Nigerian Excess crude account has been described as one of the world’s most poorly governed fund according to a report by the Natural Resource Governance Institute (NRGI). Nigeria was ranked 55th out of 81 countries the report covered.
“Nigeria scored 42 of 100 points and ranks 55th among 89 assessments in the 2017 Resource Governance Index (RGI). It has the largest oil and gas reserves in sub-Saharan Africa with an estimated 37 billion barrels of oil and 188 trillion cubic feet of gas. Nigeria is one of the world’s most resource-dependent countries — oil and gas contributed the majority of government revenues and constituted 90 percent of Nigeria’s exports in 2015.
Nigeria also has the largest population on the African continent, so the oil and gas sector’s governance issues impact the wellbeing of a large number of people. Governance challenges are present throughout the extractive decision chain. Value is lost particularly in licensing and in the Nigerian National Petroleum Corporation’s (NNPC) sales of government oil, as well as when revenues from oil and gas are shared and saved. Furthermore, a history of scandals involving top officials and the NNPC has plagued the sector and drawn public attention to corruption and asset recovery. Given NNPC’s central role in all stages of the decision chain, improving governance of the state-owned enterprise (SOE) is crucial.
The $2.4 billion account was ranked alongside the Qatar Investment Authority as the worst in terms of oversight and transparency in NRGI’s index of resource management.
NRGI rated 11 sovereign wealth funds, managing least $1.5 trillion in total, as “failing”.
“The government discloses almost none of the rules or practices governing deposits, withdrawals or investments of the ECA,” the report said. It added that the account, along with the other worst performers, is “so opaque that there is no way to know how much may be lost to mismanagement.”
Money from the account – which is rainy day fund – is occasionally used by the government to cover budget shortfalls. In such cases, the money is shared between the federal, state and local governments.
Nigeria the report said also runs the Nigeria Sovereign Investment Authority, with some $1.25 billion under management, but NRGI said it had ranked the ECA due to its larger balance sheet. The NRGI report ranked Nigeria 55th in overall resource management, with a high score on its taxation ranking helping to balance its last-place finish in sovereign wealth fund management. It scored higher than 70th placed Angola, which is second to Nigeria in African oil exports, while nearby Equatorial Guinea was fifth from the bottom of the table.
The report said “Licensing is the weakest link in Nigeria’s oil and gas value realisation component, with a score of 17 of 100, placing it 77th among 89 country licensing assessments. This score and ranking reflect high levels of opacity in key areas of decision-making, including qualification of companies, process rules and disclosure of terms.
“The Nigerian government does not regularly publicly disclose government officials’ financial interests in the extractive sector or the identities of beneficial owners of extractive companies, though it has made some early commitments to do so with the Extractive Industries Transparency Initiative (EITI) and the Open Government Partnership (OGP). The government has committed to disclosing all oil, gas and mining contracts in its “seven big wins” policy strategy and as part of its OGP action plan, but thus far, it has not disclosed contracts.
“Despite some progress in transparency of revenue collection over the past five years, tracking payments from oil and gas companies remains challenging. According to Nigeria’s 2014 EITI data, just over half of public revenues from oil and gas were distributed to the federal government and the rest were shared between the state and local governments. In terms of revenue sharing, Nigeria ranks 11th, alongside the United States (Gulf of Mexico) and Ecuador.
“The public lacks access to audited information on revenue flows to lower levels of government, and this contributes to the gap between the quality of the legal framework and actual implementation.”
Resource Governance Index, assesses the governance of oil, gas and mining in 81 countries, in policy areas including state-owned enterprises, taxation, licensing, local impact, sovereign wealth funds and subnational revenue sharing. Access the data at www.resourcegovernanceindex.org.
This index measures the quality of resource governance in 81 countries that together produce 82 percent of the world’s oil, 78 percent of its gas and a significant proportion of minerals, including 72 percent of all copper. It is the product of 89 country assessments (eight countries were assessed in two sectors), compiled by 150 researchers, using almost 10,000 supporting documents to answer 149 questions.
