DFID's Programme in Nigeria - International Development Committee Contents

Examination of Witnesses (Questions 40 - 52)



  Q40  Hugh Bayley: Can I ask a further question of Michael Peel? The President set up this Technical Committee which reported to him at the end of last year, why has nothing really happened? What did the Technical Committee recommend and why has action not been taken to implement its recommendations?

  Mr Peel: On the Delta, you mean?

  Q41  Hugh Bayley: Yes.

  Mr Peel: I do not have a detailed knowledge of that actually, but in terms of the bigger picture the Niger Delta Ministry and this Committee follow decades of other committees with exotic acronyms—NDDC, OMPADEC[6] was another one, which was supposed to tackle some of these problems in the Delta. I fail to see either at government level or at oil company level, or indeed at an international level, a more imaginative solution other than, "Let's have stronger protection of our facilities." You look at the recent example near Warri in the last month or so when a group of militants were driven out by the military from their base and that could be the shape of things to come, a military crack-down, but we have been here before. Look at the mid-90s with Shell and Ken Saro-Wiwa. We have seen in the US court case which was recently settled exactly where that can lead. That would be extremely dangerous. If this Ministry can do a positive thing, I think it would be as a kind of co-ordinator of some of the broader efforts I was mentioning to the Chairman just there, and perhaps that is something that diplomats could usefully be doing, saying, "This will only be useful if it looks at things in the round. We, the international community, will bring something to the table on this to help this process along." Maybe that is the way to look at it again, to be properly sceptical about it but to say, "Maybe there is an opportunity to make something of this new institution."

  Q42  Andrew Stunell: Perhaps we could go on to this transparency issue. How effective do you think the EITI has actually been and has it got the influence and the capacity to be effective? What else does it need to keep things on track?

  Mr Unom: It has done very well in its short life. It has helped to police the money better; money that was supposed to be coming to the Government's coffers. That it has done well. It has also taken strides to reconcile the books between the various players, so you have an idea how much has been produced, how much has been set aside for local processing, how much has been processed. That it has done well. But it needs to do more. Monitoring the production process, as the Chairman indicated earlier, needs to be tightened up. Nobody can put their hand on their heart and say the oil is not stolen, so if the oil is stolen you need the intervention of the NEITI to ensure it is not stolen, but you also need international co-operation. There have been discussions about branding, the imprints, and there is technology now for ensuring the oil is tracked. It is not clear that there is an appetite for this technology yet in Nigeria but it was the same when the international community co-operated over diamonds, blood diamonds. We need co-operation over oil so that you do not buy energy until you know where it has come from. The greater weakness remains in developing better co-ordination between the various players. We have recommended that there should be a policy dialogue and assistance to develop a revenue flow amongst government agencies and to improve the metering and infrastructure and a uniform approach to cost determination. The barrier seems to be the production costs which seems in practice to vary between companies, so in chemicals and oil in the same region there is a different regime in costs, that is significant, so you need greater consensus around that. Then DFID and other donors can help strengthen the capacity of the government departments which are involved. The Department of Petroleum Resources should be regulating the sector but has not done very well, by admission of the Government itself. To strengthen the civil society's participation, including by strenghthening its technical grasp of the subject area. NEITI is a very useful intervention which brings in civil society, which is critical. The consensus is that it can help civil society get to grips with this because it is very important and it needs to understand the field. So if the civil society participants are in there and can make a contribution, that is very, very important. The greater failure remains what happens with the money when it goes into the Government purse. That is beyond the remit of NEITI. Even if it is able to ensure that every single dollar accrued to Nigeria gets into the Treasury, the question will remain what is it that happens when the money gets into the Treasury.

  Q43  Andrew Stunell: Clearly it is a two-stage process, getting the money. It was suggested to us there might be as much as £30 billion of revenue not reaching the Government. The chair of the organisation also said that as oil was being used to fund politics, you would have to reform politics first. How strongly committed do you think the Nigerian Government really is to making this oil transparency feed right the way through?

