By Uwafiokun Idemudia
Introduction
The centrality of oil in the Nigerian economy is reflected in the fact that oil accounts for 40% of its GDP, 95% of exports and 83% of government revenue and this has effectively transformed Nigeria from an agricultural based economy into a rentier state. Nigeria’s society has been marred by social, political and economic dysfunctions frequently attributed to the resource curse. Indeed, the debate today is no longer whether or not Nigeria suffers from the resource curse i.e., economic underdevelopment, limited democratic progress and social conflict; rather, the issue now is what to do about it. At the heart of this policy response debate is the question of how revenue from natural resource extraction can be efficiently and effectively utilised for sustainable development in Africa. The emergence of this question as key to addressing the resource curse in Nigeria and other resource rich African countries is based on a particular reductionist conception of the nature of the problem that also depoliticises it. In this case, governmental failure in Africa and insatiable greed among African elites manifested in endemic corruption and persistent mismanagement of natural resource revenues is seen to be chiefly responsible for the negative political, economic and social problems associated with resource extraction.
Hence, in Nigeria, some have suggested that resource revenue should first be distributed to the citizens and then taxed back by the state as a means of reducing the mismanagement of natural resource revenue and introducing accountability into state-society relations.
For others, it is the supposedly not-too-radical strategy which links transparency with accountability that seems to be the better solution. For example, some have suggested that the main reason for persistent widespread poverty in Nigeria is lack of transparency and accountability and therefore, revenue transparency and accountability will contribute to poverty reduction and its eventual eradication. It is therefore not surprising that transparency is viewed as the cornerstone for reducing corruption and addressing other resource curse related dysfunctions. The strategy linking transparency with accountability is based on the simple assumption that the greater the transparency around natural resources revenue earned by African states, the greater the possibility for these governments to be held more accountable for the use of such revenue. This assumption informed the creation and promotion of the Extractive Industry Transparency Initiative (EITI) by Western governments, some governments of developing countries, and multinational corporations (MNC) in Nigeria. However, what has so far being lacking is a critical look at the assumptions that underpin the Nigerian Extractive Industry Transparency Initiative (NEITI) and the extent to which the rhetoric of transparency has delivered on its promise on the ground. Unfortunately, the failure to address these questions does not only undermine the effectiveness of NEITI, but also puts the daily lives and future of the poor and marginalised in jeopardy by diverting attention away from the real political and economic structures that create the conditions that allow for poverty and other social injustices and inequalities to persist in Nigeria.
The Nigerian Extractive Industry Transparency Initiative
The emergence of EITI in 2002 and the voluntary form it took can best be understood as the outcome of the reinvigorated old tension between capitalism and regulation driven by the process of globalisation. The dialectic nature of globalisation exposed the fact that while MNCs now enjoy new rights, powers and freedoms, their corresponding obligations and responsibilities to society have diminished with negative consequences for especially developing countries. It is the attempt to address this imbalance of power and responsibility with its associated negative consequences that EITI has emerged as the preferred policy response in the international community and has subsequently been promoted and adopted in developing countries like Nigeria.
The central tenet of the EITI is the idea that the opacity that marks the business-government relationship in the extractive industry facilitates greed, the mismanagement of natural resource revenue and the inability to hold government accountable. Hence, EITI is an attempt to sever the nexus of revenue opacity, corruption, poverty and the propensity for violence in resource dependent countries.
Nigeria in 2007 became the first candidate country with a statutory backing for the implementation of EITI. The willingness of the Nigerian government to commit to EITI in 2003 and then subsequently launch NEITI in 2004 can be attributed to internal and external factors.
The external factors include global actors and discourses that pushed transparency issues to the forefront of global policy response to the resource curse by highlighting the negative impact of corruption on social, economic and political development in Africa. For example, Transparency International’s consistent ranking of Nigeria as one of the most corrupt countries in the world presented the new civilian regime in 1999 with both an opportunity and a challenge. The challenge was the need to address the negative international reputation of Nigeria, and the opportunity was the ‘war on corruption’ that provided a useful mobilisation tool for the new administration to gain legitimacy. For instance, the war on corruption was instrumental to the ability of the Obansanjo’s regime to secure some $18 billion debt relief from Paris Club creditors as well as gain some local support given that the election that brought the regime to power was also marked with fraud.
