Passage of PIGB: CISLAC lauds Nigerian Senate

By Abubakar Jimoh

The Civil Society Legislative Advocacy Centre (CISLAC) has commended the giant legislative stride by Upper Chamber of the National Assembly that resulted in recent passage of the long awaited Petroleum Industry and Governance Bill (PIGB), after over twelve years in different legislative sessions of the Assembly.

The Centre made this known in a statement signed by its Executive Director, Auwal Ibrahim Musa (Rafsanjani).

The statement said passage of the PIGB formed a major campaign promise of the present administration to be delivered; the commitment which was reiterated in the Federal Government’s Short and Medium Term Priorities to grow Nigeria’s Oil & Gas Industry 2015–2019, fancifully labelled the “7 Big Wins” with a time lapse at the first quarter of 2017.

“We note that the  Bill as passed reflected many of the proposals put forward by civil society, including CISLAC and her partners during the Public Hearing session held on the Bill, especially the unbundling of the Nigeria National Petroleum Corporation (NNPC) to separate her commercial role from her regulatory functions, among others.

“It would be recalled that CISLAC had reservations about the splitting of the Bill initially because of the possibility that the other components may never be attended to and uses the this opportunity to remind the National Assembly that the Bill has left out fiscal issues which remain the most important aspect of the old PIB,” it noted.

It however, urged Senate to immediately commence work on the outstanding parts on which the passed Bill is silent as it had promised, as it is the only way to demonstrate trustworthiness and sustain confidence of Nigerian people.

The statement also called on the House of Representatives to as a matter of urgency, consider the Bill or adopt the Senate version to conclude the legislative process for onwards assent by the President.

“We call on the President to promptly assent to the Bills, whenever they are transmitted to him, after legislative process, as we believe the Bill if implemented will provide appropriate legal and regulatory framework in the oil and gas sector, it added.

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NEITI Audit Report: Experts devise strategies for impactful dissemination

By Abubakar Jimoh

The role of civil society has been described as paramount in active public debate on various disclosures and issues by the Nigerian Extractive Industry Transparency Initiative (NEITI) to promote transparency, accountability and good governance in the extractive sector.

This was revealed by the Chairperson, NEITI Civil Society Steering Committee (CSSC) also Snr. Program Officer, CISLAC Mr. Kolawole Banwo, during Inaugural Meeting of the Committee held in Kano state recently.
He observed that civil society representatives are able to speak freely on transparency and natural resource governance issues, as it is evident that NEITI Reports play a significant role in contributing to civil society’s analysis, research and advocacy.

Giving the instances of the Remediation sub-committee of the CSSC which provides concrete recommendations to the government for reform of the extractive sector as a direct result of NEITI’s Reports, the Chair also did not conceal the fact that civil society has promoted and engaged in discussions around the revised Petroleum Industry and Governance Bill (PIGB) in July 2016.

If passed into law, the new PIGB will provide appropriate legal and regulatory framework particularly important for optimal performance of the oil and gas sector. It will pave way for efficient and effective governing institutions with clear and separate roles for the petroleum industry; establish a framework for the creation of commercially oriented and profit driven petroleum entities that ensures value addition and internationalization of the petroleum industry; promote transparency and accountability in the administration of the petroleum resources of Nigeria; and foster a conducive business environment for petroleum industry operations.

He said while the right for civil society organisations to develop their independent programs to promote transparency in the extractive industries was explicitly recognized, there were no indications that civil society had been restricted from engaging in outreach to broader civil society, including related to discussions about MSG representation and the EITI process.

“Civil society is encouraged to be involved in the design, implementation, monitoring and evaluation of the EITI through participation in meetings of the NSWG, the CSSC and dissemination events. There are examples of broader civil society groups being engaged and asked to provide input to the development of the EITI in Nigeria,” Banwo explained.

He however, lamented lack of recent capacity building engagement by civil society outside Abuja and Lagos. “There do not appear to be recent examples of dissemination events in local communities by NEITI or civil society organisations, although this appears to have been more common in the past.
“Except as concerns dissemination, there is no evidence that the broader constituency is consulted or otherwise engaged in the design, implementation, monitoring or evaluation of the EITI process.

“Despite a favorable framework for civil society engagement, the impression from the stakeholder consultations is that civil society on the MSG does not in fact function as a link between the EITI and the broader constituency,” the Chair bemoaned.

In order to achieve meaningful progress, he further recommended the need to ensure full involvement of civil society in the design, implementation, monitoring and evaluation of the EITI process.

Explaining the concept of “resource curse”, Director of Communications, NEITI, Dr. Orji Ogbonnaya Orji, noted that merely possession of abundant natural resources neither guarantees economic growth nor socio-economic development. He said the tendency for resource-rich countries to be underdeveloped described the theory of “resource curse”.

Given the Dutch theory of “resource curse”, he said the menace featured in appreciation of the exchange rate of resource rich countries’ currencies comparing to those of the world which consequently reduced the global competitiveness of their manufactured and other tradable goods, and resulted in contraction of other tradable sectors of the economy.

On institutional challenges of “resource curse”, the Director observed that prevalence of poor economic policy or management, weak political, bureaucratic and economic institutions breed corruption.

He listed as consequences of “resource curse”, weak institutions, absence of infrastructure, docile population unable to demand accountability, emergence of parasitic elites, poor and ineffective tax culture, violence and social conflicts, agitation for identity and resource control.
As part of the efforts to avert “resource curse”, Extractive Industry Transparency Initiative (EITI) was introduced to promote transparency and accountability around payments made by extractive industry companies and revenues received by governments.

