Deepening Your Knowledge On How “Oil Money” Is Spent in Nigeria

National Extractive Industries Transparency Initiative (NEITI) report - Republished by Youth Against Corruption (YAC).

What is the NEITI?• The EITI describes itself as a global standard to promote open

and accountable management of natural resources. The NEITI is the National chapter.

• The Nigeria Extractive Industries Transparency Initiative Act 2007 mandates NEITI to promote transparency and accountability in the management of Nigeria’s oil, gas and mining revenues.

• Nigeria was the first of the EITI countries to enact a law specific to the EITI (the NEITI Act of 2007) . This provides us with the autonomy necessary to channel and address critical issues on resource governance from citizens.

However, after four reporting cycles covering 13 years, several questions have arisen on the effectiveness of the initiative.

What has changed? What are the results of the EITI implementation on resource governance? Has the abundant resources in oil and gas translated to improved quality of lives, and if not - why not?

These questions led the initiative to commission a Fiscal Allocation and Statutory Disbursement (FASD) audit, which involved an inspection of the allocation of spending of extractive resources.

FASD audit covered the allocation of resource spending from the period 2007 to 2011 of Nine resource states in Nigeria. It looked into the transfer and management of special development funds setup by the government to:

invest in and diversify its economy, clean the environment and strengthen its social and education services.

The funds are, among others, the Niger Delta Development Commission (NDDC), the Natural Resources Development Fund (NRDF), the Tertiary Education Trust Fund (TETFund) and the Stabilization Fund. The audit also covered allocation and utilization of oil and gas revenue in key sectors in the states.

How much money are we talking

about?From the period of 2007 – 2011 , N22.3 Trillion ( $125 billion) worth of oil, gas and mining revenues arrived at the state coffers.

That summed up to approximately 15% of GDP in that same period. To understand the gravity of this, that is $780 per person living in Nigeria!

Reported Sharing Formula of the oil, gas and mining revenue in Nigeria

One major revelation the audit report revealed, is the high degree of dependency on oil revenues in the nine states sampled. The trend is unlikely to be different in all the 36 states of the Federation.

Oil Dependencies

Key Statistics

Akwa Ibom: 91% dependent Bayelsa: 96% dependent Ondo: 85% dependent Rivers: 76% dependent Delta: 75% dependent Nassarawa: 75% dependent Kano: 74% dependent

The continued dependence on oil revenue is not only UNSUSTAINABLE, but the main reason for The increasing rate of corruption, Rent- seeking, Lack of creativity, Hard work, and Nigeria’s cycle of poverty in the midst of plenty. This is fueling the distrust of the Nigerian people in our government.

Oil Dependencies (2)

The audit also drew public attention to another negative trend in the use and allocation of revenue to major sectors:

Most of the states covered by the audit failed to channel the funds to important areas that directly improve the living conditions of our citizens. These include social services

like health and education, housing and job creation.

Oil Dependencies (3)

Case examples: Imo State & Akwa Ibom

1. Imo State allocated 2.3% of its total revenue to education and health while 72% went to recurrent expenditure covering government running costs, wages and overheads.

2. In Contrast, Akwa Ibom and Rivers channeled over 70% of their revenues to the provision of capital projects. However, the allocation of these two states to social services was also less than 10%.

Niger Delta Development Commission (NDDC)

The Niger Delta Development Commission was set up as a special intervention agency to develop the oil-rich Niger Delta and redeem the area from long years of neglect and environmental degradation.

A whopping sum of N7.4 billion (US $41.4 million) allocated to the 9 state offices of the (NDDC) for the completion of projects cannot be accounted for. Most of the projects were either duplicated, or nonexistent. The report also brought up common cases of poor administration of funds allocated to the NDDC.

Natural Resources Development Fund (NRFD)

The audit confirmed that the total transfers into the NRDF amounted to N365 billion (US $2 billion) in the years covered.

Prior to this audit report, not many Nigerians were aware that this fund existed. It was set up to develop alternative sources of revenue from natural resources.

Contrary to the objectives for which the fund was set up, the Audit discovered that the NRDF was anything but close to its original objectives.

The Fund had an outstanding debt of N339billion ($1.9billion)

The Tertiary Education Trust Fund (TETFund)

The audit also found that, at a time when Tertiary Education in Nigeria was in dire need of funds to develop its infrastructure, a whooping sum of over N200 billion (US $1.1 billion) was trapped in the coffers of the Tertiary Education Trust Fund (TETFUND), an agency set up primarily to support development of tertiary education.

The information provided by the Audit report provides us with a factual basis to have a serious conversation with our leaders.

They must be held accountable for their actions, or maybe better in-action!

Conclusion

Quote of the Day

“Democracy must be built through open societies that share information. When there is information, there is enlightenment.

When there is debate, there are solutions. When there is no sharing of power, no rule of law, no accountability, there is

abuse, corruption, subjugation and indignation.” - Atifete Jahjaga

For more on the highlights of NEITI Fiscal Allocation and Statutory

Disbursement Audit, please visit the NEITI website: www.neiti.org.ng