Comparative Analysis of the Culture of Accountability and Transparency in the Petroleum Industries (Norway, Uganda, and Nigeria)

Abstract

This paper presents a comparative analysis of the culture of accountability and transparency within the petroleum industries of Norway, Uganda, and Nigeria, with a specific focus on the Nigerian Extractive Industries Transparency Initiative (NEITI) amendment. The study explores the varying degrees of transparency and governance in these countries, each of which has distinct political, economic, and institutional frameworks. Norway is highlighted as a model of effective governance, with its strong regulatory structures, public oversight, and robust institutional frameworks ensuring transparency in the management of its oil wealth. Uganda, a relatively new entrant in the oil industry, has made strides in creating transparent frameworks through EITI membership and the establishment of regulatory bodies but faces challenges in enforcement. In contrast, Nigeria’s oil sector continues to grapple with entrenched corruption, weak institutional structures, and ineffective enforcement mechanisms, despite the establishment of NEITI. The NEITI amendments in 2017 sought to enhance the initiative’s capacity to improve transparency, but political resistance and institutional weaknesses hinder its full potential. This paper examines how these countries’ experiences with transparency in the petroleum sector provide insights into the challenges and opportunities for fostering accountability, and offers recommendations for strengthening governance in oil-producing nations.

Introduction

The Extractive Industries Transparency Initiative (EITI) founded in 2002 was created with the goal of enhancing transparency and accountability in the management of oil, gas, and mineral resources. The EITI is an international effort designed to increase openness regarding the revenues that countries obtain from natural resource extraction. Currently, 55 countries have endorsed the EITI. The petroleum industry plays a crucial role in national economies, yet its governance remains a global challenge. Transparency and accountability are essential for managing natural resources effectively. The Extractive Industries Transparency Initiative (EITI) establishes a global standard aimed at fostering transparency within the oil, gas, and mining industries. It operates through a defined structure and process designed to achieve these objectives. Its structure are outlined below:

• Countries join EITI and commit to its principles
• Companies and governments submit data on payments and revenues
• An independent administrator reviews and reconciles the data
• A report is published detailing revenues, payments, and discrepancies
• A multi-stakeholder group reviews and validates the report
• The report is made publicly available to promote transparency and accountability.

EITI in Norway: A Model of Transparency

The objective with the EITI-standards is to improve governance of the extractive industries through disclosure and oversight of government revenues from oil, gas and mining companies. This should in turn result in better management of natural resources and enable citizens to hold their governments to account for how the revenues are used.[1]Norway has set a global benchmark for accountability in the petroleum sector. The Norwegian Petroleum Directorate (NPD) and the Ministry of Petroleum and Energy ensure rigorous oversight, with financial disclosures and licensing processes being publicly available. The country’s participation in the Extractive Industries Transparency Initiative (EITI) and the management of oil revenues through the Government Pension Fund Global (GPFG) highlight its commitment to fiscal responsibility and public trust. Norwegian petroleum history dates back to the 1960s when Norway proclaimed sovereignty over the Norwegian Continental Shelf (NCS). The first licensing round took place in 1965, and the first oil commercial discovery was announced in 1969.  Since production started on the Norwegian continental shelf in the early 1970s, petroleum activities have contributed more than NOK 13,000 billion NOK to Norway’s GDP (in real terms). Norway is ranked as the tenth largest oil exporter and the third largest gas producer in the world. In 2015, Norway produced 227.8 Sm oil equivalent of marketable petroleum, equalling 2% of the world total production. At the end of 2014, proved oil reserves of 786 million Sm3 or 0.5% of the world’s reserves. Proven hydrocarbon reserves have been in decline over the past decade, although some important discoveries have been made in the past two years and new areas are being opened for exploration. To date,45% of the estimated recoverable resources on the Norwegian shelf have been extracted and sold.[2] 56 countries are currently implementing the EITI standard. Norway was accepted as EITI compliant in March 2011, and was the first OECD country to implement the EITI standard. Norway is also the first country to mainstream EITI in government system and corporate reporting which mean Norway will no longer publish a separate EITI-report. Norway implemented the EITI standards through distinct regulations, effective July 1, 2009.

These regulations mandate that oil companies report payments made to the government, and that government agencies disclose revenues received from these companies. Deloitte AS was designated as the independent administrator to reconcile these payments and revenues. A multistakeholder group, led by the Ministry of Energy and Petroleum, oversees the implementation. The initial report, detailing payments from 2008, was submitted in the fall of 2009.[3] In 2015, Norway marked its eighth year of reporting on petroleum-related cash flows. Reports from licensees and government entities showed that 97% of the reported cash flows originated from petroleum tax and Petoro/SDFI. While some discrepancies were noted during the reconciliation process, the percentage of entities with discrepancies decreased from 46% to 39% compared to the previous year. After addressing these discrepancies and making the required adjustments, the reported cash flows from licensees and operators aligned with the government’s records, reflecting accuracy and transparency.[4]

EITI in Uganda: Emerging Frameworks for Accountability

Uganda’s petroleum sector is still in its developmental phase, but legal frameworks such as the Petroleum Act, 2013, and the Public Finance Management Act, 2015, provide a foundation for transparency. The Petroleum Authority of Uganda (PAU) oversees compliance, and Uganda has joined EITI, indicating a growing commitment to accountability. However, challenges such as limited civil society engagement and concerns about revenue management persist. Uganda was admitted as an EITI implementing country in August 2020.The country has discovered commercially recoverable oil reserves, with current oil exploration work taking place in the Albertine Graben region. Uganda’s proven crude oil reserves stand at 6.5 billion barrels with 1.4 billion barrels that are commercially recoverable. The country has a large artisanal and small-scale mining sector.