According to him, the Initiative is designed to stimulate debate on public priorities; empower citizens to hold their governments to account for the use of revenues accruing from natural resources; promote transparency, accountability, sustainable development and eradication of poverty; help governments attract direct foreign investments, secure support and cooperation of global enterprises; build trust among host communities and the operating companies; prevent corruption; help countries succeed in improving their tax collection systems.

Recounting the benefits of implementing EITI in Nigeria, Dr. Orji explained that the Initiative has created a framework for reporting and disclosure of receipts and payments in the extractive industry; enabled publication of accurate and credible data on revenue flows; led to acceptance of the need for due process and transparency in the operations of the extractive industry companies; enhanced transparency and accountability by government in the application of revenues from the extractive industries; improved credit rating and higher level of credibility for Nigerian government within the international community.

Highlighting the roles and responsibilities of stakeholders in the dissemination NEITI reports, the Team Leader, Outreach, NEITI, Obiageli Onuorah, noted that civil society has the responsibilities towards community participation, social mobilisation, advocacy for remediation, public education, enlightenment and dissemination, monitoring and oversight, whistle blowing and feedback.

She mentioned as part of civil society’s expectation from the process: good governance, transparency and accountability, comprehensive reforms in the extractive sector, economy diversification, poverty alleviation, effective dissemination and simplification of the reports, social harmony, environmental justice, corporate Social Responsibility, generational equity, strong political will, enforcement and sustainable development.

The Executive Director, Centre LSD, Dr. Otive Igbuzor, explained that while the challenge of transparency and accountability, especially for countries that depend on revenue from mineral resources, is a global one, according to him, it is only through the efficient management of resources that such countries can deliver social and economic benefits to their citizens.

He said: “There is significant evidence that corruption is widespread in Nigeria. The main revenue source for the country is oil and is therefore prone to the political economy of oil. The idea of revenue transparency has gained currency with the Extractive Industry Transparency Initiative (EITI).”

Reviewing the impacts of implementation of the NEITI’s Strategic Plan 2013-2017, he commended the Strategic Plan for opening, especially the oil and gas sector to greater public scrutiny, reducing discrepancies between receipts and payments, improving quality and speed of data collection.
The Executive Director however, did not hide the fact that NEIT has been unable to deliver timely audits in a way that would maximize the currency and relevance of its audit reports with limited impact and stakeholders.

“The review showed that remediation remains the weakest link in NEITI’s operations is majority of issues raised in the audit reports which are yet to be resolved.

“While NEITI has performed considerably well in its reporting and dissemination responsibilities, the fundamental assumption that increased openness would lead necessarily to greater accountability in the management of extractive has not materialized. This is evidenced by the huge gap between the volume of revenue earned over time and Nigeria’s development indices. It is also evidenced by the weak governance indices that the country has recorded both in the governance of the extractive sector and the economy.

“The reality therefore calls for a review of the underlying assumption of the relationship between transparency, accountability and ultimately shared prosperity for the citizens,” he said.

Identifying remedial issues in 2014 Report, Michael Uzoigwe representing the Facility for Oil Sector Transformation (FOSTER) observed weak arrangements around the domestic crude oil allocation; opaque and discretionary license and lease award processes; weak arrangements for monitoring and measuring crude and liquids, from well-heads to terminals; 2000 Memorandum of Understanding (MOU)-fiscal terms- between NNPC and Joint Venture Companies; Petroleum Profit Tax (PPT) underassessment and issues with other taxes and income; loss of gas income for the Federation and Production Sharing Contract (PSC) Gas Agreement.

Uzoigwe noted the effort and improvement in addressing the 2014 remedial issues when he said through civil society advocacy, the delayed payment for domestic allocations received by Nigeria National Petroleum Corporation (NNPC) had been resolved with a joint monitoring framework developed by OAGF, Revenue Mobilisation Allocation and Fiscal Commission and NNPC to ensure payments were made by Corporation as at when due.

He explained that the civil society engage with Department of Petroleum Resources and MPR to fast track pending out of court settlement with Shell had helped to prevent loss of revenue from some oil blocks.

Uzoigwe added that the civil society’s engage with DPR to define industry standard production point to serve as standard benchmark for the purpose of computing royalty has resulted in the provision of a uniform basis for measurement of crude oil, and the proposed new measurement guideline.

Stressing the roles of civil society in NEITI process, Executive Director, Africa Network for Environment and Economic Justice (ANEEJ), Rev. David Ugolor noted that active participation of civil society in EITI Process is key to ensure that EITI leads to greater accountability.

“The participation of civil society in the EITI process is formally assessed at two stages of EITI Implementation—during the candidate assessment and validation, and hoc basis in response to special request. Civil Society provision in the EITI Standard remains consistent at every stage of EITI Implementation and the evidence changes according to the situation of the Country, stage of implementation, and availability of information.

“The NEITI Act and the Memorandum of Understanding (MOU) between the Civil Society and National Stakeholder Working Group (NSWG) provides a robust framework for civil role in the NEITI Implementation. The civil society representatives in the NSWG are expected to reflect the perspectives of their constituency in the meetings.

“Civil society can also provide input into the Work Plan through their representatives in the NSWG. Civil Society can also undertake research and advocacy around the implementation of the Work Plan. Civil Society can use their various network like the Publish What You Pay Campaign to support the implementation of concrete outcome of the annual audit report. Civil Society can also build alliance with other stakeholders to influence the NSWG to adopt concrete measures that will improve the EITI Standards. Civil Society can also use the annual audit report to engage in evidence based advocacy to end corruption in the oil sector,” Rev. Ugolor added.

NEITI Board Appointment: CSOs pass vote of confidence in Banwo

By Abubakar Jimoh

A group of civil society organisations working on good governance, transparency and accountability in the extractive sector in Nigeria has reiterated support for and passed a vote of confidence in Kolawole Banwo, a Snr. Program Officer at CISLAC, over his appointment as civil society representative on the National Stakeholders Working Group (NSWG) of the Nigeria Extractive Industries Transparency Initiative (NEITI).

