The Facility for Oil Sector Transparency and Reform (FOSTER) has aimed to reduce the many incentives for misuse of power and capture of oil revenues in Nigeria.
Public Finance Extractives Kenneth C. Ene Mark Essex Nick Travis Simon Trace Søren Vester Haldrup
Abuse and malpractice in the oil and gas sector in Nigeria is well documented and deeply entrenched. Corruption distorts policy and politics, and undermines the potential for revenues to be used to accelerate economic and social development. By seeking out different strands of commitment for reform, within government and outside, FOSTER provided organisations that had an interest in improving governance with a mixture of direct technical assistance and arms-length support.
A constant scanning and analysing of the political economy of oil in Nigeria meant the FOSTER team could seek out and support ‘pockets of effectiveness’ - identifying the key players and institutions with the potential to catalyse change, and then supporting them in their pro-reform efforts.
Oil accounts for around 80 per cent of Nigeria’s government revenues and 95 per cent of foreign exchange earnings. Despite its potential, oil wealth in Nigeria has not translated into development gains. Poverty and unemployment are widespread with 64 per cent of the population living on less than US $1.25 per day and just 12 per cent of the labour force in formal paid employment.
Typical of a number of resource-rich countries, Nigeria is one of the lowest ranking countries in the UN Human Development Index. A lack of transparency and the absence of reliable oil sector information, weak relations between the state and civil society, and a deeply embedded culture of malpractice have all resulted in a huge gap between a wealthy elite and the rest of the population.
FOSTER was established on the assumption that positive institutional changes in governance can result from working opportunistically and strategically with pro-reform forces. Whether through individuals or institutions, pockets of effectiveness can be found that have the potential to influence a reform process. By facilitating the strengthening of laws, policies, capabilities and systems, it is possible to improve the governance of the sector.
We pioneered an innovative approach to addressing the multiple issues of the Nigerian oil sector, working within the complex local institutional and political landscape to design and deliver projects that support positive governance reform. This applied political economy driven approach relies on a nimble and flexible attitude towards identifying and supporting key players and institutions that have the potential to influence underlying drivers of change on both the demand- and supply-side.
Projects were implemented using targeted technical assistance, or through the provision of grants, to a wide range of government and non-government stakeholders. By utilising a flexible £8.5 million fund, FOSTER has been able to react quickly and opportunistically to the changing environment. Adopting a portfolio approach to project design has meant we could focus on a range of areas, building up and establishing a strong basis for more systemic reforms as the opportunities arose.
Areas of work include:
- Supporting the establishment of a specialist oil and gas unit within central government to strengthen oversight of revenues from the sector;
- presenting analysis to a Select Committee whose findings were subsequently presented to the President and widely covered in the local and international press;
- supporting international initiatives to strengthen transparency in the sector such as the Nigeria Natural Resource Charter and the Nigeria EITI;
- supporting an NGO to develop a popular website to encourage public debate on the oil and gas sector (the Oil Revenue Transparency Initiative);
- establishing a ground-breaking mapping and tracking platform on oil spills in the Niger Delta, which has enhanced citizen monitoring and reporting; and
- supporting various Nigerian CSOs, through grants and technical assistance, in generating greater public awareness and interest in the main areas of reform in the industry.
FOSTER interventions are having a significant impact in promoting reform and transparency in the management of Nigeria’s natural resources. Over the longer-term, FOSTER initiatives will continue to adapt and respond to the dynamic external context. This will build on FOSTER's early achievements to support the move towards an oil sector that is more transparent, accountable and efficient.
More broadly, FOSTER has provided valuable insights and lessons to help create a better understanding of how the international community can engage in efforts to promote reform in the extractive industries sector in challenging contexts.