www.finabiz.com/poor-financial-reporting-undermining-oil-sector-growth-nnrc/

Growth in the Nigerian oil and gas industry will remain elusive over the next couple of years, unless issues of poor financial reporting, insufficient audits and inadequate information are addressed.

The 2014 Nigeria Natural Resource Charter (NNRC) Benchmarking Report, which disclosed this, further stated that, “Scarce or inadequate information, insufficient audits, and poor financial reporting standards for public entities like the Nigerian National Petroleum Corporation, NNPC, have helped in no small measure in undermining processes in the Nigerian oil and gas sector.”

The report noted that the level of confusion generated by the allegations of financial misappropriation against the NNPC has brought about the need for the adoption of best-practices in financial reporting standards, such as the International Financial Reporting Standards, IFRS.

The report further called for increased information sharing both across government and with the public, adding that complexity and opacity in public revenue procedures also continue to undermine the oversight efforts of civil society actors.
Continuing, the report, presented by the Nigerian Resource Governance Institute, NRGI, the Centre for Public Policy and Alternatives, CPPA among others, said, “Oil account payments including remittances to the federation account are not publicly available. Nor is there accurate measurement of the total volume of oil produced.

“The commencement of oil metering by an adequate flow control system has yet to occur. While the Nigerian Extractive Industries Transparency Initiative (NEITI) has produced valuable reports that have expanded transparency in the sector, the initiative has struggled to deliver accountability as government agencies have not addressed many of the problems and recommendations revealed in the reports.”

The NNRC is led by a 14-member independent, multidisciplinary expert advisory panel, comprising Mr. Odein Ajumogobia, former Minister of Petroleum and Foreign Affairs; Mr. Adeola Adenikinju, a Professor of Economics from the University of Ibadan; Mr. Bode Agusto, former Director General of the Budget Office and Professor Akpan Ekpo, Director General, West African Institute for Financial and Economic Management, among others.

Furthermore, the report lamented that weak cost regulation is causing huge revenue losses to the country and undermining the development efforts of stakeholders.

It said, “For instance, at the time of signing the 1993 Production Sharing Contracts, PSCs, industry costs were much lower than they have been in the past decade. Investment tax credits (ITC) were given at a 50 per cent rate in 1993, and transmitted the wrong signal to petroleum sector investors.

“To date, the country is yet to overhaul these fundamental components to reflect contemporary market conditions, resulting in revenue losses to the state.

“Other elements of the prevailing fiscal system for assessing and collecting oil revenues, such as the K-factor computations contained in MOUs between the Nigerian National Petroleum Corporation and its partners, also remain either outdated or too complicated for the Federal Inland Revenue Service, FIRS, to effectively administer.”

In general, the report disclosed that situation in the Nigerian oil sector did not record any significant change from when the last report was presented, noting that all the indicators used in measuring Nigeria’s performance remained the same.

“Since 2012, there has been no progress made with respect to the Petroleum Industry Bill, PIB. The Bill’s provisions are not in the most ideal form, and it is stalling for a number of reasons including disagreements over its fiscal provisions.