This was made known in a statement signed by 73 civil society organisations representing the six geo-political zones in the country.

The group however, described as “shock and disappointment”, a recent statement signed by 19 individuals of 18 organisations purportedly challenging the appointment of Banwo.
The group expressed displeasure over the statement which came after several local and international civil society groups and development partners had warmly received the news and congratulated Banwo who has since taken his seat in the Board.

It said, “The so-called self-selection process referred to which is coming eight full months after the dissolution of the former NSWG in July 2015, three weeks after the constitution of the Board and only after a meeting at the instance of the Executive Secretary was nothing short of a panic decision meant to quickly legitimize an exclusive arrangement to suit the pre-determined ends of throwing up one among the signatories who is known to have been going around lobbying those believed able to make this happen.

Debunking the rumour that Banwo’s appointment was secured through “the back door”, the group noted that neither Banwo nor CISLAC for which he works went craving for the NEITI Board appointment. “We are aware that a formal letter has been sent to the Office of the Secretary to the Government of the Federation (SGF), who issued the Letter of Appointment, by the same group and we will leave them to respond accordingly.

“It is necessary to recall that although the process that threw up the immediate past civil society representative on the NEITI Board was facilitated directly by civil society organisations themselves through a Committee they set up. The committee was made up of credible and very senior and highly respectable actors in the sector, issued with a Terms of Reference and widely publicized its process.

“The Statement issued by the purported PWYP-Nigeria on Banwo’s appointment created the impression that the step taken will freeze the civic space for civil society participation in the NEITI process. Again this is misleading, as it is not and cannot be the case. It will rather expand it. Indeed, one of the grouse some of the signatories have against CISLAC and the person of Mr. Banwo is his deliberate strategy over the past three years of deepening and decentralizing the knowledge of the Extractive sector and the NEITI process to state based groups in locations considered to be the backyard and stronghold of some of the personalities who signed the statement,” it explained.

The group therefore reiterated confidence in Banwo’s appointment as civil society representative in the NEITI Board having been in the forefront of extractive industries work in Nigeria, calling for restructuring and repositioning of PWYP-Nigeria to enhance civil society’s effective engagement with extractive industries work with a view to taking it to the next stage.

Still on Monumental Financial Loss to Oil Sales Shady Deals

By Abubakar Jimoh

The Nigeria National Petroleum Corporation (NNPC) has hitherto employed various mind-boggling secrecies in the sales of oil, maximising chances for years of unchecked monumental fraud, corruption and mismanagement of the nation’s largest revenue stream.

A recent report by Natural Resources Governance Institute estimates $41 billion generated from the sales of crude oil, which constituted the highest government’s revenue stream in the 2013, the same year studies by Civil Society Legislative Advocacy Centre (CISLAC) gathered that every 10 minutes one woman dies from conditions associated with childbirth, and only 39% births take place with assistance of medically trained personnel, coupled with the scarcity of skilled attendants, absence of personnel among other factors impeding the effectiveness of health services in the country.

At the same time, the United Nations Educational, Scientific and Cultural Organisation (UNESCO) also in 2013 released a shocking report indicating that one out of every five Nigerian children is out of school, pointing to the fact that Nigeria holds the world record (accounts for 47% of the global out-of-school population) of having the highest number of its young people out of school.

Although the above reports were widely regarded as national disgrace, however, subsequent glorified mismanagement of the nation’s huge revenue generated from the oil sales was a clear indication that citizens’ welfare and standards of living was practically out of the government’s agenda.  For instance, in early 2014, Nigeria’s Central Bank Governor, Lamido Sanusi raised alarm over the missing N20 billion from NNPC’s oil sales revenues.  The same period Nigeria Extractive Industries Transparency Initiative (NEITI) Audit reported un-remitted $9.6 billion in the oil and gas sectors couple with the massive stealing of 200,000 barrels of crude every day reinforced by the already widespread corrupt activities eating deep into the nation’s economic and political realms.

It is worrisome that effective management of oil sales has been intentionally worsened especially since 2010, primarily to frustrate transparency and accountability of revenue generated from the sector. As reported by NRGI, NNPC had entered into poorly designed oil-for-product swap deals when it could no longer meet the country’s fuel needs, just as the corporation began unilaterally spending billions of dollars in crude oil revenues each year, rather than transferring them to the treasury, because NNPC’s actual budget process fails to cover operating expenses.

Meanwhile, continuous sales of crude oil by NNPC to government that do not refine it further expose Nigeria to a glut of unnecessary middle men and prompt corruption scandals in five buyers countries.

It was against this backdrop that in September, 2015, CISLAC was widely reported advocating for the immediate need to curb all existing offshore processing agreements and institute a competitive and open process and employ the more universally practiced format of refined product exchange agreements. CISLAC expected the NNPC to design a crude sales system that eliminates the use of multiple middlemen and companies that are unqualified to operate in the sector.

By October 2015, a report by NEITI disclosed that the federal government had lost $966million in revenue from the crude oil swap deal supervised by NNPC between 2009 and 2012, bringing the cost of crude oil swapped to 6.4 billion dollars in 2012 alone, when the value of refined products returned to Nigeria was 6.3 billion dollars. This resulted in $500 million as total revenue loss to the Federation Account from 2009.

Similarly reports have questioned the dramatically widening gaps between the sales value of domestic crude, as assessed by NNPC, and the transfers of the direct crude allocation revenues to the Federation Account. For instance, in 2004, NNPC reportedly retained over $1.6billion (27%) of the direct crude allocation’s full assessed value; and by 2012, the figure had increased to $7.9billion (42%) of the value of the domestic oil for the year. Understanding these huge economic losses, the government recently approved the cancellation of offshore processing and crude swap deals for refined oil products between the NNPC and oil traders.

