SOCIO-ECONOMIC EXPENDITURE OF EXTRACTIVE INDUSTRIES REVENUE AS EFFECTIVE TOOL FOR CITIZENS INVOLVEMENT IN THE EXTRACTIVE SECTOR ACCOUNTABILITY PROCESS: THE CASE OF NIGERIA

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The use of EITI audit on social expenditure and its impact on the citizenry is exemplary as it is one of the genuine ways of measuring the effectiveness of natural resource management. The objective of EITI is to assist member countries in reversing the regime of secrecy and opacity through the periodic audit of the extractive sector and widespread dissemination of the findings of the audit reports, which contains the payments made by extractive companies to the government in form of taxes, royalties, signature bonuses, rents and management of such resources.

Social and economic spending of extractive revenue helps the economic growth and well-being of the citizenry. The resource management no matter how altruistic is about the citizen impact and benefit of the natural resources found in an area. These spending and distribution are from taxes, royalties and payments levied by central, regional and local governments from the extractive companies. The extractive companies often make contributions to regional or local governments, federal communities, non-governmental organizations or other third parties in the areas where they operate and also they contribute to social corporate responsibility (CSR) in where they operate.

Social expenditures can take many forms. They may involve cash payments such as donations, grants or other types of cash transfers, the construction of roads, infrastructure, schools, or the provision of services like training and health care for the host communities. In some cases, these social expenditures are based on legal or contractual obligations entered before the right to explore the resources by the host communities or the government. In addition, the revenue received by the government may be spent providing social services or other needs of the government.

The contribution or lack of contribution helps in building or sustaining some level of social and civic trust within the community and the country. Revenues from natural resources are often more challenging to manage than revenues from other sectors especially some mono economics or economics with weak tax regime. Government revenues may vary as production and prices fluctuate from one year to the other and this hinders planning and sustainability. That is why it not advisable to solely depend on natural resource revenue for most of the country income.

Social spending and impact is also the best way to asserting the level of effective management of the natural resource revenue by the country with natural resources. It is easier to track because it is the basic benefits that citizens can relate with and benefit from. It is equally a lead from the tracking of revenue by the government through another process of the EITI which is revenue reporting by the government. Nigeria NEITI was one of the few counties that first pioneered the social expenditure reporting through the release of the first report on the Fiscal allocation and expenditure report 1999 to 2011 which look at the transfer to the subnational government and other covered entities for some selected states and covered entities. The finding from the report exposed the lack of or poor utilization of the social expenditure from the subnational government ie health, education and human capital development. Even at the national level just like the subnational level, the bulk of the expenditure is spent on the recurrent expenditure which is the payment of salaries and another overhead cost to a small percentage of the population.

It is pathetic even at the national level the countries budget which is funded mostly by the revenue from the extractive especially oil and cas that make up of more than 80% of our national budget. From the budget up to 70% to 75 % fully funded recurrent expenditures of salaries, emolument and overhead cost over the years for less than 2% of the population and 30% hardly funded capital project which the majority of the citizenry benefit from. This loop side nature of the public finance management and expenditure have resulted in the country having an abysmal performance in all the basic measurement of the citizen well-being and benefit from the extractive revenue.

Let us look at the countries abysmal statistics which shows the level of the mismanagement of the little expenditure from natural resources in Nigeria. Nigeria is ranked 152 in 188 ranking on Human Development Indexes (HDI) 2017.It is estimated that the country has about 87 million people out of the estimated 180,000 million est 2016 in abject poverty (less than $1 per day). An out of school children of 13.5 million which is the highest in the world. An infant mortality of 69.8 death per 1000 (2015) and maternity mortality (814 deaths /100000 (2015). The country spends about 3.7% of her GDP in the health sector. In addition, the transparency international rating places Nigeria 148 out of 180 (2017). Nigeria also has a debt to GDP ratio of 21.5% (2017) with a substantial part of the revenue going to debt servicing. The latest “Commitment to Reducing Inequality (CRI)” index released two weeks ago at the annual International Monetary Fund and World Bank (IMF/WB) meeting in Bali, Indonesia, revealed that one in 10 Nigerian children do not reach their fifth birthday. All these show a country that needs to diversify her economy from the extractive sector to be able to have a significant issue in the country’s economy and investment in social welfare.

