Why whistle-blowing is important in curbing corruption in Nigeria’s extractive Industry

By Waziri Adio

Permit me to start by saying that the idea behind this event is no doubt a noble and laudable one. Having been privileged to play host to the African Centre for Media and Information Literacy (AFRICMIL) headed by Chido Onumah on the theme of this Summit during a courtesy visit on NEITI and to participate as an invitee to the launch of Corruption Anonymous (CORA) convened by AFRICMIL, I am particularly happy that the conversation we had at both events is now being taken forward. The choice of the House of Representatives Committee on Financial Crimes, the Socio-Economic Rights and Accountability Project (SERAP) and the Wole Soyinka Centre for Investigative Journalism (WSCIJ) to partner on this has no doubt expanded its importance and credibility. The generous support for the project by the John D. and Catherine T. MacArthur Foundation adds to the well-known good work that the foundation is doing in Nigeria. I do hope that the resolutions reached today will go a long way in advancing the fight against corruption in Nigeria.

Why Whistle-blowing is Important in Curbing Corruption in the Extractive Industry

I was invited to focus my presentation on “Whistle-blowing and Corruption in the Extractive Industry in Nigeria.” The question that readily comes to mind would be why is whistle-blowing policy important in the extractive industry corruption? Transparency in the extractive sector and whistle-blowing share some points of convergence, namely: about doing things right; about checkmating/preventing corrupt elements; and about ensuring that resources serve the generality of the people. The link between the extractive sector and corruption in Nigeria is located in the centrality of the former to the economy of the country. As a country, Nigeria depends almost wholly on earnings from the extractive sector (particularly the oil and gas sub-sector) for its economic survival. Up until very recent efforts aimed at growing Nigeria’s revenue earnings from other sources, the oil and gas sub-sector alone contributed as much as 95% of the country’s exports and 85% of government revenues. The solid mineral sub-sector which was the first to come upstream was recklessly abandoned, despite anchoring large deposits of over 44 different minerals spread across the country. It is thus not out of place to project that over three quarters of the sum total of money linked to corruption incidents in Nigeria comes directly or indirectly from the extractive sector.

It is general knowledge that corruption is the bane of Nigeria. Beyond limiting all that we can achieve as a nation, corruption has put every possible good thing that would ever happen to Nigeria at the level of potentials. Yet, as it is generally known, potentials are just simply what they are (i.e. possibilities) and never realities. It is in this context that the idea of whistleblowing in the fight against corruption makes laudable sense.

Whistle-blowing stands to complement the work that NEITI does in two ways, namely: ensuring that infractions often reported in our audit reports do not happen in the first place; and where they happen, ensuring that the perpetrators do not go unpunished. The Nigerian whistle-blowing policy seeks to fight corruption “by increasing exposure of financial crimes and rewarding whistle-blowers.”  It encourages whistle-blowers to expose – through voluntary and confidential information disclosure – corrupt practices and looters of public funds for reward and offer of protection by the government. It aims to complement transparency and accountability in public financial management and enhance service delivery to the Nigerian people.

Thus, rather than serve as an enabler of prosperity as evident in other resource-abundant countries such as Norway, Canada, Malaysia, United Arab Emirate (UAE) and Botswana (to mention a few), the Nigerian extractive industry was over the years tainted with corruption, leading to poverty and underdevelopment. The Transparency International Corruption Perception Index 2016 ranked Nigeria 136 out of 175 countries, scoring between 25% and 28% annually between 2012 and 2016. The UNDP Human Development Index 2016 which measures the development of countries based on an assessment of education, life expectancy and income per capita indicators ranked Nigeria 152 out of 188 countries, adding that the country “lost over $400 billion to corruption between independence and 1999.”

