FG moves to unveil owners, shareholders of extractive companies

To Conserve $18b, Address Licensing, Contract Scams

Challenges of Illicit Financial Flows (IFFs), hovering around $18b, being lost yearly, as well as growing contract scams in the extractive sector may by addressed soon going by attempts by the Federal Government to enforce the Extractive Industries Transparency Initiative (EITI’s) guideline on Beneficial Ownership register.

The initiative, expected to commence by December 31, 2019, would compel all companies, especially those operating in the oil/gas and mineral sectors to disclose all their shareholders, or beneficiaries thereby creating no hiding place for shell companies.

While other countries have already succeeded in implementing the initiative, Nigeria is currently lagging behind, even though requirement 2.5 of the EITI Standard (2016) specifies that by January 1, 2020, all member-nations must ensure that their oil/gas and mining companies that apply for, or hold a participating interest in an exploration, or production of oil, gas or mining licence, or contract publish the names of their real owners.

Being a signatory to EITI and Open Government Partnership (OGP), Nigeria and other implementing bodies are expected to enforce beneficial ownership reporting, a statutory or regulatory requirement that demands disclosure of beneficial ownership information.

EITI had noted that beneficial owner means the natural person(s) who directly or indirectly ultimately own or control the corporate entity or controls the benefit of a transaction – even if he or she does not control the company with which the transaction is executed.

Coming at a time when the country is embroiled in a controversial $9.6b judgment debt involving Process and Industrial Developments (P&ID), as well as similar cases in the scandalous Malabu oil deal and others, most stakeholders have expressed optimism that the move would help the country fish out cloned companies and enshrine transparency and accountability in the extractive sector, especially in the areas of contracts.

The Guardian gathered that the move, which is in line with the current administration’s goal of fighting corruption, is championed by the Department of Petroleum Resources (DPR), Nigeria Extractive Industries Transparency Initiative (NEITI), Mining Cadastre Office (MCO), and key stakeholders in the sectors.

Similarly, while the move is also to ensure that politically exposed persons holding ownership in oil, gas and mining projects must be publicly identified, EITI has recommended that beneficial ownership information would be made available through public registers; at a minimum, the information must be published in the country’s EITI Report.

The initiative is corroborated by the Companies and Allied Matters Bill (CAMA), which may be passed to law soon.According to the Director Legal, NEITI, Peter Ogbobine, there is no going back on the move, adding that the development would be critical to EITI validation by 2021. He stressed that it would also be beneficial to Nigeria if the register becomes functional, noting that advocacy remains critical to the aim of the programme.

With the programme, stakeholders maintained that Nigeria would be able to address financial transparency, accountability, public financial management, fight corruption, bribery and money laundering since the move would end anonymity in ownership of companies, combat tax evasion, as well as financing of terrorism.

While The Guardian had reported that money stolen from Nigeria yearly through organised IFFs may provide almost 62 per cent of the funds needed to finance the 2019 budget, stakeholders have linked the growing menace to shell companies, among other reasons.

NEITI and Trust Africa had indicated that Nigeria loses between $15b and $18b yearly to IFFs, and over 92 percent of the crime is reportedly committed in the oil and gas sector.

NEITI had equally said that secret ownership of companies, especially in the oil/gas and mining sectors was costing Nigeria and other developing countries about $1t yearly.

According to Mike Uzoigwe of Facility for Oil Sector Transformation (FOSTER), the disclosure of beneficial ownership information would enable the country to make the best out of the extractive industry, particularly in the face declining resources.He added that the development would also improve the sector, stressing that the level of secrecy in the ownership of the extractive companies remain worrisome.

Uzoigwe said the development would also help the country to address leakages, while urging media and civil society organisations to play critical roles before, during and after the register has been put in place.For Partner at Ikeyi Shittu & Co, Nduka Ikeyi, the absence of legislation that compels beneficial ownership disclosure, limitation of exploring opportunities in existing legislation, potential overlap of responsibilities and conflict amongst government agencies, pushbacks and resistance to change and other issues were challenges to the scheme.

While Nigeria is still lagging behind, many countries, including the United Kingdom had, as far back as 2016, made available a free online registry of beneficial owners of companies in open data format.

NEITI’s Remi Bello said the plan would help Nigeria to “maximise the full potential of her economy, boost investors’ confidence and improve investment climate adding; “knowing the real owners of companies in the oil, gas and mining sector in resource-rich countries is key to strengthening natural resource governance.”