Also, the excessive power accrued to the NNPC paved way for the questionable discretion exercised by the corporation over the retained several billion dollars a year for subsidized kerosene sales despite the 2009 presidential directive calling for an end to the kerosene subsidy. An audit report by PricewaterhouseCoopers (PwC) showed duplicated and undocumented expenses totalling $2.07billion in 19 months without evidence disclosing to other agencies what buyers of domestic crude actually paid.

It has become imperative for Nigerian government to: effectively manage and maximise revenue from its oil sales in order to advance an urgent developmental agenda towards socio-economic development; rebuild depleted foreign reserves and oil savings; boost demand for Nigerian crude; eliminate direct crude allocation; develop explicit revenue collection framework for NNPC to facilitate more predictable financing and reins in discretionary spending; stop NNPC from selling oil unqualified local and international companies .

How Judicious are Higher Revenue Allocations utilized?

By Abubakar Jimoh

Effort to raise public consciousness on extractive revenue allocation and utilisation at all levels brought to the fore, the simplified Fiscal Allocation and Statutory Disbursement (FASD) Audit published by Civil Society Legislative Advocacy Centre (CISLAC) with support from Oxfam Novib.

The publication, which simplified FASD Audit, covering the period 2007 to 2011 aims at: bringing to limelight in simple and understandable methodology, various revenues from the extractive industries paid into the Federation Account as well as their distribution to and receipt by the various tiers of government and other beneficiaries; improving public awareness and confidence in governance by educating the civil society of the utilisation of revenues realised by the Federal Government; enhancing public governance and awareness through provision of timely and current information and data that would form the basis for revenue allocation, disbursements and use in Nigeria.

A recent report by Niger Delta Development Commission (NDDC) identified Akwa Ibom, Bayelsa, Rivers, Delta, Ondo, Abia, Imo, Edo Cross River, and Anambra as oil producing states in Nigeria. These States are entitled to 13% derivation allocation from oil production making them the highest revenue earners from the Federation Account. The Simplified FASD Audit presents total sums allocated to the oil producing states between 2007 and 2011 as: Rivers, N1.17tr; Akwa Ibom, N972.7bn; Delta, N771.8bn; Bayelsa, N640.7bn; Ondo, N340.6bn; Imo, N237.6bn; Cross Rivers, N217.3bn; Edo, N217.1bn; Abia, N198.3bn; and Anambra, N195.4bn.

With 13% Oil Derivation Fund of N534.9bn, 403.8bn, 256.2bn, 429.1bn and 351.8b totaling N1, 976tn in 2007, 2008, 2009, 2010 and 2011, respectively, allocated to the oil producing states to augment their income and specifically develop the states to improve living standards of the people, it is worrisome to have a UNDP survey in 2010 identifying Akwa Ibom with the third highest poverty rate of 27.1 per cent in the South-south zone after Cross River (31.9%) and Bayelsa (32.5%). According to the National Bureau of Statistic (NBS), as at 2010, Akwa Ibom State’s unemployment rate was the second highest in the zone with 25.8 per cent, while Delta State had the worst (27.2%).

Apart from the oil producing states, Lagos and Kano States fall within the highest recipients of allocation from the Federation Account with N436.3bn and 304.8bn, respective in the period under review. In 2013, a report by CISLAC revealed that no fewer than 1,025 deaths take place per 10,000 births in Kano State; and the State has achieved only 8% (of 15%) of Maputo Declaration on national budgetary allocation to health. Among the contributory factors to the high prevalence of maternal mortality in the State are high level of illiteracy, poor access to healthcare services and rising poverty level.

Similarly, on 28th October 2014, a report by Vanguard Newspaper exposed how health centres in Alimosho Local Government, a suburb of Lagos were adding half gallon of kerosene to the list of requirements expectant mothers must submit before delivery. According to the report, a visit to some other health centres revealed that in addition to the power problem, chronic shortage of medical personnel is another challenge, constituting factors bedeviling effective delivery of healthcare services. “The Local Government Area, home to about two million people and one of the largest local governments in Lagos State, can only boast of two PHCs. Worse still, Alimosho has one of highest maternal mortality rates in the state. A 2008 NDHS Report shows that it had about 900 deaths per 100,000 live births.”

As highlighted in the FASD Report, projects were reportedly poorly executed and monitored. The report cited an instance of Nassarawa State, where Farin Ruwa Dam, which cost about N1.4billion, was not executed. The only structure on the project site was a security and a sign post directing people to the site.

The FASD report advised the State governments to re-evaluate the revenue profile with an articulated and strategic plan to exploit the internal economic potential with intent to ensure equalization of their social and economic cost-benefit analysis. It has become imperative for states to embark on thorough review of their recurrent revenue, most especially overhead cost to avoid wasteful spending at the expense of capital development.

Why Mining Host Communities’ Interests should be prioritized

Abubakar Jimoh

extractive-2

The Constitution of Federal Republic of Nigeria provides the Federal Government with control of all minerals in Nigeria. This consequently nullifies private ownership of solid minerals in Nigeria, and with effect, gives the Federal Government exclusive power not only over solid mineral, but also mining concerns in the country.

The aforementioned significant power makes it important to critically consider some fundamental rights of the Nigerian citizens; as solid mineral in Nigeria are mined at the expense of the host communities’ socio-economic, health and environment. Chapter IV of the Constitution of Federal Republic of Nigeria guarantees the fundamental rights of Nigerian citizens. In this case, the constitution also provides rights that are very relevant to the solid mineral extraction. For instance, according to the Constitution, “[t]he State shall protect and improve the environment and safeguard the water, air and land, forest and wild life of Nigeria. …exploitation of human or natural resources in any form whatsoever for reasons, other than good of the community, shall be prevented”.