  Dr Mustapha: I think the Norwegians offered a computing package to help track the oil, and the Nigerian Government refused to take it—or some officials within the Government. So I think there is some major resistance within the system to transfer to an accounting process. One of the problems with NEITI is that the reports they produce are not something that the ordinary journalist or the man on the street can easily take around, so maybe they need to also make a popular version of their very technical reports to get politics coming up from below.

  Mr Unom: That is the crux of the matter; the commitment of the regional government to transparency in the sector. There has been a reform process going on but nobody quite knows the shape of it. NEITI was supposed to be part of a reform and the whole sector was supposed to be restructured but it is not clear how far that has gone. There have been two changes in the NNPC[7] already because of this but you do not know whether that indicates the reform is happening or not happening; it is still not clear. It will be an intriguing proposition because oil lubricates politics, the whole system is based around how the oil money is distributed, so there has to be some sort of serious commitment to take on that system before there is a practical expression of it in terms of reforming and increasing transparency in the sector.

  Q44  Andrew Stunell: Can a donor like DFID actually facilitate this process? Is there work for us to be recommending our Government does? What should we be doing?

  Dr Mustapha: I think with NEITI there is a lot which can be done to push things further, help them in the technical evaluation of the process, help with the quality of the reports which are written, and the civil society players they can appeal to, to amplify whatever concerns they have. These are the various things which can be done.

  Mr Unom: NEITI has been very useful and the UK Government have backed it from the outset and it has been a very important contribution. It has sort of changed the dynamic a bit in the industry and it needs to be concentrated as well to help the initiative. But I do not know if it has helped with the general, larger picture of what happens when the money gets into the Treasury because that is much longer term, and you need to sort out the politics before you get the oil to get to the Nigerians.

  Q45  Andrew Stunell: When we spoke to the Finance Minister he said he goes on television every month to say how much he has got in from the oil, so he obviously thinks there is more transparency than you are hinting at.

  Mr Unom: That is just a point of information.

  Mr Peel: Something like the EITI is a bit like looking through a telescope at a small hill in a huge mountain range. It is useful, it gives you a sense of the topography, but what you need (as I think I mentioned earlier) is a sense of the much bigger picture. Headline figures only take you a small part of the way. To give an example, in about 2004 the Finance Minister for the first time—incredible that it was for the first time—published details of how much the Government disbursed to the various oil producing states. That was useful in the sense it showed that tens of millions of dollars go to State X, but it only becomes really interesting when you get the budget of State X and you get to compare the two and put them together. So EITI is a good thing I think but what it needs, and I think this is your point about making the information more accessible, is to be presented as part of the bigger picture. This is something that maybe DFID could become involved in, to make sure that people are employed to build a credible picture of the revenue flows as best they can from tap to state treasury, and to follow it all along the line, to look at the hidden costs. How much are oil companies spending, as far as we can drill down into that information—forgive the pun—what is the spending on rigs and other equipment, is it justified? What are the other money flows which are going on beneath? When it goes from governments onwards, what is the money being spent on? That would really make it real. To say, "Here is a document which shows such-and-such amount of oil was produced, it has allegedly cost such-and-such, this is how the revenues were distributed to these various agencies and companies, and this is where it flowed on from there, and this is how they were used", and you end up with a spider's web of relationships. I am not aware that anyone has ever really done that but I think that would be something which would be really useful.

  Q46  Hugh Bayley: Shell represents the oil companies on the NEITI governing board. How do you assess their contribution to NEITI? Are they going through the motions rhetorically, or are they actually determined to shine the spotlight on the revenues, so the public in Nigeria know how much they pay to the Government and where the money goes?

  Mr Peel: In terms of motives, you would probably have to ask the chief executive of Shell, but in terms of the practical—

  Q47  Hugh Bayley: I think we should write to the chief executive of Shell, probably Shell Nigeria and Shell International and ask some direct questions of them. Can I add on to that, what questions do you think we as a Committee should ask for a formal written response on from Shell in relation to transparency?

