Nigeria’s Oil Proceeds: What’s Missing from the Federation’s Share? – In a recent revelation by the Nigerian Extractive Industries Transparency Initiative (NEITI), almost half of Nigeria’s oil and gas earnings from 2021 were not made available for distribution among states due to various deductions.
The Numbers Breakdown
Nigeria, in 2021, garnered a total revenue of $23.04 billion from its oil and gas undertakings. This amount includes proceeds from oil and gas sales, taxes, dividends from the Nigeria Liquefied Natural Gas (NLNG), gas flare penalties, signature bonuses, and license fees.
Out of this substantial sum, $9.8 billion (42.72% of the oil revenue) underwent deductions. This left just $13.2 billion (roughly 57.27% of the total revenue) to be remitted to the Federation Account Allocation Committee.
Further dissecting these deductions, payments to entities like the Niger Delta Development Commission and the Nigerian Content Development and Monitoring Board amounted to $963,629 or 4.18% of the total revenue. Disturbingly, the Nigerian National Petroleum Company Limited (NNPC) did not remit an alarming $1,951,115.
The Implications
These substantial deductions imply that state governments had a reduced allocation to manage government expenses, ranging from salary payments to critical public infrastructure development. Such a financial strain can significantly impact the growth and development of the states, hindering their ability to serve their populations effectively.
A Deep Dive by NEITI
The NEITI report encompassed 69 companies, the NLNG, 13 government entities, and one state-owned enterprise, the NNPC. The core aim of this report is to offer insights into Nigeria’s oil and gas sector, especially emphasizing aiding the government in reclaiming resources. Such resources are quintessential for addressing pivotal national developmental challenges, with poverty reduction being paramount.
Ogbonnaya Orji, NEITI’s executive secretary, shed light on the report’s methodology. He mentioned that it evaluated the processes characterizing all sector transactions, focusing on the transparency and accountability of financial dealings in the oil and gas sector.
Apart from the financial metrics, NEITI’s report delved into investments by the Federation or the Federal Government in the oil and gas industries, subsidy payments, company remittances, and liabilities in terms of unremitted funds owed to the Federal Government.
A Call for Timeliness
While NEITI’s yearly audit reports on the oil, gas, and solid minerals sector offer invaluable insights, they’ve faced criticism for their timing. Critics argue that the late release of these reports makes it challenging to take meaningful action against indicted companies and government agencies.
Nevertheless, the publishing of such reports is a mandatory step, aligning Nigeria with its national and global commitments in the EITI/NEITI process.
The NEITI’s findings underscore the need for transparency, accountability, and timely interventions in Nigeria’s oil and gas sector. With significant deductions impacting the funds available for state governments, it’s imperative to ensure that every dollar earned contributes to the nation’s growth and the well-being of its citizens.