The internal factors were largely driven by populist disenchantment with decades of military rule that saw not only the embezzlement and mismanagement of public resources but also the institutionalisation of corruption to the detriment of national development goals.
The interaction of these two factors is reflected in a background paper on NEITI which noted that, “The federal government has recognised that improvements in the transparency of petroleum revenue data are needed for the effective management of public resources and to improve the image of Nigeria at home and abroad.”
The NEITI Act was passed into law in 2007 and its governing body is the National Stakeholder Working Group (NSWG) that consists of representatives from civil society, government, oil companies, representatives of communities from the six geo-political zones, and the media. The primary objectives of NEITI are:
- To ensure due process and transparency in the payments made by extractive industry companies to the federal government and its agencies;
- To ensure accountability in the revenue receipts of the federal government from extractive industry companies;
- To eliminate all forms of corrupt practices in the determination, payments, receipts and posting of revenue accruing to the federal government from extractive companies.
In view of these objectives, NEITI undertook the first financial, physical, and process audit for the period between 1999 and 2004 in the country. While the initial report suggested that the discrepancies between revenues paid by oil companies and those received by government agencies amount to $300 million, subsequent auditing suggests that only about $6 million is unaccounted for. The director of communications of NEITI attributed the initial discrepancies to sloppy book-keeping, improper labelling and inadequate communication between companies and various governmental agencies. In addition, NEITI has also been able to boost governmental oil revenue earnings by ensuring that proper payments are made by oil companies. For example, the Chairman of NEITI, Dr Siyan Malomo noted in 2007 that NEITI was about to recover over NGN 130 billion from oil companies in the country between 2004 and 2006 by identifying lapses that traditionally lead to loss of oil revenue for the government.
However, while Nigeria has until the 9th of September 2010 to undertake validation , Human Rights Watch notes that the government has failed to push through key pieces of legislation that would have complemented its participation in EITI by making government expenditure at all levels more transparent. For example, the government is yet to pass into law the fiscal responsibility bill that would introduce new measures of integrity, transparency and uniformity of budget-making and government expenditure at all levels. At any rate, there is no doubt that the present local and international efforts to address the resource curse via emphasis on transparency and accountability have yielded some benefits, and continue to face serious challenges. However, the real danger lies in the fact that the present approach seems to also be diverting attention away from real political, economic and social constrains enabling the manifestation of the resource curse in Nigeria. Unfortunately, it is these underlying political, economic and social structures that inform the ‘governance failure complex’ driving the full manifestation of the resource curse in Nigeria and other resource rich African countries.
NEITI: Deconstructing its assumptions and sifting rhetoric from reality
While there is no doubt that EITI in Nigeria has opened a new space of engagement among different stakeholders, and offers new possibilities for the demand for accountability, it suffers from some inherent shortcomings that undermine its effectiveness as a vehicle for making accountability work for sustainable development. These shortcomings are largely rooted in the misdiagnosis of the ‘governance failure complex’ in Africa that is manifested in the fact that:
- EITI is often treated as ideologically neutral, and as if it is devoid of power relations. For example, while transparency is called for with regard to payment made by oil MNCs to the government of Nigeria, the fact that the government cannot independently determine outside figures presented by the oil MNCs on the amount of crude oil pumped per day from their territory is not covered in the initiative. Surely, addressing this problem is just as important as oil MNCs’ payment disclosure to the government.
- The historical nature in which EITI is often presented is yet another problem. It is as if with the adoption of EITI, all the underlining reasons behind the demand by the Puublish What you Pay Campaign (PWYP) campaign as well as its concern about the effectiveness of a voluntary initiative like EITI have all simply disappeared.
- The tendency for EITI to emphasise government revenue earning with limited focus on governmental expenditure. For example, NEITI has so far identified and published discrepancy between government accounts of oil revenue earning and oil MNCs’ record of payment. However, the monitoring of actual governmental expenditure of oil revenue has so far been absent.
- EITI places enormous faith on civil society to be able to demand for accountability, yet little attention is paid to the nature, character, and capacity of civil society in Africa.