Uganda aims to use EITI membership to strengthen efforts in ensuring overall transparency in the sector, strengthen tax collection, promote public debate, improve the investment climate, build trust and create lasting value from petroleum and mineral resources.

To achieve these objectives, the Uganda EITI’s (UGEITI) work plan includes activities such as the development of a policy and plan on contract and license publication, the documentation of planned reforms on beneficial ownership transparency, a scoping study on state participation in the extractive sector and activities relating to communication and dissemination of data. UGEITI further seeks to enhance revenue management and accountability, for example through the publication of data on social and environmental expenditures, quasi-fiscal payments and the documentation of environmental impact.[5] Since its accession to the EITI in 2020, Uganda has cultivated a vibrant EITI process, characterised by an engaged multi-stakeholder group and a dynamic civil society operating within a relatively constrained civic environment. The EITI remains instrumental in facilitating discussions about the EACOP pipeline, ensuring a multi-stakeholder dialogue around the project.[6] It has also contributed to the revision of the 2003 Mining and Minerals Act. The 2022 Mining and Minerals Act provides new legal provisions for the disclosure of contracts and beneficial owners of companies, in line with the EITI Standard. The Extractive data below clearly shows the point.

NEITI in Nigeria: Amendment and Its Implications

Nigeria, as Africa’s largest oil producer, has historically struggled with corruption and mismanagement in its petroleum sector. The NEITI Act, has played a pivotal role in promoting transparency by requiring audits and public disclosure of oil revenues. The recent NEITI Amendment seeks to strengthen its independence, enforce compliance more effectively, and enhance whistleblower protections. While these amendments are promising, challenges remain in enforcement and political will. Nigeria’s extractive industry, driven by its substantial oil and gas reserves, is a major contributor to its GDP and export profile, accounting for 4.51% from mining and 65% from oil and gas. However, this sector has long been plagued by corruption, mismanagement, and lack of transparency. To address these issues, Nigeria became a founding member of the Extractive Industries Transparency Initiative (EITI) in 2003. This commitment requires companies to disclose their payments to the government, with the government reciprocating by disclosing its receipts.

Despite incremental progress, EITI reports have exposed significant discrepancies between company payments and government receipts, highlighting the ongoing need for reform and increased transparency. NEITI’s 2021 oil and gas report, titled “Impact Built on Blocking Leakages to Grow Revenue,” is the 14th in a series of reconciliatory reports on the sector. According to the NEITI Act of 2007, an Independent Administrator is appointed each year to audit Nigeria’s oil and gas industry, ensuring transparency and accountability.[7] Given that NEITI House is based in Abuja, why is there a need for an Independent Administrator? Independent Administrators may not be funded as much as they need to, thus promoting the possibility of bribery and corruption. The IAs are most times accountable to the person who appointed them, thus the higher probability that they are threatened or influenced into concealing certain transactions. This writer also argues that it is a sign of laziness for NEITI to include such provision in its Act delegating such duty to independent persons whilst collecting fat cheques for same duties. If this is not corruption itself, then what else could be? Also, NEITI should be in charge of conducting such researchfor their reports hence when there is a loophole, they would directly take the blame.

More so, the Hart Reportstates that the NEITI uses the Cash Basis of Accounting, which records transactions on the date the financial transfer occurs, regardless of the period to which the transaction pertains.The reason of preference for this accounting method over other proven methods of accounting which have proven effective over the years remains a question to ponder on. It is also noted that an absence of strong leadership is a key contributor to the failures of Nigeria’s Extractive industry compared to that of Norway. The table below shows a clear example of the role of strong institutions to this regard.

Compararism and Conclusion

Norway’s strong institutions and independent oversight bodies contrast with Uganda’s evolving structures and Nigeria’s challenges with enforcement. Also, Norway’s sovereign wealth fund exemplifies best practices, while Uganda’s model is developing, and Nigeria continues to grapple with leakages and mismanagement. Norway also has an open and participatory framework; Uganda is improving in this area, while Nigeria’s reforms under NEITI seek to enhance public accountability.

The comparison of Norway, Uganda, and Nigeria highlights the importance of robust governance frameworks, strong institutions, and political commitment in fostering accountability and transparency in the petroleum industry. While Norway sets a high standard, Uganda has opportunities to build on emerging accountability measures, and Nigeria’s NEITI Amendment presents a chance to strengthen governance in the extractive sector. Effective implementation and enforcement remain key to achieving lasting transparency and accountability in Nigeria’s petroleum industry. The findings and discussion so far highlight the risks of disconnecting natural resource management from domestic political systems. While Norway has successfully developed its oil industry with minimal market distortions, leading to socio-economic stability, Nigeria remains trapped in rent-seeking behaviour and dependence on oil. This reliance exposes Nigeria to both domestic and international market shocks and vulnerabilities.The NEITI Amendment is a crucial step in improving Nigeria’s transparency framework, but its success depends on effective implementation. Learning from Norway’s best practices and Uganda’s emerging strategies can help Nigeria optimize its petroleum governance and resource management for sustainable development.

Reference(S):

[1] https://www.norskpetroleum.no/en/economy/transparency-eiti/

[2] http://www.norskpetroleum.no/en/economy/governments-revenues/

[3] Deloitte, “Extractive Industries Transparency Initiative Reconciliation of cash flows from the petroleum industry in Norway”, Translation from the original Norwegian version, December 2009.

[4] Deloitte, “Extractive Industries Transparency Initiative: Cash flows from the petroleum industry in Norway 2015” Deloitte AS – 7. December 2016. Translation from the original Norwegian version.

[5] https://eiti.org/countries/uganda

[6] ibid

[7] Nigerian Extractive Industries Transparency Initiative, “NEITI 2021 Oil and Gas Industry Report” 2021.