Nigeria is the largest oil producer in Africa and the eleventh largest producer of crude oil in the world. In 2006, total Nigerian oil production averaged 2.45 million barrels per day. Nigeria had 36.2 billion barrels in proven oil reserves as of January 2007. ¹

Nigeria's leaders have accomplished several important economic reforms since 2000, when new anti-corruption measures were put in place. One of the greatest achievements of former president Olusegon Obasanjo was the opening of oil and gas revenues to greater scrutiny through implementation of the EITI. Since 2003, unprecedented amounts of revenue information have been brought into the public domain.

The Nigerian economy is heavily dependent on the oil and gas sector, which accounts for 99% percent of export revenues, 85% of government revenues, and about 52% of gross domestic product (GDP).² Despite total earnings of over $400 billion USD in oil revenue since the early 1970s, Nigeria's GDP per capita is only about $1,049 (2007), and the vast majority of its 140 million citizens have seen little benefit from this legacy of wealth. Nigeria ranks 159th out of 177 on the UN Human Development Index.

The democratic transition begun in 1999 has increased protection for civil and political liberties, but it has yet to yield tangible improvements in the standard of living for average Nigerians. More than one third of the population lives in extreme poverty—defined by the World Bank as earnings of under $1 per day—while 9 out of 10 Nigerians live on under $2 per day.³ Most people lack access to basic services such as clean water, electricity, and health care.

The combination of poverty, poor governance institutions and environmental damage has also spawned a violent insurgency in the Niger Delta that, in 2008, has reduced oil production by an average of 20%. In September the Yar'Adua government announced the establishment of a Ministry of Niger Delta as part of measures to address the problems of insecurity, poor infrastructure and unemployment in the region.

Despite these challenges, some important economic and governance reforms have begun to show results. Macroeconomic performance has improved, as evidenced by the accelerated growth rate of the non-oil sector, from 8.2% in 2005 to 9.6% in 2007, and the drop in inflation to 5.9% in 2007. A reinvigorated fight against corruption, growing financial and telecommunications sectors, greater budgetary transparency and more prudent economic policy represent additional highlights (although the abysmal 2007 elections took the sheen off these advances).

The Nigerian government has demonstrated a strong commitment to the Nigeria Extractive Industry Transparency Initiative (NEITI), and also recently passed Fiscal Responsibility and Public Procurement Laws. Building on these advances depends on the will of the current government to sustain implementation, and its determination to tackle other critical issues such as improved transparency of government budgets at the federal, state, and local level.

Revenue Transparency

Nigeria's steps toward greater revenue transparency began in 2003-2004 with President Obasanjo's endorsement of the EITI. The NEITI was launched in February 2004 under the inspired political leadership of Obiageli Ezekwesili. In 2005 the government created a working group with representatives from civil society, industry, federal and state governments to oversee the EITI process. Because only three out of twenty-eight members of the group were from civil society, a Civil Society Steering Committee was established in June 2005. This body, comprised of 10 additional civil society representatives, is meant to consult with the National Stakeholders Working Group (NSWG) on EITI implementation.⁴

President Obasanjo officially signed the NEITI bill into law in May 2007, just before leaving office. According to the law, NEITI is "charged with the responsibility … for the development of a framework for transparency and accountability in the reporting and disclosure by all extractive industry companies of revenue due to or paid to the Federal Government."

NEITI's first report, published in 2006, represents an ambitious effort. The report exceeded the minimum EITI criteria in several important ways. It included financial, physical and process audits which together provide a far broader picture of the oil sector than simply the disclosure of financial transfers. Moreover, payment data was disaggregated by company and payment type, providing a nuanced account of revenue inflow. The report, conducted by the Hart Group, was based on an audit of the oil industry between 1999 and 2004.

Regarding financial flows, NEITI's first report initially found a discrepancy of $232 million between the amount the central bank said it had received between 1999 and 2004 and the higher amount oil companies said they had paid. At the urging of President Obasanjo, the auditors conducted further work and the discrepancy figure was brought down to $8.5 million.⁵ Rather than millions in missing money, the review's most compelling finding was general imprecision by several government agencies in their oversight, documentation, collection and calculation of oil revenues.

In 2005 the government instituted an open bidding process for oil blocks, indicating a potential departure from the purely discretionary process oil block awards that had been abused by past presidents. However, the implementation of the 2005 bidding round, as well as subsequent rounds in 2006 and 2007, have cast doubt on the government's stated commitment to transparency in awarding oil concessions. Numerous petitions, court cases and executive and legislative probes into the bidding procedures indicate that discretion continues to hinder fair processes. Reported problems include the allocation of blocks to companies who did not bid, the politicized selection and partnering of the so-called "local content vehicles," the award of "first rights of refusal" and the partial enforcement of signature bonus payment deadlines.

Along with consistently publishing audits, the success of the NEITI will rest on its ability to demonstrate concrete changes at the sub-national level, particularly in the Niger Delta. The monitoring of expenditures at the state and local level—following the example of recent innovations in Ghana—is critical to broadening and institutionalizing accountability principles in Nigeria and demonstrating the fundamental relationship between transparency and development.