It is noteworthy that mining extraction comes at a cost to environment, community health, and with social consequences most of which are borne by mining host communities. At the core of planning and implementation in the mining sector adequate attention has not been given to the protection of the rights of mining host communities; and failure to ensure their protection often results in disasters.

There are reported little or no knowledge by most mining communities in West Africa about the mining and its impact on their environment, health or social construction.  Also, most have no knowledge that mining activities – both by company companies and artisanal miners are regulated by government. While they knew most companies obtain licenses from the government, they have very vague knowledge of the regulatory institutions or legal framework governing mining or protecting their rights within this framework.

More importantly, illegal underground mines constructed by unregulated artisanal miners in some communities covered by the report have created environmental hazards and weakened social infrastructural like communal access roads. It has been observed that large expanses of farmlands have given way to unsustainable mining activities, giving accounts that de-vegetation promotes erosions and directly contributing to rapid desertification across the region.

The common health impacts of mining activities reported in host communities assessed were air effluents and dust pollution resulting in respiratory infections and condition including asthma, chronic bronchitis, and pneumoconiosis; noise pollution resulting in varying degree of deafness and stress related disorders; and water pollution resulting outbreaks of cholera and other water borne ailments. These sources of pollution potentially for long term health impacts such as cancer, skin disorder, birth defects, miscarriages and infertility.

Free prior and informed consent (FPIC) is a principle that a community has the right to give or withhold its consent to proposed projects that may affect the lands they customarily own, occupy or otherwise use. FPIC remains a key principle in international law and jurisprudence related to indigenous peoples. As noted by Forest People Programme (FPP), England, FPIC implies informed, non-coercive negotiations between investors, companies or governments and indigenous peoples prior to the development and establishment of mining estates or other enterprises on their customary lands. “This principle means that those who wish to use the customary lands belonging to indigenous communities must enter into negotiations with them. It is the communities who have the right to decide whether they will agree to the project or not once they have a full and accurate understanding of the implications of the project on them and their customary land. As most commonly interpreted, the right to FPIC is meant to allow for indigenous peoples to reach consensus and make decisions according to their customary systems of decision-making,” FPP explained.

Also, on the other hand, FPIC becomes necessary to ensure a level playing field between communities and the government or companies, and where it results in negotiated agreements, gives companies with greater security and less risky investments.

It has therefore become imperative for government to prioritise the interest and involvement of mining hot communities in relevant agreement with mining companies. This will not only guide the communities from negative effects of mining activities, but also ensure mineral resources are harnessed for growth and development country.

Still on 2009 ECOWAS Mining Directive

By Abubakar Jimoh

Effort to strengthen protections for the local communities most directly impacted by the mining activities resulted in the adoption of a new directive guiding the principles and policies of the region’s mining sector in 2009 by mining ministers representing the member states of the Economic Community of West African States (ECOWAS), a sub-regional body of 15 countries.

Without doubt, adopting a regional mining policy directive remains an important step toward strengthening regional protections for the basic rights and livelihoods of mining-affected communities in West Africa and ensuring that mineral resources contribute to their sustainable development. The draft of the directive, which aims at addressing financial, social and environmental challenges facing mining host communities across West African region, was developed by the ECOWAS Commission with input from government officials, civil society organizations, and communities affected by mining.

Although, revenues from the mining industry form an important part of the economies of many West African countries, however, these revenues do not always translate into benefits for citizens. For example, Ghana is the second-largest gold producer in Africa—producing 2.5 million ounces of gold in 2007—but nearly 80 percent of Ghanaians are living on less than $2 per day. Also, Nigeria is one of the major exporters of crude oil in the world, the 6th largest producer of crude oil and the 5th largest supplier of crude oil to America and Western Europe, however, 61 per cent of Nigerians are reportedly living below the poverty line.

Apart from ineffective utilization or mismanagement of revenue from extractive sector across West African region, mining extraction comes at a cost to environment, community health, and with social consequences most of which are borne by mining host communities. At the core of planning and implementation in the mining sector adequate attention has not been given to the protection of the rights of mining host communities; and failure to ensure their protection often results in disasters, a classic example was the Zamfara lead poisoning disaster in Nigeria.

There are reported little or no knowledge by most mining communities in West Africa about the mining and its impact on their environment, health or social construction.  Also, most have no knowledge that mining activities – both by company companies and artisanal miners are regulated by government. While they knew most companies obtain licenses from the government, they have very vague knowledge of the regulatory institutions or legal framework governing mining or protecting their rights within this framework.

It is noteworthy that illegal underground mines constructed by unregulated artisanal miners in some communities covered by the report have created environmental hazards and weakened social infrastructural like communal access roads. It has been observed that large expanses of farmlands have given way to unsustainable mining activities, giving accounts that de-vegetation promotes erosions and directly contributing to rapid desertification across the region.

The common health impacts of mining activities reported in host communities assessed were air effluents and dust pollution resulting in respiratory infections and condition including asthma, chronic bronchitis, and pneumoconiosis; noise pollution resulting in varying degree of deafness and stress related disorders; and water pollution resulting outbreaks of cholera and other water borne ailments. These sources of pollution potentially for long term health impacts such as cancer, skin disorder, birth defects, miscarriages and infertility.

As one of the major steps to address the aforementioned challenges, on 17th April, 2009, ECOWAS Ministers of mines and Industries met in Abuja to adopt the Draft ECOWAS mining directive after a two-day meeting of experts from Member states. The West African Civil Society Forum (WACSOF), ECOWAS Commission and OXFAM America, West Africa Regional Office, worked for the vision and the exemplary win-win partnership that led to the adoption of a mining directive. They also developed an action plan to support its actual implementation process before 2014.