- EITI is essentially a top-down process with a narrow scope. For example, NEITI does not extend to state and local government in Nigeria and the voices of the poor and marginalised is hardly adequately represented.
These shortcomings have inevitably made EITI and by extension NEITI, more of an attempt to create accountability for accountability's sake, as opposed to an attempt to create accountability for sustainable development in Nigeria. This is because, while greater transparency and less corruption could increase government revenue, the crucial question with regard to sustainable development in Nigeria is how government spends oil revenue. Hence, any effort to connect accountability to sustainable development in Africa requires a more critical but holistic diagnosis of the governance failure complex in Africa. Such an approach will reveal that the problem of inefficient utilisation of natural resources revenue is not rooted in the lack of accountability per se; rather, the mismanagement of resource revenue and the lack of accountability are in fact emblematic of the governance failure complex in Africa. This governance failure complex is a result of Africa’s unique colonial history, its weak position in international political economy, poor leadership, its heterogeneous society and its overdependence on natural resources. These factors interact in different ways to ensure the lack of an enabling environment for the equitable redistribution and efficient utilisation of natural resource revenue in Nigeria. For example, Nigeria as a state-nation rather than a nation-state meant that from its creation it faced a legitimacy crisis.
In addition, given its multi-ethnic constituents and religious diversity essentially reified during the colonial era, also meant nationalism had to be enforced top-down. According to Rejia and Enloe this process of top-down cultivation of nationalism is due in part to the pre-existence of a state, which is trying to bolster its own legitimacy as well as deliberately quell upward development of nationalism out of fear of heterogeneity. Similarly, given that Nigeria was predominantly under military rule that relied largely on coercion, the state has been historically alienated from its citizens. Furthermore, in the colonial and postcolonial state competitive communalism dominated national politics in which the three major ethnic groups were suspicious of one another as well as seeking to maximise their share of the ‘national cake’. Hence, there was never a coalition of nationalist elites capable of developing and pursuing nationalist development goals that were free of politics.
In the following years, pressure to adopt multi-party politics and structural adjustment programmes together with inept self-interested leadership effectively allowed for the total metamorphosis of competitive communalism into a better structured and more exclusive neo-patrimonial relationship. Since emphasis was on feeding clients as opposed to pursuing the common good under the neo-patrimonial relationships that dominated national politics, institutions and traditional African norms of co-operation, co-existence, and accountability were effectively subjugated and those of corruption, inefficiency, and the so called ‘Big Man syndrome’ became dominant. For example, Awe’s analysis of the history of governance structures suggests that while governance in pre-colonial Nigeria ensured participation and accommodation of common interest, governance structure in the post-colonial Nigerian state does not provide room for the same. To make matters worse, the forced integration of a pre-capitalist Nigeria into the world capitalist system and its eventual overdependence on oil that essentially made Nigeria a mono-commodity rentier state further undermined the state-society relationship. This is because as a rentier state, the average Nigerian citizen increasingly became irrelevant to the state and its ability to continue to reproduce itself. On the other hand, decades of governmental disappointment meant the average Nigerian either displayed apathy towards the state or saw the state as merely a tool for primitive accumulation by the elite. These structural and systemic factors effectively ensured that a developmental state capable of equitably redistributing and efficiently utilising natural resource revenue never existed in Nigeria.
It is these structural and systemic inadequacies inherent in African states and their societies that inform the governance failure complex in Nigeria and is manifested in the lack of accountability, bottleneck bureaucracies, ineffective government and the paradox of poverty amid plenty.
Beyond NEITI: the possibilities of linking natural resource revenues to sustainable development in Nigeria
The foregoing critical analysis suggests that NEITI’s efforts taken alone cannot transform the politico-economic and socio-cultural structures that create the conditions in which poverty and mismanagement of natural resource revenue persist. Hence, to effectively address the question of how natural resource revenue can be efficiently utilised for sustainable development in Nigeria and elsewhere in Africa, there is the need to go beyond tackling the symptoms of governance failure complex via a piecemeal approach as is the case with NEITI, to paying attention to the structural deficiencies inherent in the African state (the root cause of the problem) and the associated systemic inadequacies in its societies(the proximate cause of the problem). Efforts to address the structural dimension of the governance failure complex in Africa would require resource rich African states like Nigeria to pursue a compatible cultural democracy as opposed to blind emulation of Western multi-party political forms of liberal democracy. Indeed, Ake points out that for democracy to be relevant and sustainable in Africa, it must not only be radically different from liberal democracy, but must also reflect the values and interests of its social base i.e., the ordinary African. This is because the appropriateness of a political system is dependent on the history of the people and their cultural environment. In the absences of such an appropriate political system, sustainable development goals, human rights objectives and the capacity to aspire are likely to remain an illusion.