Nigeria still lacks a clear strategy for or commitment to translating federal transparency initiatives to the states.⁶ Executive and legislative branches of state and local government lack the capacity to implement new measures, and lack of clarity on the actual availability of funds at the local level remains a pressing issue.⁷

In 2003, the federal government began to publish in local newspapers the monthly oil revenue allocations that it claims are transferred from the federal to state and local governments. These allocations make up the bulk of state and local government revenue. The Nigerian constitution currently provides that oil-producing states receive 13% of natural resource revenues up front as derivation grants. Of the remaining 87%, the federal government receives 52.7%, the states 26.7%, and local governments 20.6%.

Civil society groups argue that in addition to the federal publication of regional revenue allocations, state and local governments should also publish the money they receive from federal allocations, as well as any revenue they receive directly from oil companies. Public disclosure of the state's annual budget is another important early step.

Budget Transparency

Nigeria's budget process remains opaque. The country fell into the worst performing category on to the 2006 Open Budget Index, with scant or no information provided to citizens.⁸ Despite notable improvements in revenue transparency, key aspects of federal, state and local budgets remain shrouded in secrecy.

Meanwhile, state and local government revenues have risen by as much as six hundred percent between 2000 and 2004. Allocations to the states from the National Federation Account increased from $1 billion to $6 billion over the same period, with nearly one third of this windfall reportedly going to the major oil-producing states: Delta, Rivers, Bayelsa, and Akwa Ibom. The IMF has also called for greater availability of information about the budgets of state and local governments.⁹

The Fiscal Responsibility Law, passed in late 2007, sets out a general framework for budgetary planning, execution and reporting at the federal level. This new framework is a necessary, though insufficient, step in strengthening transparency and accountability. The law's impact will depend on whether its implementation exceeds current fragile efforts at budget reporting.

Anti-Corruption Institutions

Corruption remains a serious problem in Nigeria, but groups like the Independent Corrupt Practices Commission (ICPC) and the Economic and Financial Crimes Commission (EFCC) have made some progress in recent years. The EFCC has recovered more than $5 billion since 2006, and has successfully prosecuted 82 people, including high-profile public figures such as a former police chief Tafa Balogun and several former governors. Nigeria's progress has been recognized by the Transparency International Corruption Perceptions Index (TICPI), where it rose from 1.6 in 2005 to 2.2 in 2006, but unfortunately the score has remained stagnant since that time.

During the first years of its operations, EFCC was regularly accused of pursuing only President Obasanjo's opponents—a charge that former EFCC chairman Nuhu Ribadu denies. These public perceptions were exacerbated when the EFCC launched an investigation of Vice President Atiku Abubakar soon after he publicly protested Obasanjo's campaign to run for a third term. Under the Yar'Adua government, the widely-respected Ribadu was removed from his post and demoted in a move many interpreted as damaging to the EFCC's reputation.

Both of these institutions need to engage more effectively with credible civil society organizations that are already playing an oversight role in the use of public funds.¹⁰ One obstacle is the absence of witness protection programs in the ICPC and EFCC, which could encourage people to speak against corruption and misconduct for the sake of public interest.

Freedom of Information

Laws that were passed under military rule blocked disclosure of information, especially information concerning public finances. The Official Secrets Act made it an offense not only for civil servants to give out government information, but also for anyone to receive or reproduce such information. Further restrictions were contained in the Evidence Act, the Public Complaints Commission Act, and the Statistics Act.¹¹

Despite more than seven years of civil society efforts, Nigeria's Freedom of Information Bill has yet to be passed into law. In 2004 the House of Representatives approved a freedom of information bill, and in November 2006 the bill was endorsed by the Senate. But the bill failed to get legislative approval under the current government and was thrown out by the House of Representatives in June 2008. If it were to become law, the bill would guarantee Nigerian citizens the right to access government-held information, constituting a critical step in instituting a culture of transparency in government. More information is available at www.foicoalition.org.

Civil society groups have also formally presented a proposed Whistleblowers' Bill to parliament to encourage people to challenge corrupt practices and other wrongful activities, and to protect whistleblowers from discrimination or retaliation. But in spite of relentless efforts, the bill has yet to be gazetted. The bill will likely have to be reintroduced, since sponsors usually must present a bill again once the legislative calendar period ends.

¹ Oil and Gas Journal
² World Bank 2008 country fact sheet
³ World Bank, "Nigeria Country Brief," updated April 2006.
⁴ PWYP/RWI, Eye on EITI: Civil Society Perspectives and recommendations on the EITI, October 2006, p. 15.
⁵ Kunle Aderinokun, "Oil Revenue: NEITI Wants EFCC to Probe Discrepancies," This Day, November 11, 2006.
⁶ A legislative template has been prepared but is not publicly available according to the World Bank. Delta state has passed a Fiscal Responsibility Law, and Ogun, Benue, and Rivers states have made explicit demands for support in passing this legislation. The World Bank is apparently supporting the drafting of fiscal responsibility legislation in Jigawa and Cross Rivers. Designing procurement legislation for the state level is easier as good practices are clearly identified in these areas.
⁷ Civil society organisations have demonstrated limited analytical capacity to use the published budgetary disbursements to require more transparency on state-local government transfers.
⁸ For index, see www.openbudgetindex.org.
⁹ IMF, "2005 Article IV Consultation Concluding Statement," March 25, 2005, Para 25
¹⁰ ICG, Nigeria's Faltering Federal Experiment, Africa Report No. 119, October 25, 2006, p. 11.
¹¹ Sam Olukoya, "Freedom of Information Bill Proves Elusive," IPS, June 21, 2006.