There is a significant correlation between corruption, poverty and underdevelopment, and Nigeria’s experience in that context is legion. Despite earning so much from the extractive sector (particularly oil and gas) over the decades, the country personifies what development economists refer to as ‘resource curse.’ Resource curse anchors on the thesis that ‘countries with large endowments of natural resources … often perform worse in terms of economic development and good governance than do countries with fewer resources’[1]

Most of the debate about resource curse is misplaced in that it undermines the fact that it is not natural resources per se that are the problems, but the absence of and/or non-adherence to good governance mechanisms to regulate their exploration, production, sale and revenue management that turns the blessing of extractive resources into a curse. Put differently, as I have recently argued elsewhere, “resources do not come studded with curses. It is the risks and choices that resource-endowment predispose the ruling elites and the larger societies of resource-intensive countries to that turn natural resources from potential enablers of prosperity to uncanny facilitators of poverty.”[2]

While globally the extractive sector shares a tendency of opacity that facilitates corruption, it takes determination and deliberate efforts in planning, institutionalised regulation and strict enforcement of rules and procedures to achieve its effective governance. Nigeria’s failure in this regard owes largely to many years of abuse of processes to the extent that became a culture. Indeed, so entrenched was the culture of corruption in the country’s extractive industry that a major World Bank publication argues that every institution along its “value chain that potentially could prevent fraud is weak.”[3] It is thus not any surprise that the sector has become the most probed over allegations of corruption in recent history. Aside occasional summon of operators in the industry by the National Assembly to answer questions on perceived cases of infraction and corruption, the oil and gas sector, specifically, has experienced major corruption-related investigations resulting in:

  • KMPG audit report on the NNPC (September 2010)
  • House of Representative Ad-Hoc Committee Report on Fuel Subsidy regime (April 2012)
  • House of Representatives Report on Malabu Oil Deal (OPL 245) led by Hon. Leo Ogor (2014)
  • Senate Committee Report on Fuel Subsidy led by Senator Magnus Abe
  • Aig-Imoukhuede-led Technical Committee report on Payment of Subsidy (June 2012)
  • Aig-Imoukhuede-led Committee Report on Verification and Reconciliation of the Findings of the Technical Committee of Review of Subsidy Claims (2012)
  • Nuhu Ribadu-led Petroleum Revenue Special Task Force Report (August 2012)
  • Dotun Suleiman-led Special Taskforce on Corporate Governance and Controls in NNPC and other Parastatals within the Federal Ministry of Petroleum Resources (2012)
  • Senate Committee Report on Alleged Unremitted US$49.8b Oil Revenue by NNPC led by Senator Ahmed Mohammed Makarfi (2014)
  • PriceWaterHouseCoopers ‘Forensic’ Audit Report (April 2015)

To the extent that these reports established infractions and corrupt practices in the extractive sector which several other reports (i.e. seven cycles of NEITI oil and gas audits, five cycles of solid mineral audits and one Statutory Allocation and Fiscal Disbursement) audits have confirmed, the whistle-blowing policy comes handy for complementing other tools devised by President Muhammadu Buhari administration to fight against corruption. However, its success will largely be determined by the mechanisms in place and tenacity of efforts in implementing it. Beyond the offer of protection, a reward ranging between 2.5% to 5% of the recovered sum is what is guaranteed the whistle-blower. In terms of what the government has recovered since then, the policy can be adjudged to be delivering results, despite the negligible instances of false alarm accompanying it.

Whistle-blowing Spots in the Extractive Industry

The extractive sector has a value chain comprising exploration, discovery, operation/production and decommissioning. Globally, the sector is deliberately made opaque, and as such, corruption (be it financial or process) is a possibility at every stage in the transactions across its value chain. The policy, legislation, enforcement mechanisms, reward/sanction measures in place, and demonstrable investment made across processes to ensure strict compliance to these determine the extent of the safeguard of any resource-abundant country.

