Nigeria's story should encourage Uganda to join EITI

Jul 26, 2013

A week ago, Nigeria’s President Goodluck Jonathan ordered Nigerian revenue collection agencies to recover $9.6b in underpaid or unpaid taxes.

By Byaruhanga Chris

A week ago, Nigeria’s President Goodluck Jonathan ordered Nigerian revenue collection agencies to recover $9.6b in underpaid or unpaid taxes and royalties from oil companies operating in Nigeria, following an audit of the country’s oil and gas sector stretching over the last 10 years.

For a long time now, corruption and successive weak leadership have ensured that half of the 70 million Nigerians remain in poverty, despite their country being the leading crude oil producer in Africa.

So it is surprising, as much as it is admirable, when one hears that President Goodluck Jonathan wants the oil companies brought to book over unpaid monies.  Foreign oil companies operating in Nigeria include Shell, Chevron, ExxonMobil, Eni and Total.

This loss was discovered and reported following an audit by the Nigerian arm of the Extractive Industries Transparency Initiative (NEITI) which found that colossal sums of money were being lost by the government through under-assessment, under-payment of levies, taxes, bonuses, royalties and other ‘clever’ accounting practices.

The Extractive Industries Transparency Initiative (EITI) is a global standard, where member governments declare income they earn from their extractive industries and the companies operating in those countries also declare the payments they make to host governments.

EITI reconciles these two sets of figures. It is through such reconciliation that the anomalies in Nigeria were discovered.

For the last several years, NEITI has consistently uncovered irregularities in financial reports submitted by the government and oil companies.

In August 2009, NEITI’s second report identified over $800m of unresolved differences between what companies said they had paid in taxes, royalties and signature bonuses against what the government said it received. According to the NEITI, that sum exceeded the 2009 individual budgets for the ministries of education, health and power.

Fast forward to the 2009-2011 audit, where NEITI reveals that the companies have avoided paying almost $10b, including $4b that the state-owned Nigerian National Petroleum Corporation failed to remit in oil and gas revenues.

It is clear that EITI has enabled Nigeria to make some steps towards the much-needed transparency in the country’s oil and gas sector, and it is based on case studies like these, that transparency activists in Uganda want the country to join EITI.

The Uganda government has been consistent, and politically correct, by maintaining that it will join EITI at an appropriate time. Energy minister, Irene Muloni, even made an announcement at the EITI global conference in Sydney, Australia, last month to that effect. There have also been some reports of President Museveni promising Development Partners that he would see to it that Uganda joins EITI.

So what’s the delay? Why has Uganda been slow to prioritise an already tried and tested transparency tool, especially now that the country is facing some of the biggest corruption scandals of its time?  Why can’t we, the citizens, be told how money is exchanging hands in the oil and gas sector?

Interestingly, there is a global shift towards greater corporate transparency with home governments of huge businesses including oil and gas companies, putting legislation in place to monitor the financial activities of their companies.

In 2010, the United States introduced the Dodd-Frank Act that compels American-registered companies to disclose payments to governments on a country and project-specific basis, while the European Union governments reached a political decision in April this year to implement the Accounting Directive legislation, the European equivalent of Dodd-Frank.

Tullow Oil Plc, itself a corporate supporter of EITI, admitted that it was “acting ahead of proposed legislation” when it published details in its Corporate Responsibility Report last month, of the payments the company made to 12 individual governments in the countries it operates.

But looking at Nigeria’s case, what is to lose, if the Uganda government acts now and opens up its financial transactions with its corporate partners to public scrutiny?

In any case, with the home governments of these international oil companies pushing for greater transparency in their dealings with host governments, the over-used ‘confidentiality’ clause argument that the Uganda government normally puts forward will get weaker and weaker.

The writer is the Managing Editor, Oil in Uganda-www.oilinuganda.org
 

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