A compatible cultural democracy form of government in Africa would entail among other things, a co-societal arrangement i.e., the use of ethnic groups, nationalities and communities as the constituencies for representation. It would be both centralised and decentralised with equal emphasis on individual and communal rights. The underpinning logic here is that Africa is still largely a communal society and it is this communalism which defines the people’s perception of self-interest, their freedom and their location in the social whole. Nevertheless, it is important to point out that the argument here is not another attempt at cultural determinism or an attempt to romanticise African cultures. Rather, what is being suggested is that culture i.e., the context of meaning and social practice through which Africans encountered, interpreted and responded to the institutional and cultural intrusion of colonialism and postcolonial development, plays an important role in shaping the developmental outcomes associated with the abundance of natural resources in Africa. As such, any suggestions with regard to the appropriate governance structures needed to address the resource curse need to fit well with both the social realities and cultural contexts in Africa. The merit of this position also arises from the fact that it is now common knowledge that culture and development are intricately intertwined. Indeed, the exception of Botswana within Africa is often cited given that the state has defied the resource curse thesis. However, what is often not mentioned, as pointed out by Maundeni, is that the success of Botswana is rooted in its indigenous state initiator culture. The argument here is not that the Botswana political structure of democracy should be blindly replicated in all other African countries or that the model has no deficiency. Rather, what is being suggested is that resource rich African countries stand a better chance to generate the missing enabling environment for transparency, accountability, and active citizens’ participation in affairs of the state if they were to integrate indigenous culture into their political structure in a manner consistent with the African philosophy of Ubuntu . Indeed, the pursuit of compatible cultural democracy must be underpinned by institutional reforms like electoral reform that would allow for legitimate elections and encourage active grassroots participation in governance in Nigeria.
Furthermore, a core problem that continues to undermine the effective use of resource revenue in Africa is the weak institutional and technical capacities of the agencies that are supposed to provide checks and balances within the African state. Hence, efforts directed at technical and institutional capacity building at all levels of government, i.e. federal, state and local government institutions, is essential. For example, the present focus of NEITI on the federal government alone without a similar focus on state and local governments means that transparency at the federal level will not necessarily translate into sustainable development in local communities. This is because oil revenues that are not mismanaged at the federal level are effectively being misused at the state or local government levels. For example, despite significant increases in oil revenue to the state and local governments in the Niger Delta, there has been no tangible gain either with regard to community development or poverty reduction in the Niger Delta. Instead, the region now faces an increase in the scale and intensity of violence.
In addition, issue specific partnerships to compensate for institutional weakness can be encouraged. For example, to deal with corruption associated with contracts that undermine effective delivery of services, Transparency International (TI) Canada is facilitating a partnership between TI-Nigeria and the Niger Delta Development Commission (NDDC) to adopt Integrity Pacts (IP) in contracting for NDDC economic development projects. The integrity pact concept refers to independent monitoring of the contracting process at every stage from preparing specifications, to competitive bidding, to selecting a contractor, to implementing the contract, to preparing a final audit. If successful, the partnership between TI-Nigeria and the NDDC would facilitate the institutionalisation of integrity pacts and help reduce corruption associated with project implementation in the Niger Delta.
Crucial also is the need to strengthen the institutional and technical capacities of civil society groups in Africa as well as encourage them to diversify their strategy for engagement with the state. For instance, limited institutional capacity and a dearth of material resources among civil society groups in Nigeria mean they rely solely on activism as a strategy for achieving their objectives. While this strategy might be effective on some issues, there is the need for civil society groups to expand their tools of engagement to include active lobbying of governmental institutions and agencies for sustainable development goals.
