US embassy cable - 04ABUJA350

UNCLAS SECTION 01 OF 02 ABUJA 000350 
 
SIPDIS 
 
FOR E (PENCE), EB (KELLEY AND HAUSER, INL (LUNA AND 
BRANDOLINO, AND AF/W 
 
E.O. 12958: N/A 
TAGS: PGOV, KCOR, EPET, NI 
SUBJECT: EITI: PUBLIC SHOW WORKSHOP; PROGRESS BEING MADE 
BEHIND THE SCENES 
 
1.  Summary:  Nigeria's February 19-20 EITI Petroleum Revenue 
Management Workshop was not as happy a step forward on 
transparency and corruption as the enactment of the Economic 
and Financial Crimes Act (reftel) on February 23, but it was 
useful nevertheless.  The two days of speakers - attended by 
GON ministers, labor and other civil society leaders, IMF and 
World Bank representatives, major oil company executives, 
members of the National Assembly, the press and assorted 
diplomats - created political space and added legitimacy for 
transparency supporters inside the GON.  The public Workshop 
often appeared to be creating that space by bashing oil 
companies, however, and sometimes veered away from 
transparency issues.  Judging from the Workshop, we will want 
to restrict this sort of public forum to EITI, and keep the 
broader G-8 plus IMF and World Bank Evian effort strictly 
within official channels.  Shell (although not the American 
oil majors yet) has expressed a willingness to begin 
publishing revenue and expenditure figures through a USAID 
program.  End Summary. 
 
2.  PolCouns and other Mission officers attended the GON's 
EITI Petroleum Revenue Management Workshop, and it was not 
quite what was described by the Nigerian newspaper Vanguard 
in an article "No Foreigner..." circulated by allAfrica.com. 
President Obasanjo did not say, for example, that no 
foreigners could teach him about transparency.  He did say, 
and it was a frequent theme in the Workshop, that Nigeria has 
already been doing transparency since 2002 and it was the 
Europeans (oil companies) who were the problem.  Obasanjo 
said he had been a transparency advocate since his days on 
the board of Transparency International before running for 
president in 1999, and he hoped the Europeans "will do as 
much as they talk." 
 
3.  Obasanjo stated that his government's EITI purpose was to 
align Nigeria's transparency program with international best 
practices "in every aspect of government revenue and 
expenditure activities."  While this was a step forward from 
the feared EITI concentration on only publishing what the oil 
companies were paying as revenue to the GON, it was also 
tactical to allow wider criticism of the oil companies as 
source of Nigerian ills.  As GON anti-corruption czar Oby 
Ezekwesili put it to PolCouns, "We need to give people a 
chance to criticize everything, even if it is not about 
transparency, in order to get it out of their systems." 
 
4.  For example, Nigerian speakers the first day waxed 
eloquent about the (foreign) oil companies needing to better 
contain their costs.  The GON speakers phrased it in terms of 
the oil companies dodging proper taxes by inflating their 
production costs.  A Nigerian consultant to the GON put it a 
different way, saying Nigerians were not getting "Value for 
Money" from the oil companies when they inflated their 
production costs, and then paid themselves by 
less-than-arms-length contracts to provide the services.  The 
"open microphone" session at the end of the first morning was 
then a parade of Nigerians, some from labor and some from the 
press, accusing the oil companies of hiring expatriates 
instead of Nigerians.  The only time the word transparency 
was used was when arguing that oil company decisions on 
expatriate/local hiring were not transparent. 
 
5.  Much of the second day was a variant on that taking the 
oil companies to task.  GON Budget Director General Agusto 
gave a good presentation about managing GON expenditures, but 
it paved the way for the rest of the morning's speakers to 
call on the oil companies to put more of their profits into 
local communities.  The GON even set itself up for criticism 
by branching into a discussion of how oil revenue should be 
shared between the federal government, states and Local 
Government Areas.  The subject was only brought back to 
transparency in the EITI sense by NNPC (Nigeria National 
Petroleum Company) General Managing Director Kupolokun, in an 
afternoon speech on his efforts to build accountability into 
NNPC. 
 
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BUT THERE WAS VALUE FOR MONEY IN THE WORKSHOP 
--------------------------------------------- 
 
6.  This EITI workshop did, however, address some of the real 
challenges of transparency for the GON's oil revenues.  GON 
Federal Inland Revenue Service Chairman Ballama Manu outlined 
the complex scheme of taxation and profits collection as 
revenue from the GON-oil majors' joint ventures.  He then 
highlighted that these problems will become more complex, 
technically and politically, as the sector shifts from joint 
ventures to production sharing agreements in the bulk of oil 
and natural gas production over the next few years.  Obasanjo 
economic advisor Charles Soludo, the World Bank's Charles 
McPherson and IMF's Menachem Katz skillfully shined a light 
on other potholes ahead of transparency on both the 
expenditure and revenue ends of the budget process. 
 
7.  Foreign oil company executives in the 300-plus audience 
such as Shell Deputy Director Allan Detheridge gritted their 
teeth through the criticism and stayed for the entire 
conference, even as the GON ministers and National Assembly 
members dwindled markedly after the first morning. Obasanjo 
made a point of saying he "commended the oil companies, all 
of whom have formally and informally communicated their 
commitment to the vision of the government for reporting 
standards."  While the Workshop appeared on the national 
stage, the real work is being done off-stage by 27 
"stakeholders" in the GON's EITI National Working Group.  If 
the Workshop could make GON transparency seem fruitful and 
even nationalistic, the Working Group will have more room to 
maneuver. 
 
8.  Civil society played an important role in the Workshop. 
Many of the civil society speakers at the Workshop actually 
are GON consultants, but more neutral civil society leaders 
convinced the organizers to get their voices heard too.  They 
are to be included in the EITI National Working Group 
offstage as well. 
 
9.  After the EITI Workshop, USAID Director Liberi met with 
Shell executive Detheridge and DFID representatives from 
London and Abuja to discuss collaboration on provision of 
budget information from oil companies to civil society. 
USAID already funds a project (PROSPECT) designed to educate 
Nigerian civil society on GON budget revenue projections and 
expenditures.  Detheridge and the DFID reps agreed PROSPECT 
would be an excellent vehicle through which to also educate 
civil society on revenue projections and expenditures for the 
major oil companies in Nigeria.  Detheridge said he believed 
Shell management would be willing to engage in such a 
process, and make available its revenue and expenditure 
information for 2002 and 2003, as well as projections for 
2004.  Next steps involve final approval from Shell 
management, followed by a request from Shell to USAID and 
DFID to plan a civil society workshop to be conducted by 
PROSPECT, with assistance from Shell, to pass on the Shell 
information in April/May 2004.  USAID Director Liberi, Shell 
executive Detheridge and DFID reps agreed that this would be 
an excellent first step to address EITI goals, and indicate a 
"good faith" effort on the part of Shell to comply with the 
"publish what you pay" concept.  Post will report on progress 
in moving forward with this additional workshop. 
 
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COMMENT 
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10.  While all appreciate the GON's need to show that reform 
is not merely to please foreigners, there is a risk the 
reformers and their politician patrons will act on their 
nationalistic rhetoric and stray from the transparency 
purpose of EITI.  The Evian G-8 plus IMF and World Bank 
anti-corruption effort includes EITI, and we should keep that 
broader G-8 format strictly in official channels with the GON 
-- even if the GON EITI Workshop and its successors continue 
to be a lightning rod for the Nigerian public. 
ANYASO