The directive aims at improving transparency in mineral policy formulation and implementation process in mining in West Africa and through participation of the State, mining companies, concerned communities, and civil society actors in their diversity; providing a mining environment that will boost growth in West African economies and lessen competition among member states; providing a legal framework for various civil society actors and communities to engage States and Companies for accountability, respect of human rights, and preservation of the environment; providing for compliance and contentious issues to be addressed by the ECOWAS Commission and the ECOWAS Court of Justice.

It is worrisome that despite the adoption of the directives six years back, there are persistent reports on failure by member states to diligently implement the directives to safeguard their citizens from environmental impacts of mining activities. In some communities for instance, abandoned mines have been improvised into water wells and contaminated them for community use.

In order to facilitate the attainment of an efficient mineral sector that is beneficial to the West African populations through the effective implementation of the EMDP and the Directive on the Harmonization of Guiding Principles and Policies in the Mining Sector (henceforth referred to as the Regional Mining Directive or The Directive) in the ECOWAS Member States, as well as the development of a Regional Mining Code, a regional meeting was organized by WACSOF with the support from Oxfam in Accra, Ghana from 22-23 February 2013.

The forum revealed that in terms of publication of the Directive in the Official Gazette, seven countries (Benin, Burkina Faso, Gambia, Guinea, Guinea Bissau, Senegal and Togo) had published the Directive in their Official Journal; three countries (Mali, Niger and Nigeria) were in the process of publishing the Directive;  Cote d’Ivoire had not begun the process to publish the Directive in its Official Journal; Liberia and Sierra Leone had an unclear status regarding the publication of the Directive; and Cape Verde has not demonstrated interest in publishing the Directive in its Official Journal.

Going forward, in March 19-20, 2015, an Annual Impact Reflection (AIR) meeting organized by Oxfam West Africa Regional Office in Darkar, Senegal, revealed that through the inclusive process of regional civil society led by Oxfam, comparative study on mining and oil codes and the ECOWAS Directive has been drafted in Senegal; Mali has shown commitment to promoting the Domestication of the Directive; while seven African countries (Mali, Guinea, Niger, Senegal, Sierra Leone, Cote ‘Ivoire and Ghana)were reported to revised or in process of revising their mineral code to harmonise with the ECOWAS Mining Directive, six others (Benin, Burkina Faso, Gambia, Senegal, Guinea Bissau, Togo and Ghana) have applied the ECOWAS Mining Directive.

The meeting noted several challenges militating against effective implementation of the Directive by member states were observed and these include: weak collaboration between civil society and some state authorities on issues affecting extractives; existing misconception about the relevance of civil society by state authorities; inadequate awareness; inadequate intervention by civil society; diverse interests by civil society and state authorities; member states’ institutional capacity challenges; inadequate capacity by civil society organization to engage mining issues.

More importantly, in Accra 2013, WACSOF had proffered some useful recommendations to the aforementioned challenges. These are: more specialized civil society on extractive issues; constructive collaboration between civil society member states; enhanced civil society’s participation in regional mining processes; adequate funding for civil society to engage mining process and demand accountability; states’ institutional capacity development on issues affecting mining.

Furthermore, persistent advocacy to by civil society to key policy and decision makers, communities, media as well as regional experience sharing on domestication and implementation of the ECOWAS Mining Directive were other vital strategies recommended by participants at Annual Impact Reflection (AIR) meeting in Dakar, Senegal.