  Mr Peel: I would say in a preamble—clearly the chief executive does not need the Committee or me to tell them—its operations have had huge problems in Nigeria which obviously have complicated causes but the Committee believes that one of the reasons is that there still is not enough transparency around the industry. Shell has a long-standing rhetorical commitment to transparency, it has become involved in EITI and so forth, but here are some further aspects that the Committee thinks should have light shone on them and in a way which would be beneficial for the credibility of the company and the industry itself. Those things would include some things I have mentioned earlier, such as how the company disburses educational scholarships, other benefits to communities, what goes to which communities and when, how is it spent, what are the so-called memoranda of understanding that the companies make with various communities. If you go down to the communities you can usually see a copy of them, they are quite detailed going down to the level of, "We will build this hospital, provide two speedboats" or whatever it is. These are the subject of great contention between communities. The Committee could also look at the bigger questions such as the relationship between companies and the security forces, which again is a reason why the companies are at best distrusted and at worst despised because they are seen as part of this huge leviathan, along with the state. There are curious things like a force called the Supernumerary Police, which are known as the Spy Police, which are national police force officers who are seconded to oil companies and the oil companies say they are national officers but they are officers who are paid by the oil companies, they get medical care and so forth from the oil companies, so the boundaries of the state and the private sector have been blurred. How many of these officers are there in Shell and in other companies, what exactly are their duties? The companies claim they are unarmed and they have fairly routine, mundane duties like driving, but other activists say that is not true and they are much more actively involved in security. There are very practical questions, some of which are raised in the paper I did on the Niger Delta for Chatham House, which I referred to in my evidence, and factual questions which would shine a light in a way which over time, if other people can be persuaded to do the same, could help lead to real practical change.

  Mr Unom: Shell has been contributing to conflict in the region through its own practices. For instance, its practices have had a destructive effect on solidarity and cohesion within the communities. It patronises what it calls host communities, but the definition of "host" isn't shared, so sometimes the host is simply the community by the rig, but to get to that community you need to pass through other communities and that community might be part of a larger whole, so once they see Shell engineers around looking like there is going to be oil-related activity, you have conflicts straight away with regard to who is the host and who is not. So you have a real incentive to fight to be the host community. They also prefer to deal with individuals even within these communities, and even the projects they do are determined by the Shell staff rather than the beneficiaries. You see a lot of physical projects on the ground—schools, hospitals, boats—which are built at a cost and this cost is determined entirely by Shell. So on paper you have so much paid for in the community but sometimes it is difficult to reconcile the value of what is on the ground with the value of what is in Shell's books. So Shell has a huge community budget which notionally should go a long way to addressing the problems, but in practice this process has contributed more to conflict than resolving conflict.

  Q48  John Battle: A general question about civil society. Dr Mustapha a few moments ago you mentioned civil society "amplifying their concerns". I think there is a general view that the civil society organisations, and there are many of them in Nigeria, are reasonably active. My question would be how representative are they? Are they broad and deep enough? How effective are they in engaging, in the best sense of the word, with government at every level?

  Dr Mustapha: I think they are variable in terms of the quality of the work they do, and some of them are just a one person show, others are much more serious about the agenda they want to focus on. The recommendation we make is that one needs to change the definition of civil society. Usually the donor communities in Abuja tend to deal with like-minded people in and around Abuja, and they need to go to the far off communities and deal with people who do not have email addresses. It is a fairly dated process because they may have rules—maybe women sit behind the men in front—which affronts our notions of what civil society should be. But those are the effective organisations if you want to go beyond the normal class groups in Abuja. That would be our main recommendation, that we need to relax our understanding of civil society and try to engage more with society outposts which have concerns.

  Q49  John Battle: Is that conversation going on with DFID?

  Dr Mustapha: We have certainly raised it in a number of recommendations.

