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BEYOND PUBLISHING: NEITI AND THE POST-AUDIT STRATEGY By Dr. Bright E. OKOGU Executive Secretary, Nigeria-EITI

BEYOND PUBLISHING: NEITI AND THE POST-AUDIT STRATEGY By Dr. Bright E. OKOGU Executive Secretary, Nigeria-EITI. Order of Presentation. Introduction Nigeria’s Quest for Transparency in the Extractive Industries Audit of the Sector Remedial Measures Next Steps Conclusion. Introduction.

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BEYOND PUBLISHING: NEITI AND THE POST-AUDIT STRATEGY By Dr. Bright E. OKOGU Executive Secretary, Nigeria-EITI

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  1. BEYOND PUBLISHING: NEITI AND THE POST-AUDIT STRATEGYByDr. Bright E. OKOGUExecutive Secretary, Nigeria-EITI

  2. Order of Presentation • Introduction • Nigeria’s Quest for Transparency in the Extractive Industries • Audit of the Sector • Remedial Measures • Next Steps • Conclusion

  3. Introduction • Process was to enlighten the Nigerian public & to open up operations of sector • Cultivate culture of transparency & end mutual suspicion • To share experiences with other countries & incorporate best practice in our system.

  4. Nigeria’s Quest for Transparency in the Extractive Industries • Started with a determination to make a clean break with the past • Government in 1999,commissioned a World Bank study of the management of the oil & gas sector. • Report revealed serious shortcomings in: • crude oil output and disposal; • funds inflows; • funds outflow; and • institutionaleffectiveness.

  5. Nigeria’s Quest for Transparency…cont’d • Nigeria first country to sign up to EITI membership in the Q4, 2003. • The National Stakeholders Working Group (NSWG) inaugurated in February 2004 to oversee the EITI process. • NSWG/NEITI commissioned audit of the oil and gas sector for the period 1999-2004.

  6. Nigeria’s Quest for Transparency…cont’d • Final audit reports encompassing the financial, physical & process audits were unveiled in April 2006; reports in public domain (see NEITI website). • Final reconciled audit report released in August: resolved most discrepancies observed in the the April report • Several road shows to communicate purpose of NEITI & audit findings to Nigerians

  7. Audit Results…I • Financial audit: • no loss of revenue: about 2% originally unaccounted for; later narrowed to 0.02% in the reconciled audit report (well within the conventional margin of error) • the system of data keeping was very weak. E.g. in some years, CBN showed less revenue in Govt. account than companies said they paid; • in other years, CBN had more money in the accounts than companies said they paid • Office of the Accountant General of the Federation (OAGF) not fully in the picture; not in a position to monitor or control amounts in Federation Account.

  8. Audit Results…II • Physical audit: • Systematic loss of crude oil between the wellhead and the export/metering terminals • Flow rate at night was lower than during the day, suggesting theft activities during the hours of darkness • Also some issues with the handling of the imports of petroleum products

  9. Audit Results…III • Process audit: • Report flagged some concerns, including: • discretionary powers of Minister of Petroleum for allocating oil blocks arising from the Petroleum Act of 1969; • Subject to abuse as under the military • Concern about use of Local Content Vehicle (LCVs) in the 2005 Bid Round • Use of strategic downstream investment considerations in the bid round • Other issues on Petroleum downstream mass balance, etc.

  10. Remediation Measures • Inter-Ministerial Task Team set up by President to design remediation strategy for identified lapses in reports. • Members drawn from all government entities involved in the Petroleum sector management • A number of sessions already convened.

  11. Remediation: CBN • Identified flaws & proposed remedies: • CBN Poor record keeping practices and weak accounting systems by CBN Proposed measures: • Introduction of robust IT infrastructure • An integrated document management system is being set up • opened individual accounts to efficiently manage the different revenue streams it receives • Inter-agency committee to ensure convergence of information/data by all government entities • Capacity building

  12. Remediation: OAGF • OAGF issue • OAGF lacked proper accounting systems and efficient interfacing with the CBN and NNPC • Proposed remedial measures • OAGF working on a program on capacity building with PTDF funding support • CBN and NNPC would henceforth advise the OAGF on all transactions on a daily basis • Overall, a more empowered OAGF.

  13. Remediation Measures: DPR • Report noted that DPR lacked capacity to carry out independent assessment of oil companies’ royalty liabilities and also lacked efficient accounting systems. • Proposed remedial measures • Skills upgrade; recruitment of right skills • National Data Repository (NDR) is currently being set up to address issue of poor data management. • Possible improved funding for DPR, including for IT systems upgrade & to improve operating equipment

  14. Remediation Measures: NNPC The report noted that NNPC’s interfacing with other government entities was not organized and they also lacked proper data keeping systems. • Proposed remediation measures • NNPC to introduce automated software package for data retrieval which would be released 3rd or 4th quarter of 2007. • Accenture was engaged to restructure the corporation.

  15. Remediation Measures: FIRS • The audit report noted that FIRS lacked proper accounting systems & poor record keeping practices. • Proposed remediation measures: • FIRS has embarked on in-house capacity building for staff; • Restructuring & recruiting qualified staff • IT systems being deployed to improve data management • A revised bill on the PPTA Act currently before National Assembly to address gray areas in Act

  16. NEXT STEPS • Study teams to be set up within each Government entity, & technical assistance would be provided to enhance institutional capacity • N-EITI procuring experts to conduct training for agencies in critical areas of sector • Institutionalizing the EITI process (NEITI bill currently before the National Assembly)

  17. NEXT STEPS…Cont’d • Extending the transparency template to the Solid Minerals Sector. • Solid Minerals sector has been largely restructured; licenses and leases revalidated; IT-based mining cadastre now in place • REGULAR DATA RECONCILIATION FOR ALL RELEVANT AGENCIES • Law enforcement to kick in after this

  18. LINK WITH POVERTY REDUCTION • Development program spelt out in NEEDS; poverty reduction a key element • NEEDS Funding gap of about $4 bn p.a. • Transparency gives resource envelope, including for Pro-poor programs • Transparency in EI is part of wider reforms; implied transparency helps value for money • Information will empower citizens to ask questions about use of resources

  19. CLOSING THOUGHTS • Nigeria has made substantial progress in implementing EITI • Audit work exposed weaknesses; now being redeemed • Law enforcement to kick in after all honest effort is made from an accounting and data angle • Need to engender culture of accountability in system • Will help fight against poverty • Transparency being pursued as an integral part of wider reforms; process is mutually reinforcing.

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