However, we should all bear in mind that Nigeria is not a rich country when you do a comparative analysis of the production output from oil and gas with some other oil producing countries and the population of Nigeria. Also the country’s GDP and PPP shows the country is still a relatively poor country. Nigeria is ranked 23rd in the world oil reserve per capita, and $ 23,400 which is among the lowest of all major oil producers. The Country needs to diversify the economy with the oil income although this is always affected by the volatility in the oil sector and the shoddiness of the subsidy regime in the downstream sector of the oil and gas sector. If the deregulation of the downstream sector is effectively done this could free up the resource to effectively invest in the social services sector which will, in turn, improve the human development index of the country.

The EITI aim of using the reporting and data from the social and public expenditure can best be effective for the citizenry to hold the different stakeholders accountable. Experience has shown that the most effective tool in citizens questioning the management of natural resource is the EITI report on the Fiscal Allocation and Disbursement report as shown in Nigeria. When the finding is effectively disseminated and the findings and mismanagement tied to the resources, it would have provided the citizenry, even in the remotest of villages, the tool to hold their leaders and public officials accountable. This reduces the incidence of corruption and natural resources revenue mismanagement. This will also ensure that good macroeconomic policy, resource mobilization, social services availability, infrastructure development, and effective stakeholders participation and engagement is uphold.

Paul Ogwu

PWYP Nigeria

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PWYP Engagement with covered entities towards the remediation of NEITI Report Findings

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In a bid to implement the global EITI requirement, NEITI audit reports clearly points out remediation issues that will impact policies, legislation and operational procedures if adequately addressed. PWYP Nigeria believes that if the remediation is adequately addressed, there will be a great improvement in the Nigeria’s Extractive sector. NEITI findings highlight key issues of which some have been since 1999 relating to different agencies and these issues have continually remained in subsequent audit reports, thus the need to adequately carry out advocacy on the remedial issues and engage the stakeholders or companies who have continually showed lapses in the data or operational reports supplied in the audit reports.  This was the basis for the engagement.

Some of these covered entities includes NNPC, DPR, PPPRA, FIRS, NAOC, MOBIL/ESSO, WALTERSMITH, SHELL, SNEPCO, PLATFORM, ORIENTAL ENERGY, PILLAR OIL, NIMASA, and CBN. It is however sad to say that some of these companies or agencies did not turn up for the meeting.


NEITI audit reports, clearly point out remediation issues that will impact policies, legislation, and operational procedures that will check corruption in the extractive sector if adequately implemented.


Over the years, the Nigerian government and the covered entities has shown slow or little compliance to the remedial issues. Civil society, citizens and the media seem to have experimented several ways to bring about remediation but the result has not been very successful. It is to this end that Publish What You Pay Nigeria resorted to engaging some of these covered entities to advocate for remediation of the NEITI Audit reports.

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CSOs media engagement and advocacy to media houses on the PIGBs

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PWYP and other CSOs held a media engagement and advocacy to some media houses in a bid to push for the president to assent to the PIGBs. This advocacy visit was in an effort of Publish What You Pay Nigeria with its partners to increase awareness of the state of the PIBS and the need for the President to assent to the bills which have already taken over 17 years to get to his office.

