Nigeria ranks 40th in Quality of Governance in Oil & Gas

The 2013 Resource Governance Index (RGI) of the Revenue Watch Institute (RWI), which measures the quality of governance in the oil, gas and mining sector of 58 countries across the globe has placed Nigeria 40th in the overall global ranking. According to the report, which was released in Abuja recently, Nigeria, which remains Africa’s largest oil exporter and the world’s 10th largest oil producer and accounted for more than 2.2 million barrels of crude oil per day in 2011 received a « weak » overall composite score of 42 over 100 within the multiple scales of “satisfactory, partial, weak and failing.” The report was launched by the Chairman Board of the Zero Corruption Coalition (ZCC), Auwal Musa, at a press briefing, which held simultaneously across the globe to unveil the 2013 RGI findings to the public.

Accordingly, the 58 countries that were accessed produced 85 percent of the world’s petroleum, 90 percent of diamonds and 80 percent of copper. Profits from their extractive sector totalled more than $2.6 trillion in 2010 and in 41 of these countries, the extractive sector contributed a third of gross domestic product and half of total exports on average. Nigeria with oil revenues that totalled about $50.3 billion in 2011, ranked 40 out of 58 countries with relatively strong performance on its institutional and legal setting component contrasting with poor enabling environment score.

From highly ranked countries like Norway, the United Kingdom and Brazil to low ranking countries like Qatar, Turkmenistan and Myanmar, the index identified critical achievements and challenges in natural resource governance; it indicated that in 2011, oil revenues for Nigeria alone were 60 percent higher than total international aid to all of sub-Saharan Africa, adding that the future of the country depends largely on how well it manages its oil, gas and minerals. For instance, in its assessment of institutional and legal setting which it scored Nigeria « partial » with 66 points, the report stated that such reflected substantial public access to information but incomplete revenue disclosure policies. It explained that Nigeria’s minister of petroleum resources grants licenses for oil exploration, while the Department of Petroleum Resources (DPR), under the minister, oversees the licensing process and regulates the sector, yet some revenues in royalties, rents, license fees and bonus payments still bypass the treasury and are not reported to the legislature.

The report further stated that the lack of contract transparency and incomplete reporting on most aspects of the petroleum industry had led to Nigeria’s « failing » score of 38 in reporting practices, adding that the country received a « failing » score of 18 in enabling environment for government inefficiency and lack of rule of law in the sector. Musa in his assessment of Nigeria’s performance in the process stated that it was a national shame for the country to continue to encourage opaque practices in its resource management. “Our preliminary reaction to Nigeria’s overall “weak” rating in the RGI is that the premise upon which the scorecard was based is a true reflection of the state of governance of Nigeria’s oil and gas industry. “Indeed, it has only confirmed the bad practices bedeviling the industry on the basis of which the civil society has been seeking appropriate reforms and redress,” Musa said. He added: “Given its experience in oil and gas production and the quantum of what it produces as the world’s 10th largest producer of oil, it remains a national shame and embarrassment that Nigeria lacks virtually all the basic ingredients of best practices in the extractive industry.”

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