation (NNPC), Office of the Accountant General of the Federation (OAGF), Office of the Auditor General of the Federation (OAuGF), Department of Petroleum Resources (DPR), Federal Inland Revenue Service (FIRS), Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) and other agencies.

Regardless, he said the IMTT has not functioned effectively due to some structural issues bordering on the legal framework establishing NEITI.

Although NEITI was mandated to handle the remediation process, he said there was nothing in the enabling law empowering the agency to compel any person or company to act in compliance with stipulated regulations.

“There is nothing in the NEITI Act that empowers NEITI to sanction or take any legal action against anybody for refusing to undertake remedial issues. If an issue is identified with NNPC, CBN or DPR, NEITI cannot do anything other than call a meeting and persuade them to comply,” he said.

Even where the meetings are called, he said, those who have powers to influence action would either not attend, or send lower grade representations that lack authorities to take important decisions to enforce remediation.

Achievements, Challenges, Recommendations

To strengthen the IMTT to be more effective, Mr Adio said NEITI proposed the inclusion of high ranking government officials, like the Vice President, with the power to compel action towards compliance with remedial issues on NEITI audits.

On overview of NEITI remediation status, acting director, technical department, Sa’ad Balarabe, listed some of the remedial issues identified in the various audit reports since 1999 that have either been resolved, partially resolved or yet to be resolved.

Some of the resolved issues include the 33.02 million barrels crude oil production volume by NPDC; $25 million unremitted NLNG feed-stock sales paid in January 2014 and $0.39 million education tax paid by Platform Energy in 2014.

The partially resolved issues include $0.40 million outstanding royalty from crude oil sales by NPDC after paying $50 million; $0.48 million outstanding value added tax by NPDC after paying N6.54 billion.

Others include N2.3 billion outstanding balance of the Niger Delta Development Commission levy by Nigerian Agip Oil Company after initial payments of N5.36 billion and $7.57 million between March and September 2017.

Issues pending resolution include N1.08 trillion unreconciled proceeds of domestic crude sale, after only N1.36 trillion was paid in the federation account by the NNPC out of N2.44 trillion for 2014.

Other outstanding issues include $1.7 billion unpaid consideration for Shell joint venture assets which NNPC agreed to settle the balance, and the $1.55 billion unpaid consideration for Agip joint venture assets which NPDC is yet to pay the renegotiated amount.

Mr Balarabe said NEITI was conducting a study on the losses NNPC claimed it suffered for the non-renegotiation of the 1993 production sharing contract agreement (deep offshore Act) provided fiscal terms different from petroleum profit tax (PPT).

Under the deep offshore inland production agreement, the Act stipulates the renegotiation of government’s revenue take to make PSC economically beneficial if the price of crude oil at any time exceeds $20 per barrel.

Also, the Act also stipulates a review of the law after 15 years’ period from the date of commencement (January 1, 1993) and every five years thereafter.

Mr Balarabe lamented that despite the rise in the price of crude oil to $145 per barrel in 2014 before it dropped to the current price of about $80, none of the stipulated reviews have been effected.

The conference was attended by civil society groups, government agencies and the media.

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