Can the new company law end opacity in oil, gas sector?

There is no gainsaying that Nigeria’s oil and gas industry is smeared with lack of transparency and accountability, hence the Federal Government efforts in tackling this with the 2020 CAMA and mandatory disclosure of Beneficial Owners of oil companies through a portal created by the Nigerian Extractive Industry Transparency Initiative (NEITI). ADETOLA BADEMOSI writes on ending opacity in the sector through declaration of Persons with Significant Control (PSC).

Businesses failing to declare ‘Persons with Significant Control’ (PSC) are no longer qualified for company registration in Nigeria, the Corporate Affairs Commission has said, bolstering the progress against non-declaration of beneficial ownership (BO), particularly in the largely opaque oil and gas sector.

This follows the enactment of the Companies and Allied Matters Act (CAMA) 2020, which provides for the establishment of a beneficial ownership register for all corporate entities in Nigeria by the Corporate Affairs Commission (CAC). The new corporate governance legislation defines anyone with 5% holding in a company as persons with significant control of the company.

The new provisions are expected to advance transparency in the oil and gas sector, where operators are long known for reluctance to declare their beneficial owners, thereby creating risks of illicit financial flows. The Companies and Allied Matters Act, Cap 59, 1990 (CAMA), which CAMA 2020 replaced, did not provide for the identification of beneficial owners, nor the establishment of a publicly-accessible beneficial ownership register.

“Anonymous ownership masks abuse of office and conflict of interests and enables tax evasion, illicit financial flows, money laundering, drug and terrorism financing,” said the Nigerian Extractive Industry Transparency Initiative, NEITI, which also maintains a beneficial ownership portal.

Data from the 2020 NEITI oil and gas audit report showed that the country has 61 Oil Prospecting Licenses and 110 Oil Mining Leases but the majority of them exhibit complex structures of secrecy to shield the identity of their real owners.

Out of 69 companies that were covered in the report, less than 50 percent, that is, only 32 companies provided all the information required.

“The template was divided into five sections including guidance notes to assist the companies on how to fill the correct and adequate information of their Beneficial Owners,” the report reads.

According to the report, 11 companies did not provide any information on beneficial ownership while 26 did not provide complete information, most especially the owners (natural persons) of the companies.

It said: “Most of the companies that submitted BO information provided the required attestation by a senior management officer or senior legal counsel of the company as to the validity of the information provided.”

NEITI Beneficial Ownership Portal

A search of the agency’s portal on oil and gas revealed information on the beneficial owners of companies. This includes names, stakes of each individual, and nationality, among others.

For instance, a simple search for owners of OANDO Oil Limited reveals the Gabrielle Volpi family and Jubril Adewale Tinubu as the Beneficial Owners with 60 and 40 percent shareholdings respectively. Volpi is the Nigerian-Italian billionaire with whom presidential hopeful Atiku Abubakar founded Intels, the oil and gas logistics giant.

But for searches conducted on some multinationals and local companies listed in the agency’s 2020 oil and gas report, the results revealed that corporate entities represent beneficial owners, thereby masking the natural persons with significant stakes.

For Mobil Producing Nigeria Unlimited, the portal listed the beneficial owners as Mobil Development Nigeria Inc and Mobil Exploration Nigeria Inc with 50 percent shareholding interests each.

Then, a search was conducted on Star Deepwater Petroleum Limited.  Beneficial owners were identified as Nigerian Chevron Alpha Limited and Nigerian Chevron Beta Limited both having equal shareholding of 50 percent each and owned by Nigerians.

However, the owners of both entities were listed as Chevron Nigeria Limited and again, Star Deepwater Petroleum Limited. The actual names of natural persons were not stated.

To further ascertain their ownership, Chevron Nigeria Limited was subjected to a public search via the Corporate Affairs Commission website. Findings showed that the company, which is private limited by shares, was registered in Bermuda and has four persons with significant control.

The PSCs are; Nigeria Chevron Alpha Limited (EC25750), Nigeria Chevron Beta Limited which both appeared twice.

These were also listed as inactive.

Again, for Total Exploration and Production Nigeria Limited, there were two beneficial owners according to the NEITI’s portal: Total Exploration and Production Nigeria (France)  and Total Exploration Nigeria Limited ( Nigeria) with 98 and 2 percent, respectively.

These complicated structures hurt corporate governance and financial transparency, observers say, with optimism, though, that CAMA 2020 would help to address the opacity.

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By sections 119-120 of CAMA 2020, “disclosure of persons with significant control” is now mandatory. The new law mandates the CAC to maintain a register of persons and requires companies to make the disclosure with penalties in the form of fines in case of default.

‘We no longer register companies without PSC-CAC’

Since the commencement of the implementation of CAMA 2020 on January 1, 2021, the CAC said it no longer registers companies who fail to disclose Person with Significant Control (PSC).

“It is a requirement right from the point where you are registering your company, you must disclose owners either through the form or our website and there is no way you can register a company without complying with that requirement,  the company will not be registered,” Rasheed Mahe, CAC’s spokesperson.

“Right from when we started the implementation of the 2020 CAMA on January 1, 2021. What is happening right now is that under the beneficial ownership there is a place where you have to disclose the PSC that is the Person with Significant Control (PSC). If it is not disclosed your company will not even be registered.”

On the possibility of people using pseudonyms for registration, Mahe said with the introduction of biometrics, concerned persons are now required to provide valid means of identification like the National Identification Number and international passport.

Similarly, Mahe disclosed that any company whose status is inactive simply implies that such has failed to file the statutory annual returns.

On his part, Dr. Michael Uzoigwe, an industry expert, said declaring beneficial owners of companies is a vital tool for fighting corruption.

Uzoigwe, speaking in a telephone interview, said Nigeria, being a member of the Extractive Industries Transparency Initiative (EITI), is left with no choice but to comply with the directive on declaring BO as a means of further promoting transparency and accountability.

He cited instances where public servants who own companies try to award contracts to themselves as a result. He said the new development mandating beneficial ownership disclosure will help to reveal taking contracts, thereby limiting abuse of office by officials.

He said “the process of beneficial ownership reporting also requires that you have to identify the natural owners of the company but who are also politically exposed, like people who are in government, governors, Ministers, commissioners and all that. That’s where the corruption comes in. If you’re in a position of power, that gives you leverage and some advantage.

“You can use that position to influence government decisions that will favor those companies because you own them. You can as a minister award a contract to a company that is actually owned by yourself, but people don’t see the connection now. So it (beneficial ownership disclosure) is a powerful tool for fighting corruption.”

On why other companies are being disclosed as beneficial owners instead of the identity of natural persons,  he said: “Yes, some companies are owned by other companies and this means that you need to check further on the beneficial owners of the identified company.”

‘This story was produced under the Dataphyte Data and Development Reporting Fellowship 2022.