  Mr Unom: DFID tries its best but it requires greater patience and perhaps greater tolerance on your part to do what needs to be done. For instance, the concern about accountability means that donor agency staff will work with organisations that meet deadlines, they have bank accounts already, they can write good reports, so they are all better able to respond to donor policies and guidelines. To broaden the range of civil society actors with which donors engage is critical. To do this is pretty dirty work and will require greater tolerance on the part of all who are involved. Some of the unions and professional associations have their own timetables, have their own ways of making decisions, so you do not call the president of the local union to a meeting and expect him to decide there and then what is to be done, as you would with DFID. He or she may ask to go back and consult with the membership and that is how they work. So you need to have that sort of latitude if you want to operate with a broader range of organisations rather than working with the intermediaries in the centres.

  Q50  Chairman: A final point on that. Given what you said at the beginning, that you have all said that leading politicians are not very keen on elections and that there is a low expectation from the public, yet the role of civil society is to help the public articulate their voice, to raise expectations and to put pressure on politicians to actually deliver at elections. To what extent is DFID's engagement in stirring up civil society likely to cut across their work in trying to bring the politicians on board to deliver? Clearly they do need to come together, but you take my point.

  Mr Unom: DFID is leading the Coalitions for Change (C4C) project in Abuja which mobilises reform energies which are focusing on how the money from debt relief is being spent on poverty reduction, gender issues like gender inequality and issues like constitutional reform. C4C has been sponsoring five or six projects and DFID has similar projects at the state level as well, trying to mobilise civil society's energies. It is not just a conference, what it is seeking to do is get civil society to work with like-minded people in government and in the private sector to pursue reforms through government, to pursue reforms and institutionalise them. The challenge is that if you do not have mechanisms which impose costs on politicians, which is what elections should do, it is difficult to get that sort of commitment from the politicians, so there is a risk that you can mobilise civil society and they are raring to go but then they will come up against cynical politicians who just do not care, and it can be difficult and frustrating and the change does not happen and you have committed your energies. That is the problem.

  Mr Peel: Are you asking if there is a risk of a tension between mobilising civil society on the one hand and perhaps annoying people in government on the other? The policy of government is not to rig elections—I guess that is what you can always come back to—to say officially you are committed to clean elections so why would it be a problem if we worked with civil society groups? I think there is a broader diplomatic question here. Despite the fuss around the 2007 elections, in the end the international community accepted them and, to quite a large extent, it was back to business as usual. I did note in the DFID evidence there was a line—and I am paraphrasing from memory—about how there had been a cloud over the elections until a tribunal ruled in the Government's favour this year. The implication, whether this was intended or not, was that that tribunal ruling somehow removed the cloud over the elections, but I do not think that is how most Nigerians would see it, I am sure. I hope my co-panelists agree with that.

  Q51  Chairman: What we have got in any case is that what tends to happen is that the opposition lose the election, they protest, when they lose their protest they join the Government.

  Mr Peel: There is a certain fungibility about alliances, that is true.

  Q52  Chairman: I think we cannot explore that very much further! Can I thank all three of you for coming along. Clearly we recognise, and DFID recognise, that Nigeria is extremely important. It is the biggest player, we should be there. It is difficult, it is challenging. I think a point was made to us that if you look at the big picture you can get depressed, if you can celebrate your small victories and build on those, you can actually get a sense of progress. I take your point, Mr Peel, when you say that the problem is serious but you believe there are solutions. We look forward with interest to seeing your book in the Autumn. Obviously we are questioning the Minister next on this issue. I doubt if the Committee can produce a definitive report on this because it is clearly very much work-in-progress but your evidence, and other evidence, has certainly helped us to get a better feel for what is an extremely difficult, complicated but very important country. Thank you very much indeed.

  Mr Peel: Thank you.

6   Niger Delta Development Commission (NDDC) and Oil Mineral Producing Area Development Commission (OMPADEC). Back

7   Nigerian National Petroleum Council. Back

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