Similarly, civil society organisations in Nigeria tend to have a diversified portfolio in which they focus on a wide range of issues such as the environment, democracy, conflict resolution and human rights. There is no doubt that these issues in an African context are intricately related, which therefore explains the tendency for one civil society group to focus on all of these issues. However, this broad issue focus often means that in the face of limited resources, these civil society groups are often over-stretched, leading to internal fragmentation and the inability to serve as an effective countervailing force for the public good. Hence, there is the need for civil society groups to engage in the process of specialisation i.e. a focus on one issue area, and collaboration in the form of partnerships with other non-governmental organisations as both a strategy to mitigate the impact of limited resources, consolidate their competence, facilitate inter-organisational learning and build solidarity. The point here is not that this strategy of specialisation-collaboration does not presently exist; rather, it is that it needs to increasingly become the norm.
Additionally, the centrality of oil to the Nigerian economy means that oil MNCs have an important role to play as well as a significant leverage to support the efficient use of natural resource revenue via their corporate citizenship initiatives. Unfortunately, at present, there is a tendency among oil MNCs in the country to focus almost exclusively on micro-level corporate citizenship issues such as social investment in roads, school and clinics in local communities to the detriment of macro-level corporate citizenship issues such as corruption, accountability, and a decline in the agricultural and manufacturing sectors due to the Nigerian state overdependence on oil. However, while attention to micro-level corporate citizenship issues might address some aspects of local grievances, it is unable to deal with the root causes of grievances. This is because events at the micro–level i.e., host communities, are often consequences of activities, action or inaction, at both state and national levels. Hence, an emphasis on both micro and macro issues is critical if oil MNCs wish to contribute to sustainable development via their corporate citizenship initiatives.
Addressing macro-level corporate citizenship is bound to increasingly become critical to the long term viability of the oil industry, given that the federal government now plans to abound the Joint Venture Contract (JVC) model. This is because the present blame culture in which the oil MNCs are able to hide behind governmental failure and claim that their community development spending is restricted by their JVC partners will no longer suffice. To avoid collective action problems and issues of free riding in the oil industry, rather than have individual oil MNCs pursue macro-level corporate citizenship issues, oil MNCs can collectively actively support the Oil Producers Trade Section (OPTS) of the Lagos Chambers of Commerce to work with NEITI and TI Nigeria to deal with the issue of transparency and accountability at federal, state, and local government levels. This kind of strategy will go a long away in ensuring that transparency in the oil industry would yield some sustainable development benefits in host communities as well as ensure that no one oil MNC is put at a competitive disadvantageous position in Nigeria due to its involvement with macro-level corporate citizenship issues.
Finally, the overdependence of the Nigerian state on oil and its weak position in the global capitalist system means that the state lacks both the capacity and incentive to effectively regulate the activities of oil MNCs. For example, the Department of Petroleum Resources (DPR) that is supposed to regulate the oil MNCs depends on oil MNCs to provide it with information regarding the nature, volume, and extent of environmental damage with regard to oil spills. In addition, based on the JVC contract between the government and oil MNCs, the Nigerian government is the senior partner as it owns a majority share in the partnership. However, the fact that it is only oil MNCs that have the technical capacity to extract oil and they essentially control the running cost of the JVC, they are in practice effectively the senior partners. Under these circumstances there is the need for internationally binding laws to regulate the activities of oil MNCs in Nigeria if oil extraction is to translate into sustainable development.
The point here is not to reiterate the voluntary initiative versus mandatory initiative debate; instead, the argument here is that the rentier status of the Nigerian state means it lacks the most basic incentive to pursue sustainable development goals when these are not perfectly aligned with the goal of oil extraction. As a result, a significant driver of voluntary initiatives does not exist in Nigeria as in most other African countries. This partly explains why the absence of sanctions in NEITI for both government and oil MNCs has been a major stumbling block in the fight against corruption in Nigeria and therefore has been unable to deliver on its touted promise by its advocates. International binding laws with clear sanctioning mechanisms are therefore a necessity, which can complement a voluntary initiative like NEITI, in the quest for a cure for the resource curse in Nigeria.