Nigeria Extractive Industries Transparency Initiative

Introduction
Figures from the on-going Nigeria Extractive Industries Transparency Initiative (NEITI) independent comprehensive audit of the extractive sector were submitted to the NEITI Secretariat on the 31 st of December 2005 by the Hart Group. It was therefore essential to assemble a team of experts and stakeholders to dissect the report with a view to setting up a work plan and timetable for:
• The dissemination of the audit results and the appropriate Advocacy
• The development of an effective communication plan, through participatory dialogue, to enhance local community understanding of the audit results.

One of the desired outcomes of the NEITI series of roundtable discussions is to ensure that the Audit results are comprehensible, accessible and user friendly to the different publics, particularly the Nigerian public and community groups.

The reports on the Physical and Process audits will be ready in early February 2006 and they should further elucidate the findings of the Financial Audit. Another roundtable meeting is planned for the 17 th of February 2006 to analyse them.

The NEITI invited experts from Government, Civil Society, the Extractive Industries, the Organised Private Sector and the general public to participate at the first in a series of roundtables on the Audit Reports and strategies to communicate the audit findings.

The roundtable discussions began around 9:20 am with a welcome address and background speech on the NEITI by Obiageli Ezekwesili, Cabinet Minister and Chairperson, NEITI. The Minister:

• Took the participants through a historical overview of the NEITI since it was established by President Obasanjo in Feb 2004.
• She threw light on the selection process of the auditors as well as the scope of the audit work.
• She concluded by saying that the Interim Report is the on the Financial Audit and that the reports on the Physical and Process Audits are expected in February 2006.

Chairman's Welcome Remarks
Prior to the Hart Group being called upon to present the findings of the report, the Chairman of the session, the High Commissioner of the United Kingdom to Nigeria, Mr. Richard Gozney stated five important points about the activities of the NEITI; these are,

I. The exercise is Nigerian led with no unduly influence exerted by foreigners. The engagement of the consultants to carry out the audit reports was done according to international best practice and as such they (Hart Group) have no incentive whatsoever to be biased.

II. The templates used and the mechanisms adopted to carry out the work were extremely careful, thorough and dispassionate. There is no vested interest for the Group preparing the report

III. The timing for the dissemination of the information could not be more convenient as the International Advisory Group (IAG) meeting is coming up in Abuja in less than four weeks. Timing is also imperative for this Administration as it prepares to wrap up and so this can be termed to be a good example of work carried out during the Obasanjo Administration. Also a few nameless oil-producing Countries have to be shown an example, and the achievements of Nigeria on EITI are an exemplary one.

V. The discussions will also give an opportunity for suggestions on how the processes can be improved, the alliances that can be built as well as suggestions on how to move forward.

The Chairman then called upon Mr. Chris Nurse to give the presentation on findings of the audit report. He stated that this report is the interim report with a final report to be ready in February 2006 which will give the results of all financial transactions as well as any additional information.

The Accountant General of the federation is not in a position to monitor or control the amounts deposited in the federation account and whether they are in accordance to his expectations.
The CBN records are not based on complete double entry accounting and recording system.
The CBN has not been notifying receipts to relevant agencies on a timely basis: some receipts were not notified at all.
The weaknesses are linked to the lack of a clear accounting system.
There are also important weaknesses in Government regulatory oversight in the following categories; the way in which DPR assesses royalty on oil & gas and gas flare penalty; the way in which DPR controls that companies have paid the right amounts; the way in which the FIRS assesses company liability to PPT as well as making sure the companies have paid the correct amounts of PPT.
Information systems do not exist or are not working properly.

Comments by Roundtable Participants
Comments were then called from the participants and the audience on the contents of the report. These are highlighted below;

There is a culture of weak record keeping in Government Agencies. This has led to delays in the audit process and represents a clear challenge to policy makers. There is a need for attention to capacity building in this area.
There is a weak system of accounting control, which creates an environment for corruption.
There are weaknesses in the oversight and regulatory agencies DPR & FIRS in the capacity to assess royalty payments and PPT.

Issues of public accounts management are more profound and severe that are on ground.
There are issues of reconciliation of earnings and payments
To counteract the problems encountered there is a new Audit Law that will be heard shortly. This new Bill if passed will set the tone for a new way in which public accounts are managed in Nigeria . All are invited for the public hearing.

