Nigeria

The APRM findings relating to the management of natural resources in the Niger Delta revealed important lessons and good practices, which could be replicated by other re-source rich African countries. More importantly, they demonstrate the extent to which the APRM assessment contributes and lives up to the building blocks of good governance for the mineral resources sector.

The case study (see Annex I- Fact Sheet 1) has shown the importance of having peace, security and political stability as well as clear, transparent, predictable and efficient legal and regulatory frameworks. Drawing from both the positive and negative experiences, the case study informs that it is important to analyse the various laws that govern the use of land and to ensure that the local community retains ownership of the land (See Box 6).

Box 6: Conflict in the Niger Delta

In Nigeria, the laws that were passed to nationalise all land and mineral resources located in the oil-rich communities including the Niger Delta has caused grievances in the communities that have turned into conflicts. The core grievances of the Niger Delta are: local control of oil and gas resources, greater representation at the federal level, economic empowerment, infrastructure development and environmental sustainability. This is a clear example where the divides between national and sub-national claims to ownership, and grievances between the population, give rise to disenfranchised local stakeholders who do not have access to mineral rights.

Furthermore, there is an urgent need to increase transparency about the amount of crude oil extracted by oil companies as well as, information about the revenues generated through oil export by the Federal government. In fact, legal frameworks are deemed to be of utmost importance as they protect the rights of communities living in the Niger Delta. Transparency about the amount of crude oil extracted by the oil companies enables parliament and civil society to exercise their oversight functions thus ensuring account-ability with regard to the use of public resources. In this regard, the implementation of the Extractive Industries Transparency Initiative for the management of mineral resource is an exemplary measure that could be taken up by other countries. However, this initiative does not suffice as a stand alone transparency instrument but rather needs to be corrobo-rated by other measures. A study³⁶ finds that increased transparency through the EITI in Nigeria’s oil industry did not lead to improvements in governance as such. The study argues that civil society has not been meaningfully empowered and increased transparency has not been influential in calling Nigeria’s rulers to account (See Box 7). This shows that a comprehensive framework as elaborated through the various building blocks is required in addition to specific governance initiatives such as EITI.

36 Shaxson, N. 2009. Nigeria’s Extractive Industries Transparency Initiative: Just a Glorious Audit?”.

London: Chatham House

Box 7 : Nigeria and the EITI

A report by Shaxson (2009) aimed to explore the extent to which Nigeria EITI lived up to its goals of improving transparency and fostering better governance (including civil society participation). The report finds that: the publication of the 1999-2004 audits is EITI’s main achievement; Nigeria EITI has informed but has not meaningfully empowered civil society; it is not certain that more capacity building and work will overcome the fundamental problems faced by civil society as this is likely to be linked substantially to Nigeria’s dependence on mineral revenues, which drives leaders not to take their citizens’ needs into account; the consumers of Nigeria EITI information may have been the elite groups and might have gained in understanding the Nigerian oil and gas sector better; the minor discrepancies discovered by Nigeria EITI audits show that the ‘reconciliation exercise’ did not help address the main problem; the global EITI process would be best to focus on countries where the political dynamics for governance and reform already exist; and the global EITI concept of transpar-ency did penetrate into Nigerian policy-making. ^b

b. Shaxson, N., 2009, ‘Nigeria’s Extractive Industries Transparency Initiative: Just a Glorious Audit?’ Chat House http://eiti.org/document/shaxson-neiti-glorious-audit.

The establishment of fair and equitable fiscal regimes is critical for utilising mineral rev-enues in an equitable manner. Moreover, the development of the fiscal regime is needed as mineral resources reduce the need for the government to tax citizens. As a consequence ac-countability relations between the state and citizens are not developed. The case study on Nigeria illustrates this by emphasizing the need for effective and efficient tax administra-tion so as to increase domestic tax collecadministra-tion; introducing fiscal policy reforms in order to achieve macroeconomic stability, internal balance and fiscal transparency so as to develop an improved revenue base; decentralised control of resources by the local communities;

and an adequate revenue sharing formulate for the distribution of oil revenues to lower tiers of government (state, district, province, municipality) (See Box 8).

