CODWA faults recent  NEITI Audit  reports, says reports now encourage corruption, loss of revenue, deprivation of host communities.

By Stephen Oladele

A civil society organisation advocating good governance on the country and Welfare of the local communities, Community Outreach for Development and Welfare Advocacy ( CODWA) has decried  alleged revenue losses in the oil, gas, and mining sectors and the deprivation of host communities in the sectors.

The organisation alleged that this was recorded under the immediate past leadership of Nigeria Extractive Industries Transparency Initiave (NEITI) and that it happened because the Initiative’s audit reports did not reveal under-assessment and underpayment under the leadership as it used to be previously.

The CODWA in a statement issued by its Executive Director, Taiwo Otitolaye alleged that the under-assement and underpayment happened because the NEITI leadership headed by Orji Ogbonaya Orji neglected and was insensitive to its oversight function

The organisation noted that one major objective of annual oil, gas and mining audits conducted by NEITI is to ensure oil, gas and mining companies pay what they ought to pay and government receives what it ought to receive in taxes, royalties, signature bonuses and other payments.

It said for this to happen, there must be correct assessment of taxes and royalties based on accurate crude oil and minerals production figures by Nigeria Upstream Petroleum Regulatory Commission, NUPRC, for royalty and Nigeria Revenue Service, NRS, for petroleum taxes

The CODWA claimed that in the past, NEITI oil and gas audit reports consistently revealed millions of dollars in recoverable revenues as a result of under-assessment by NUPRC and NRS which led to underpayment by companies and revenue losses to government.

It said the revelation of under-assessment and underpayment usually triggered re-assessment of taxes and royalties and subsequently led to recovery of revenues into government coffers.

“Over the years, under-assessment and underpayment in royalties and taxes, which are major sources of recoverable revenues, are no longer disclosed by NEITI audit reports.

“As civil society organizations working on natural resources governance, and the global EITI space, this trend is worrisome and raises questions on the quality of NEITI reports and its auditors. 

“This is particularly concerning because governance and process gaps responsible for under-assessment and underpayment of royalty and taxes are still prevalent in our oil and gas sector.

“It is more worrisome that payment of outstanding company liabilities is now referred to as recovered revenue, instead of additional revenue arising from re-assessment of royalty and taxes as recommended by NEITI reports, or outright stolen revenue recovered by anti-corruption agencies,” the organisation stated.

The CODWA said that the alleged dereliction of duty by the NEITI’s leadership has weaken the Initiave’s oversight function, created enabling environment for corruption, cost the government loss of revenue and deprived the host communities of entitled benefits.

It stated: “This failure has far reaching implications:

“A. For Extractive Governance

“It weakens NEITI’s oversight function. It reduces deterrence for non-compliant companies. It undermines transparency and accountability in the extractive sector. It erodes public confidence in NEITI and Nigeria’s standing in global Extractive Industries Transparency Initiative (EITI) implementation.

“B. For Economic Losses

“It leads to huge revenue losses to the Federation Account. It deprives federal, state and local governments of funds for development. It increases fiscal deficit and debt burden. It allows companies to retain revenues that should fund national budget.

“C. For Social Policy Neglect*

“It reduces funds available for 13 percent derivation. It reduces funds for Host Community Development Trust Fund under Petroleum Industry Act 2021. It reduces funds for Community Development Agreements under Section 116 of Nigerian Minerals and Mining Act 2007. State ministries, Mineral Resources and Environmental Management Committee and other oversight institutions are left without resources to implement social policies.

 “D. For Human Costs and Host Communities* 

“Host communities in mining and oil producing areas are deprived of shared benefits. Loss of revenue means loss of water projects, health facilities, schools and livelihood support. Environmental damage continues without remediation. Youth unemployment and resource-related conflicts increase.

“E. Link to Corruption

“The failure to disclose under-assessment and underpayment directly creates enabling environment for corruption in the extractive sector.

“When NUPRC and NRS under-assess royalty and taxes based on inaccurate production figures, and NEITI fails to reveal it, the difference between actual production and declared production becomes unaccounted rent. This rent is prone to diversion through collusion between officials and companies.

“When outstanding company liabilities are labeled as recovered revenue without clear re-assessment history, it obscures whether such payments are voluntary compliance, result of NEITI recommendation, or recovery of stolen revenue by anti-corruption agencies. This lack of disaggregation hides the scale of revenue leakage.

“It undermines anti-corruption efforts. Under-assessment that is not disclosed cannot be investigated by Economic and Financial Crimes Commission and Independent Corrupt Practices Commission. Revenue losses that are not revealed cannot be tracked and recovered.

“In mining host communities, inaccurate mineral production figures and weak royalty assessment allow for under-declaration of minerals mined. This is not mere administrative gap. It is corruption that deprives Federation Account and host communities of shared benefits.”

The organisation demanded that NEITI audit reports must return to revealing under-assessment and underpayment as core anti-corruption function stating that without this, transparency becomes ceremonial and accountability becomes impossible.

It further demanded: “CODWA hereby calls on the National Stakeholders Working Group, NSWG, also known as NEITI Board, the National Assembly, and the current Executive Secretary to take immediate action:

“1. Conduct independent review of the quality of NEITI oil, gas and mining audit reports for the last four audit cycles.

“2. Ensure future audit reports clearly disclose under-assessment and underpayment in taxes and royalties as separate line of recoverable revenues.

“3. Ensure public disclosure of production volumes against royalties and taxes assessed by NUPRC and NRS.

“4. Strengthen independence and technical capacity of NEITI auditors and improve civil society participation in audit process.

“5. Account for all recoverable revenues identified in past audits and ensure full recovery and remittance.

The CODWA said that NEITI was established to enthrone transparency and ensure Nigerians benefit from extractive resources and submitted that any leadership that neglects this oversight function betrays the Nigerian people and host communities.