Since its establishment in June 2003, the Extractive Industries Transparency Initiative (EITI) has made considerable progress in addressing key governance issues in the extractive sector. The EITI Standard – outlining key requirements for the good governance of oil, gas and mineral resources – is currently being implemented in the 52-member countries of EITI. At a basic level, each country is required to publish an annual report disclosing information on issues such as production, revenue collection and allocation, contracts and licenses and economic and social spending.
Nigeria joined EITI in 2003 and made history by becoming the first country to provide legislative backing for the initiative in 2007. Since signing up, the country has been proactive in implementing the global standards underlying the initiative, including producing audit reports, revealing suspicious transactions and engaging the broad range of stakeholders in the extractive sector to enhance transparency.
Despite this, the high number of corruption cases that have come to light in the oil industry globally and in Nigeria in particular in the last couple of decades raises questions about the effectiveness of the initiative in addressing corruption: Why hasn’t EITI been effective in preventing corruption in the extractive sector? Why doesn’t its audit reports expose certain corruption scandals? What role can EITI play realistically in the fight against corruption? Etc.
These are some of the questions that informed a Discussion Paper on The Role of EITI in Fighting Corruption, which was commissioned by the EITI International Secretariat in June 2019. The paper looked at ways through which EITI is currently helping to address corruption in member countries, the limitations of its approach and what more can be done to enhance the role of the Initiative in practically addressing corruption.
To provide a Nigerian context to these issues, the Africa Network for Environment and Economic Justice (ANEEJ) recently convened a High-Level Policy Roundtable to interrogate the role of NEITI – the Nigerian chapter of the global initiative – in addressing corruption in Nigeria and come up with recommendations. The issues raised in the paper and the outcome of the Roundtable provide significant insights on how best to effectively address corruption within the framework of EITI in Nigeria and elsewhere.
Presently, the framework for addressing corruption under EITI is two-fold: Firstly, in accordance with its general objectives, EITI promotes transparency by exposing suspicious deals and transactions and advancing global norms and practices on disclosure in the extractive industry. Secondly, the framework enhances the work of stakeholders in the anti-corruption domain by providing them with valuable information and supporting discussion, monitoring and advocacy.
Beyond these, however, there are identifiable structural and non-structural limitations that reduce the effectiveness of the EITI initiative in addressing corruption. In terms of structural limitations, many corrupt activities take place outside the scope of EITI. As rightly pointed out in the Discussion Paper, the revenues from the extractive sector end up being used in construction and other sectors that are susceptible to corruption, and outside the mandate of EITI. Also, the fact that EITI does not have investigative and prosecutorial powers over acts of corruption limits its ability to play a direct role in addressing corruption in member countries.
Other limitations identified include the fact that the structured audit process of EITI could provide room for actors in the sector to organise deals in a way that circumvents the EITI reporting process. An instance of this is how Nigerian officials avoided the appearance of the $1.1 billion payment made by Shell and Eni for the rights to the oil block OPL 245 by setting up a special escrow account to receive the payment.
In terms of the non-structural limitations, the paper observed that some actors – especially national governments and major companies –are likely to use their participation in the initiative as proof of integrity and action in addressing corruption without necessarily taking decisive steps. Such acts of “whitewashing” milk the reputational benefits of the initiative by holding up EITI participation as a proxy for controlling corruption, without the needed effect.
Furthermore, and in the context of Nigeria, the often-belated release of the mandatory audit reports limits the potential effective use of disclosures in those reports for anti-corruption purposes. As of September, 2019, the most recent audit report released by NEITI on the oil and gas sector is for 2016. Whilst there are funding and related issues that understandably affect the timely preparation and release of reports, the current delays seriously hamper their use by civil society groups, anti-corruption agencies, the media and other stakeholders in addressing corruption issues disclosed.
From the International Secretariat to the national level, there is a growing concern and disposition to enhance the effectiveness of the EITI Initiative in addressing corruption. The following recommendations can prove helpful to achieving this: EITI, at both international and national levels, need to be more proactive in furthering its role in addressing corruption. There should be a more strategic focus on revealing cases of corruption, beyond mere disclosure. Increased partnership with anti-corruption agencies in areas like information sharing is also important. This is one area where NEITI has been proactive in recent years. In 2016, NEITI worked with the Economic and Financial Crimes Commission (EFCC) in a Joint Task Force to investigate issues raised in the NEITI audit report released that year. The outcomes of processes like this can be integral to addressing corruption.
The validation process which all EITI members are required to undergo to assess the level of compliance with the EITI standard should take into consideration factors around accountability and remediation for acts of corruption. This will make up for EITI’s lack of prosecutorial mandate in addressing corruption. EITI should work with civil society organisations to enhance their capacity and role in understanding and analysing audit reports on the extractive sector and mechanisms to use such disclosed information for anti-corruption purposes. EITI needs to address corruption in a more direct and intentional way through measures such as reviewing its internal policies and practices, working with stakeholders in more specific ways on how to address corruption revealed through its processes, and monitoring the use of EITI data for anti-corruption purposes.
Whilst it is obvious that EITI has played a significant role in improving transparency in the extractive sector globally, the transformation of these gains into concrete outcomes would depend on how the initiative considers its role in addressing issues such as corruption and the spending of revenues for economic and social development purposes. The time is right to commence and accelerate this process of moving from transparency to accountability under the EITI framework.