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FORMALIZING ARTISANAL AND SMALL SCALE MINING IN NIGERIA

The exploration of minerals in Nigeria by the artisanal method has occurred for over 2400 years from mining basic clays to base metals and gold. There have been popular culture in Nigeria that have mining symbols as symbols of their existence like the Nok culture, Ife, Benin and Oyo cultures. At a time in Nigeria between 1903 and 1940, ASM operations dominated the mining in Nigeria and up till now, there is still a substantial dominance of Artisanal and Small Mining. Artisanal and Small-scale mining accounts for over 90% of solid mining in the country. In Nigeria some of the mining products mined in the ASM include precious metals, gold and varieties of gemstones like Sapphire, Emerald, Tourmaline, aquamarine, topaz, zircon etc and also Metallic minerals like Cassiterite, Columbite / Tantalite, lead /Zinc Ore and in addition the non-metallic minerals, gypsum, barite, silica, sand, Bentonite, Dolomite, Limestone, Aggregates, Gravels and Zircon sand.

There are around 170 ASM sites identified in the country with over 400,000 people directly involved and 300,000 indirectly involved and around 300,000 as service providers.

For a proper description of the term Artisanal and small-scale mining, ASM is a pro-poor livelihood strategy that involves people using simple tools and equipment in an informal sector outside the preview of regulators and with near no official and legal regulations. As a result of the non-formal involvement of the government and environmentalist there are potential environmental damage, social disruptions and conflict, as a result, the activities of the artisanal and small-scale mining needs to be closely monitored and formalized.

Apart from the poor livelihood strategy and the use of local tools the other characteristics of Artisanal and small-scale mining include that it is poverty driven, it is exploited in marginal and small-scale minerals, lack or low level capacity, unskilled personnel involved, low level of productions, poor access to markets, chronic lack of investment capital, low level of consideration for health, safety and environmental implications, low level of income among operators, operating without legal mining rights, titles, conflict as a result of the contending interest, gender issues and child labour prevalence.

Furthermore, the sales channel is largely unofficial and embedded with smuggling and distribution cartels leading to loss of revenue from taxes, loss of revenue from royalties, exposure of miners to uncontrolled risks, uncontrolled and non-systematic evacuation, resulting in environmental degradation, erosion and excessive pollution, amongst other negative effects.

However, for effective and efficient maximization of the benefit of the ASM, the country should double efforts towards the formalization of the process of the ASM operations. Some of the measures to be taken include the intensification of advocacy and sensitization on the need and benefits of establishing and joining cooperatives to galvanize and formalize the resources and access to service.

The registration of the cooperatives by the relevant government organizations and agencies so that ASM cooperatives enjoy the services of the extension services provided by the government and other relevant stakeholders. Some of these extension services include prospecting and exploration services, assist small-scale miners on mine/quarry design and planning, teaching on mining techniques, environmental impact assessments and guidelines for waste and safe mining, provision of marketing facilitates, introduction of simple mining technologies, plant hiring, access to grant and finance, foster technical corporations by international organizations and liaising with government agencies to providing holistic regulations in the sub-sector .

The government should as a matter of urgency establish policy initiatives as a way forward towards improving the ASM. The government should allocate sufficient funding to government department and organization to ensure they lay out the necessary framework and policy for ASM growth and development, the human capital development of the technical staffs to carry out the extension services, regular monitoring of the mining sites nationwide, the establishment of mining support centers in all the states of the country, sensitizing of miners on the need to access mineral buying centers in the country and the commencement of equipment leasing programs for ASM operations.

Formalization offers advantages not only to artisanal and small-scale miners but also to governments, large-scale mining companies, and rural communities. Formalization helps promote better working practices and conditions; reduces negative environmental impacts of activities; prevents and helps to better manage conflict associated with encroachment of miners and operations onto large-scale mining concessions; supports ASM to become an engine of enterprise and growth leading to higher government returns and job creation and stability; enables government to capture the revenues and tax from ASM activities. Formalization is an essential first step to transforming ASM into a sustainable livelihood activity and reducing criminality and criminal elements associated with some ASM activities.

For formalization to be effective, the host communities, miners, governments at all levels, the regulatory agencies in charge of mining, international organizations and initiatives all have a vital role to play in helping this vital sector to maximize its benefit and potential in Nigeria.

Paul Ogwu

PWYP Nigeria

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