Harnessing potential from the extractive sector

By Abubakar Jimoh
extractive
It is not gain saying that Nigeria is a member of Organization of Petroleum Exporting Countries (OPEC), one of the major exporters of crude oil in the world, the 6th largest producer of crude oil and the 5th largest supplier of crude oil to America and Western Europe, 8th largest oil exporter in the world with proven oil reserves exceeding 9 billion tons, the largest hydrocarbon feedstock producers in Africa, and ranks twelfth place worldwide.
The country relies heavily on its petroleum industry for economic growth – the sector accounts for about 80% of government revenues and provides 95% of foreign exchange. Despite all this, Nigeria has over the years being denied its fair share of adequate revenue from the oil and gas.
Apart from the oil and gas sector, Nigeria is blessed with abundant natural resources of various types. A report by Civil Society Legislative Advocacy Centre (CISLAC) titled “Maximizing Tax Revenue from the Extractive Industries”, estimated that Nigeria has over 500 mineral deposits sites of over 34 different minerals across the country. These include gold, coal, tin, columbite, bitumen, diamonds, and precious stone of various degrees.
Findings have revealed that of all the resources, 100 are common, 50 are occasional and others are extremely rare. It would be important not to be carried away by these, but the extent at which Nigeria effectively harness the present common resources to provide for the basic needs of the citizens.
It is noteworthy that though principal objective of every fiscal policy is to ensure the government receives the best share of revenue from resources, however, Nigeria records no significant rise in revenue during periods of increase profitability.
As reveals by the 2014 Nigerian Natural Resource Charter (NNRC), “The fiscal regime does not ensure that the government receives a rising share of revenues during periods of increased profitability as the fiscal terms in the contracts covering almost all of Nigeria’s oil production.
“The fiscal regime does not ensure that the government has a minimum revenue stream in all production periods, with the exception of signature bonuses and royalties except for deep-water operation under the 1993 PSC contract, for which royalty is zero. The fiscal regime does not provide robustness to changing circumstances as it often requires the government and IOCs to re-negotiate when circumstances change, and many previously agreed contractual terms are still under dispute.”
The principle legislation governing petroleum operations in Nigeria is the Petroleum Profits Tax Act of 2007. Its major fiscal instrument is the Petroleum Profit Tax, a resource rent which focuses on profitability. This tax according to 2014 NNRC Report, “is considered progressive as it taxes only increase in profitability with Net Present Value (NPV) threshold rate calculation. Under the PPT, the tax rate is set at 67.5% for the first five years of taxable operation by the company and 85% thereafter.
“According to industry experts, extensive revenue losses persist due to weak cost regulation. At the time of signing the 1993 PSC, the conditionality for petroleum products including industry cost for production was low. Till date, the country is yet to overhaul the fundamental strategy components that will address contemporary market conditions.”
In order to promote transparency and accountability in the management of revenues from oil, gas and mining sectors, Nigeria took a bold step with the creation and legal strengthening of the Nigeria Extractive Industries Transparency Initiative (NEITI) in 2004, when it signed on to the Extractive Industries Transparency Initiative (EITI), a global initiative aimed at ensuring that resources from the extractive industries contribute to poverty reduction and sustainable development.
The NEITI has the primary objectives of promoting greater transparency and accountability in the management of natural resource revenues as well as combating corruption between the public and private sectors by calling for the mandatory disclosure of payments from companies to the national governments and declaration of payment received from companies by the governments. Secondary objectives pursued by NEITI implementing countries are reducing poverty, creating a climate favourable to economic growth by the improved use of state revenues coming from the extractive industries, and addressing the environmental impacts of the extractive industries.
Accessing the achievement, NEITI since it was adopted in Nigeria, Madeline Young, a Financial Nigeria columnist, wrote, “Nigeria can be proud that it was the first of 45 member nations to enact formal legislative framework for EITI (NEITI Act of 2007).
“The initiative has brought positive developments in revenue transparency, but it has not had a significant effect on human development and governance reform. International stakeholders in the public and private sectors are concerned that the Nigeria Extractive Industry Transparency Initiative (NEITI) is being undermined by fundamental incoherencies between unchecked commercial activities in the extractive industries and incongruous development cooperation policies.”
Young argues that in order for the international community to effectively contribute to the economic and political development processes of the NEITI initiative in parallel to Nigeria’s own national reform efforts, the problems of skewed economic interests and policy incoherencies must be addressed at international levels.
Presently, Nigeria depends heavily on the extractive industry (largely oil and gas) for over 85% of her revenue. Extraction of resources provides huge financial benefit to Nigeria through export earnings and taxation, which constitutes more than 60% of the total tax revenue accruing to the Nigeria treasury.
Fiscal policies remain the fundamental principles which guide the orderly development of tax laws and administration, and lays basis for the formation of the whole tax system. Inconsistent tax policies would certainly result in dysfunctional of the entire system. Thus, it has become imperative to fast-track the passage of Petroleum Industrial Bill presently lying dormant before National Assembly to reform legal frameworks on the Petroleum and Tax Policy.
Apart from the proposed PIB, government has promulgated various legislative frameworks to regulate taxation of the extractive sector and ensure maximum tax revenue accrues to the government. Among these are 1999 Constitution of the Federal Republic of Nigeria, Companies Income Tax Act, NEITI Act, Mineral and Mining Act of 2007, Companies Income Tax Act Cap C21 Laws of Federation of Nigeria 2004, Petroleum Profit Tax Act Cap P13 Law of Federation of Nigeria, Federal Inland Revenue Service Act Cap F36 Laws of the Federation of Nigeria, Value Added Tax Act Cap V1 Laws of Federation of Nigeria 2004, Deep Offshore and Inland Basin Production Sharing Contract Act Cap D3 Laws of the Federation of Nigeria 2004.
However, various factors have been observed thwarting efforts at maximizing taxation revenue from the extractive sector in the country. As reported by CISLAC, these are poor record and accountability, over-reliance on self-assessment by extractive industry companies, undue incentive under PSCs and MoUs, complicated tax regime, poor capacity among tax official, tax evasion and avoidance by the companies in the extractive industry, lack of political will to prosecute evaders, ineffective monitoring, illegal bunkering and mining, widespred corruption, ambiguous provision with respect to taxation of gas, insecurity.
Harnessing extractive revenue for the maximum benefit of citizens requires enhanced public accountability through reducing in government’s influence on NEITI’s actions and audit reports; and civil society oversight to promote NEITI’s objectivity and increase its independence from the public administration.
Formulating and adopting effective measures by all levels of government to address the identified challenges resulting in leakages in revenue has become essential. This includes timely reviewing and strengthening of the existing laws, giving serious consideration to speedy dispensation of tax disputes and evasion prosecution.
It is important to put in place appropriate record keeping by mandated agencies to track production data and financial inflows to enable government make informed decision and independent assessment of the extractive companies; and appreciable efforts to curb illegal mining, oil bunkering and systemic corruption.
It is a known fact that taxation of oil and gas industry is presently regulated by Petroleum Profit Tax Act and Deep Offshore and Inland Basin Production Sharing Contracts Act. It is important to fast-track the passage of the Petroleum Industry Bill to harmonise loose frameworks regulating taxation of extractive industry and simplify the collection of government revenues for maximum realization of tax revenue.
As Ministry of Mine and Steel Development currently lacks power to regulate the whole extractive sector. Giving the vast number of extractive industries and the presence of various types of minerals in different part of the country, decentralizing the power to regulate the mineral whose exploitation does not exceed beyond certain threshold is crucial to ensure efficient regulation, proper monitoring and effective data storage to fortify appropriate taxation.
Adequate support for the host communities to facilitate the utilization of licenses granted mining industries by the federal government through execution of Memorandum of Understanding between the mining industries and the host communities.
Furthermore, sufficient provision for Federal Inland Revenue Service to promote sustainable tax reform through effective training and retraining programmes, motivation, adequate funding and operational equipment for staff of various department dealing with taxation of extractive industry as well as administrative and legislative response to address the current anomalous arrangement insulating FIRS from direct dealing with accruable tax from extractive sector.

