Economy

Nigeria’s Excess Crude Account Worst Governed Fund, Says Natural Resource Institute

London, UK-based Natural Resource Governance Institute (NRGI), on Wednesday ranked Nigeria’s Excess Crude Account (ECA) as the world’s worst governed sovereign fund, perhaps ahead of Qatar Investment Authority, reputed as having US$330bn in assets.
This was contained in a new report by the 2017 Resource Governance Index produced by the NRGI, showing that 66 of the 81 countries assessed are struggling with adequate governance of their oil, gas and mining sectors, and therefore weak, poor or failing in their governance of extractive industries.
The ECA was established in 2004 during the administration of then President Olusegun Obasanjo to warehouse revenue from oil in excess of the benchmark price and production output set in the yearly budget. The fund, rather than being invested in the country’s decaying critical infrastructure is shared by the Federal and State government, oftentimes outside of budgetary provisions.
The cross-country study of extractives governance, released on Wednesday, London NRGI noted in a statement by Lee Bailey, its Communications Director, “is the most comprehensive of its kind to date. It is based on new research into how countries’ governance affects their potential to realize value and manage revenues from their resources. It also incorporates existing assessments of countries’ “enabling environments”—a measure of how well citizens can access and use information, freely work together to voice their concerns and hold their governments to account, and of the quality of institutions in the areas of administration, rule of law and corruption control.”
The gap between law and practice is larger in countries where corruption is systemic, the index found. This gap occurs in many policy areas of extractive industries—including environmental and social impacts, and the sharing of resource revenues by national governments with local authorities—and is particularly problematic for communities living near extraction sites.
The index also assesses the governance and transparency of sovereign wealth funds in 33 countries. Colombia’s Savings and Stabilization Fund is the best-governed of the assessed funds, followed by the Ghana Stabilization Fund.
Index data show that Norway exhibits the best governance of natural resources, followed closely by Chile, the United Kingdom and Canada in the top-most “good” performance category. Eritrea exhibits the worst resource governance and receives a failing grade in the index, with Turkmenistan, Libya, Sudan and Equatorial Guinea among others also rated failing. Some middle-income countries—such as Colombia, Indonesia, Ghana, Mongolia, Peru, Mexico and Botswana—achieve good or satisfactory overall ratings. Burkina Faso places highest among the low-income countries studied; its mining sector ranks 20th overall.
“Good governance of extractive industries is a fundamental step out of poverty for the 1.8 billion poor citizens living in the 81 countries we assessed in the Resource Governance Index,” said Daniel Kaufmann, NRGI president and CEO. “It is encouraging that dozens of countries are adopting extractives laws and regulations, but often these are not matched by meaningful action in practice.”
Chile’s Codelco state mining company was listed as the best-governed of 74 extractive sector state-owned enterprises that were assessed for their disclosures and corporate governance. The Oil and Natural Gas Corporation of India came second. Forty-eight countries’ state-owned companies received unsatisfactory ratings. The index identifies weak governance in the China National Petroleum Company, and finds failing governance in the Abu Dhabi National Oil Company, the Gabon Oil Company, Turkmengas and Saudi Aramco.
“The Resource Governance Index shows us that if they are to contribute to their countries’ development, state-owned enterprises require serious reform,” said Ernesto Zedillo, former president of Mexico and chair of NRGI’s board of directors. “But effective governance of the oil, gas and mining sectors is not an insurmountable challenge—the index provides many examples of developing countries defying expectations and stereotypes.”
In recommendations released with the data, NRGI calls upon governments to support key transparency measures (including compliance with open data standards) and for them to adopt and implement laws requiring the disclosure of the identities of the true beneficiaries of oil and mining companies.
NRGI also calls for a reversal of the trend toward closing civic space in many resource-rich countries. “Where freedoms of citizens and journalists are under attack, governance of the extractives sector is fundamentally impaired,” said Kaufmann. “Access to information on contracts, revenues, state companies and sovereign wealth funds is only valuable when citizens can hold authorities and companies to account.”
According to the NRGI, the index is comprised of 89 sector-specific assessments in 81 countries (NRGI assessed both oil and gas and mining sectors in 8 countries). It was formulated using a framework of 133 critical questions answered by 150 researchers, drawing upon almost 10,000 supporting documents. For each assessment, NRGI has calculated a composite score using the scores of three index components.

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