Cablegate: Eiti: Public Show Workshop; Progress Being Made

This record is a partial extract of the original cable. The full text of the original cable is not available.

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.

---------------------------------------------
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

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