The Other Side of Mining Activities in Nigeria

By Abubakar Jimoh

extractive-3

Artisanal mine workers in Nigeria; Photo: (c) 2012 Human Rights Watch

Effort to identify and address the persistent human rights and governance challenges facing mining host communities in Nigeria has prompted the recent release of findings from various assessments carried out by Global Rights across mining communities in the country.

Speaking at the event, Country Director of Global Rights, Abiodun Baiyewu recalled that four years ago when the lead poisoning health emergency first broke out in Zamfara state, Global Rights conducted a needs assessment on the protection of mining communities in the state.

“Since that initial assessment, we have gone on to evaluate some other states in Nigeria. Our recently concluded appraisal of these mining host communities sought to identify the human rights and governance issues facing the mining industry in Nigeria.

We hope this briefing will serve to enlighten the public and strengthen our campaign for effective resource governance and accountability in the solid mineral sector which respects the rights of host communities,” she anticipated.

Presenting the report, which consists facts and findings to the stakeholders, the Programme Officer of Global Rights, Precious Eviamiatoe explained that Nigeria as a country well-known for its rich deposit of hydrocarbons is also endowed with some planet’s finest minerals; and if effectively harnessed, mining could potentially improve infrastructure, create employment and improve standard of living, especially in mining host communities.

She said, “Mining extraction however comes at a cost to environment, community health, and with social consequences most of which are borne by mining host communities. At the core of planning and implementation in the mining sector therefore, there must be a deliberate attention to the protection of the rights of mining host communities. Failure to ensure their protection often results in disasters, a classic example was the Zamfara lead poisoning disaster.

“We have three core takeaway from Zamfara state: effective governance of the extractive industry for both formal and informal mining in Nigeria is possible; extractive host communities are quite capable of demanding for the protection of their rights and seeking remedies, if they receive the requisite knowledge and support from both government and civil society to do so; and the lead poisoning disaster in Zamfara is a potential time bomb waiting to happen in other states in different contexts.

“Premised on these we widened the scope of our intervention to other states in Nigeria, starting with assessment visits to extractive host communities in Plateau, Niger, Ebonyi, Osun, Oyo and Kogi States.”

The report bemoans little or no knowledge by most mining communities in Nigeria about the mining and its impact on their environment, health or social construction part from those they immediately feel or can directly attribute to these activities. “Most have no knowledge that mining activities – both by company companies and artisanal miners are regulated by government. While they knew most companies obtain licenses from the government, they have very vague knowledge of the regulatory institutions or legal framework governing mining or protecting their rights within this framework.

“Host communities’ lack of knowledge of government’s requirements for mining grossly short changes mining communities in various ways. One of the most striking ways is the situation in which communities, aware of the presence of mineral resources within their own land engage in unregulated artisanal mining, oblivious of procedures for obtaining a mining lease or forming mining cooperatives,” it disclosed.

On the environmental impact of mining activities, the report reveals failure to diligently implement available laws and policies as the greatest setback to environmental protection in Nigeria. It highlights a proliferation of abandoned mines in every community assessed; lack of prioritized effort by government to reclaim inactive mining gouges. While the Mineral and Mining Act makes provision for funds to reclaiming mines by companies, little thought has been paid to the aftermath of artisanal mining activities. According to the report, in some communities, abandoned mines have been improvised into water wells for community use. It cites the instances of Ishiagu and Komu mining camps in Ebonyi and Oyo States respectively, where some community members use contaminated rain water collected from inactive unreclaimed mines to bath and cook.

Illegal underground mines constructed by unregulated artisanal miners in some communities covered by the report have created environmental hazards and weakened social infrastructural like communal access roads. The report noted large expanses of farmlands have given way to unsustainable mining activities, giving accounts that de-vegetation promotes erosions and directly contributing to rapid desertification in the Northern region of the country as occasioned in Zamfara State.

The common health impacts of mining activities reported in host communities assessed were air effluents and dust pollution resulting in respiratory infections and condition including asthma, chronic bronchitis, and pneumoconiosis; noise pollution resulting in varying degree of deafness and stress related disorders; and water pollution resulting outbreaks of cholera and other water borne ailments. These sources of pollution potentially for long term health impacts such as cancer, skin disorder, birth defects, miscarriages and infertility.

“In spite of the high revenues generated from extractive activities, socio-economic development in the host communities assessed was not commensurate by any standard. Most residents complained that mining – artisana and formal – have done little to enhance their economic, social and infrastructural development. At Komu where a gemstone mining camp is located for example, there is a noticeable absence of governmental presence evidenced by the abysmal level of infrastructural development in and around the camp. The community lacks access roads, portable water, a functional health centre, power supply and telephone services. Mining communities in Zamfara state have some of the highest number of out of school children in Nigeria,” the report described.

As shown in the report, compensation and resettlement of affected communities for land compulsorily acquired for mining purpose often raise concerns about the security of land tenure, intensify land disputes and amplify concerns about the security of land tenure, intensify land disputes and amplify concerns about adequate and fair compensations, and appropriate resettlement.

The Minerals and Mining Act of 2007 mandates mining companies to consultatively reach Community Development Agreement (CDA) with their prospective host community towards the provision of social and economic benefits that will enhance the sustainability of the host community. However, the report faults CDA which does not stipulate the appropriate representatives to negotiate the Agreement with, or insist that social and environmental impact assessments be conducted and explained to members of the communities to assist them understand the far reaching impacts of the mining activities.