New Index Classified Nigeria Oil Governance as ‘Poor,’ With NNPC and Excess Crude Account Especially Problematic

• Nigeria’s oil and gas sector ranks 55th out of 89 governance assessments worldwide, with a score of 42 of 100 points
• Despite some improvements in transparency, Nigeria National Petroleum Corporation’s (NNPC) performance and accountability challenges persist
• Improving transparency could help address Nigeria’s failing performance in licensing
• Nigeria’s Excess Crude Account (ECA) deemed the most poorly governed sovereign wealth fund of all assessed

ABUJA, 28 June 2017—A global index assessing countries’ oversight of natural resources has ranked Nigeria’s oil and gas sector 55th out of 89 assessments worldwide.

Nigeria is one of the world’s most resource-dependent countries, with oil and gas sales constituting 90 percent of the country’s exports in 2015. The strength of oil and gas sector’s governance therefore impacts the wellbeing of Nigeria’s 182 million citizens.

The 2017 Resource Governance Index (RGI), compiled by the Natural Resource Governance Institute (NRGI), shows that governance challenges are present throughout Nigeria’s oil industry decision chain. According to the findings of the index, value is lost particularly in licensing and in NNPC’s sales of government oil, as well as when revenues from oil and gas are shared and saved.

Licensing is the weakest link in Nigeria’s “value realization” component, with a score of 17 of 100 points for the policy area, placing it 77th among 89 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.

Despite some progress in transparency of revenue collection over the past five years, tracking payments from oil and gas companies remains challenging. In terms of the governance of subnational resource revenue sharing, Nigeria ranks 11th in the index. However, the public lacks access to audited information on revenue flows to lower levels of government, and this contributes to the gap between the legal framework and implementation.

“NNPC has made some new disclosures under the Buhari administration, but the details and revenue implications of many of its high-value transactions remain secret,” said Sarah Muyonga, Nigeria country manager for NRGI. “Furthermore, 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. This enables widespread corruption, with which Nigerians are all too familiar.”

NNPC achieves a poor governance score of 44 of 100 points, falling below the sub-Saharan African average for state-owned enterprises (SOEs), despite being the largest SOE on the continent. The company does not disclose detailed annual reports on its finances, despite top officials having committed to doing so, and little information is publicly available, particularly concerning some of NNPC’s least efficient and most questionable activities.

A finding with huge implications for the country concerns its largest sovereign wealth fund. Nigeria’s Excess Crude Account (ECA) is the most poorly governed sovereign wealth fund assessed by the index, ranking last alongside the Qatari Investment Authority.

Muyonga added: “Improving governance of the state-owned enterprise NNPC is crucial, and will hugely benefit the lives of millions if done effectively. The government discloses almost none of the rules or practices governing deposits, withdrawals or investments of the ECA. Given that the ECA is the largest fund by asset balance in Nigeria, this constitutes a vast governance concern at the end of the oil sector value chain.”

Full results from the Resource Governance Index are available at www.resourcegovernanceindex.org.

Note to editors:

The Resource Governance Index is the sum total of 89 sector-specific assessments in 81 countries (in eight countries NRGI assessed both oil and gas and mining sectors), formulated using a framework of 149 critical questions answered by 150 researchers, drawing upon almost 10,000 supporting documents.

For each assessment, NRGI has calculated the composite score using the scores of three index components. Two of the components comprise new research based on expert answers to the questionnaire, and directly measure governance of countries’ extractive resources.

The first component—value realization—covers the governance of allocating extraction rights, exploration, production, environmental protection, revenue collection and state-owned enterprises. The second—revenue management—covers national budgeting, subnational resource revenue sharing and sovereign wealth funds. The index’s third component assesses a country’s enabling environment. This component draws on pre-existing research to measure the broader governance context.

Enquiries:

Bola Ayejuni
Senior Business Executive, Media Strategy & Execution
CMC Connect Burson-Marsteller
+234 802 834 6376
[email protected]

Lee Bailey
Communications Director
Natural Resource Governance Institute (London)
[email protected]
T +44 (0)20 7332 6114 / M +44 (0)7823 442 954