For instance, licenses to explore for natural resource deposits could be mired in corruption when granted to individuals without the requisite financial capital and technical know-how to operate allocated acreages. Offering preferential contract terms and taxations to individuals and companies is another fertile ground of corruption, while condoning illicit financial flights through open stealing, transfer (mis)pricing and savings fund malpractice add to the list of corrupt practices. Also, investment in crony practices resulting in personal gains for public officials constitute corruption by conflict of interest and abuse of public positions in extractive sector governance. In the oil and gas industry, the downstream sector transactions in refined products was the leading spot for corruption that resulted in a humongous $8 billion dollars expenditure in the name fuel subsidy in 2011. Nigeria is yet to recover from the wounds of that experience. It is in this context that the whistle-blowing policy requires expansion beyond the revenue collection point of the extractive sector.

Conclusion and Way Forward

Corruption in the extractive industry is not limited to the exchange of financials, but includes other practices that skew a system to the point of creating an unequal field of play for investors. Either cases are antithetical and injurious to current efforts by the Nigerian government in promoting ease of doing business. A whistle-blower policy should thus be seen beyond an exercise in the recovery of looted funds to include the creation of a level playing environment for investors and businesses to engage in a healthy competition that is capable of increasing government take and transforming the economy of Nigeria.

The main driver/incentive for embracing whistle-blowing should not be solely money, but genuine patriotism and self-reckoning of the fact that as Nigerians we owe our country a responsibility of vigilance and economic protection. We must be ready to play our parts as citizens by seeing whistle-blowing from the point of view of a duty rather than a favour to government or what we can gain. Thus, whistle-blowing underscores the agency of citizens in the fight against corruption, knowing that ultimately they stand to benefit. Citizens cannot be passive victims of corruption. There is a lot they can do to prevent or limit corruption and to bring to book the perpetrators of corruption. Whistle-blowing should be seen within the context of deepening the culture of openness and mutual reinforcement of transparency and accountability that voluntary principles such as NEITI and the Open Government Partnership (OGP) push.

Secondly, we must invest in extractive sector knowledge development in the citizens, especially as it is a highly technical area. Nobody blows the whistle on what s/he has limited or no knowledge about. We will be playing to the gallery if we assume that the citizens already understand the extractive industry well enough to play their parts.

Finally, it is important to add that for whistle-blowing in the extractive industry (and any other sector) to succeed, the government needs to demonstrate its commitment to offer protection to whistle-blowers against all forms of intimidation and harassment in exchange for volunteered information. Given the extractive sector’s image of big business regulated by naked politics and brutality, perpetrators of corruption in the sector will be ready to go to any length to make their enemies (including the whistle-blowers) pay for daring to exposed them. Therefore, the whistle-blower in the sector must not be left to lick his/her wounds after payment of rewards due to him/her. The overall success of the whistle-blowing policy of government will not be determined solely by the amount of looted funds recovered, but also by the degree of confidence the citizens will ultimately repose in government as a genuine guarantor of lives, welfare and security in exchange for useful information on the common enemies that steal from us and upstage societal balance.

Thank you for your attention.

[1] Macartan Humphreys, Jeffrey D. Sachs & Joseph E. Stiglitz, “Introduction: What is the Problem with Natural Resource Wealth?”, in Macartan Humphreys, Jeffrey D. Sachs & Joseph E. Stiglitz (Edited) Escaping the Resource Curse, New York: Columbia University Press, 2007.

[2] Waziri Adio, “Extractive Sector Transparency, Value Maximisation, and Nigeria’s Economic Recovery”, a paper delivered at the 3rd Annual Lecture of the Dauda Adegbenro Foundation at the University of Ibadan, Ibadan, Nigeria on Wednesday, 27 September 2017.

[3]Alex Gboyega, Tina Søreide, Tuan Minh Le & G. P. Shukla, Political Economy of the Petroleum Sector in Nigeria, Policy Research Working Paper 5779, Washington, DC: World Bank.

Waziri Adio is Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI).  He presented this paper at the National Stakeholders Summit on Harnessing the Whistle-blowing Opportunities in the Fight against Corruption in Nigeria held at Rockview Royale Hotel, Abuja on Tuesday, 14 November, 2017.