Box 8: Fiscal Policy and Mobilisation of Domestic Resources

The Nigerian government has introduced fiscal policy reforms to achieve macroeconomic stability, internal balance, fiscal transparency and an improved revenue base. An oil-based fiscal rule seeks to separate government expenditure from volatile oil prices and ensures that excess crude revenues are saved. However, effective and transparent public administration can be enhanced by increasing non-oil related revenues. Indeed, fiscal policy continues to be limited by a narrow tax base. Also, new mea-sures that were adopted to improve tax collection were unable to reduce tax evasion. The government has attempted to mobilise domestic resources and to diversify the economy through port concessions, reforming the customs service, increasing tariffs on utilities, expanding businesses by creating micro-credit facilities, consolidating the banking sector, and establishing a Revenue Mobilisation, Alloca-tion and Fiscal Committee. This can be further stimulated by exploiting revenues from groundnuts, rubber, cocoa, palm oil, coal and other unexploited mineral and agricultural resources. More than 34 commercially viable minerals have been identified in different parts of the country with every State at least having one major resource, but these are still unexploited.

The importance of Credible Public Participation for efficient management of mineral re-sources is clearly illustrated in the case of Nigeria as the local communities in the Niger Delta Region feel excluded in the management of the natural resources. Ensuring access to state power by the local communities, including minority representation; and utilising public-private partnerships and dialogue between communities and oil companies to port the implementation of Corporate Social Responsibility programmes is critical to sup-port bottom-up development approaches and ultimately will lead to broad-based growth.

The latter could be seen as an example of establishing the ‘social licence to mine”, thereby avoiding conflict and enhancing transparency in the management of natural resources (See example of Shell in Box 9).

Box 9: Shell and Corporate Governance

Multinational oil companies in the Niger Delta at first took the position that there was no legal or moral obligation to provide socioeconomic assistance to their host communities. However, compa-nies such as the Royal Dutch/Shell group later revisited their position on human rights, environmen-tal protection and sustainable development, as well as the content of its Statement of General Business Principles. Shell defined a new community development strategy in 1997. The company created a community development organisation to support broad socioeconomic development in the Niger Delta in 1998. It included introducing best practices from development professionals; transforming existing community programmes by partnering with expert agencies, nongovernmental organisations (NGOs) and governments; promoting rather than opposing advocacy for the Niger Delta commu-nities; supporting the capacity building of government institutions so as to improve their manage-ment of regional developmanage-ment projects; and increasing their funding of community developmanage-ment programmes. Since then, other oil companies operating in the region have adopted Shell’s approach An enabling business environment characterized by adequate infrastructure is critical to gain optimally from the exploitation of mineral resources. In this regard, it is first and fore-most important to harness economic development of the oil producing region by infra-structure development and preventing environmental degradation. In addition it is critical to mobilise domestic resources and diversify the economy through incentives such as: port concessions, reforming custom services and expanding business by creating micro-credit facilities as illustrated by the case on Nigeria. This will ensure sustained resilience and reduce external shocks. Furthermore, ensuring due process mechanisms in public procure-ment and contracting as illustrated by the reforms initiated by the Nigerian governprocure-ment aimed at strengthening the management of public expenditure are critical for improving transparency and accountability.

Developing strong institutions can support positive development outcomes in countries endowed with mineral resources. In this regard, setting up a sovereign wealth fund (i.e.

Excess Crude Account in Nigeria) can stimulate effective use of the revenues for socio-economic development. Indeed, benchmarking the budget on an oil price that is lower than the actual market price reduces vulnerabilities to internal and external shocks. There is a need, however, to establish supportive legislation to govern such accounts in order to ensure full accountability and transparency.