Commended the Hart Group and the Chairperson NEITI
The position of the National Assembly (House & Senate) has been vindicated as issues highlighted are of concern to them.
It is imperative that the institutions that regulate the industry are empowered to carry out their duties more effectively.
On behalf of the committee, the Hon vowed to assist in any way they can within the powers conferred upon them.
The committee is also not comfortable with the JV cash calls
Lastly, as soon as the NEITI Bill is passed the lawmakers that are Members of the NSWG would seize to be members of the Group.

Commended the Chairperson NEITI
Stated that the essence of the roundtable is not to attribute any assertions on corruption, but to open up any negativity present.
Accounting discrepancies are very much present and inadequate
There is use of non conventional accounting procedures
The Accountant General is marginalized and not utilized
CBN is acknowledging payments when there is no basis for it doing so.
To move forward, personnel/ agents may need to be procured to carry out the jobs that FIRS, DPR are supposed to be doing.

Issues concerning FIRS are unfair and to some extent damaging
A system and procedure in FIRS is present that guides the work which they feel is adequate.
An audit procedure is also in place
The assertion that PPT paid is higher than what they are actually paying is a misclassification.

The report should be adapted to be comprehensible to the general public.
When the monies are remitted are receipts issued?
What has the FGN done with the revenue of 40 billion
Does 'revenue' comprise of sales of crude net or is it aggregate income?
Why is the issue of misclassification consistent and why is it always higher in CBN.

Chairperson responded that the Hart Group should look into these comments and questions.

The Accountant General should have been reflected in flow diagram on p9.
Accountant General's office needs to be fully built up to rise to the challenge.
FIRS needs a lot of capacity building as past experience has shown in Reserve Addition Bonus (RAB)
Enhance the remuneration of regulators to stimulate good performance.
A database should be created in DPR
FIRS should use a uniform assessment method for all oil companies
How does the office of the Auditor General fit in the picture?

The Memorandum of Understanding (MOU) is being worked upon
The activities of the MOU should be collated so that a single voice can be heard
The tax laws of the land need to be examined
A National data centre should be established
The Hart Group needs to get oil industry professionals on their team.

Issues raised are all issues pertaining to the information management and use of data
There will be physical audit challenges
Problems are systemic and common to government agencies
'Operators are ahead of regulators' and so capacity building is imperative.
There should be a coordinating point where these government agencies meet to verify data.

Capacity building in the affected Agencies is key
Most of the issues raised are on being assessed and worked upon by the various facets within the NSWG.
Information dissemination is an issue
NEITI Bill will be a great step towards correcting the various anomalies presented to give it structure and to make it a more functional entity.

CBN records and figures provided by the oil companies seem very 'sweeping'. ( Chairperson NEITI asked Mr. Nda to clarify his 'Sweeping' phrase for the understanding of all and also stated that the essence of the dialogue is to deliberate on ways to move forward)
Mr. Nda also commented on pg 5 of the report and pointed out that there were discrepancies on the method of accounting used.
Also on p15 archiving systems should be put in place.
Pg 22 'inflows do not agree with the oil companies' figures

To strengthen the work that the auditors have carried out, the information regarding the JP Morgan account should be more detailed.
There should be standardization on both PPT and royalty assessments.
There should be a more detailed digital highway

Disagreed with the figure quoted by Dr. Asobie as $ 40 billion.
Laws have to be updated to allow data be available in the public domain.
The MOU should and is being reviewed to bring about a clearer interface between the operators.

There is a stakeholders forum that deliberates on the revenues accrued to the FGN.
Therefore it is only after the deliberations that figures are agreed upon.
CBN poor management systems affect proper accounting system, which affects the work of the Accountant General.
An online revenue tracking system should be put in place, which is in line with Mr. Osho's argument that there should be a central point where all players can verify data.
As the legal custodian of the JP Morgan account it is funny that control actually lies with the CBN.
Commercial banks also hamper the process by not remitting monies on time to the federation account

The Hart Group thereafter stated that the comments were useful and will be taken on board as necessary. They also stated that there are appendices available with lots of figures available for scrutiny.

The Chairperson concluded by thanking the participants as well as stressing the need to move forward and not getting defensive with the various issues raised. She underscored the importance of admitting that the procedures were flawed as a first step to finding ways and measures to improve revenue administration within the various Government entities.