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NEITI&THEDODD-FRANKWALLSTREET

REFORMANDCONSUMERPROTECTIONACT

(HR4173)

2010

By Aderemi Ogunbanjo

An interesting development in recent United States (US) f inancial reform

legislation is a disclosure obligation contained in a miscellaneous provision of

the Dodd-Frank Wall Street Reform and Consumer Protection Act which was

signed into law by President Obama on Wednesday, July 21, 2010. The Act

was approved by the US House of Representatives on June 30, 2010 and by

the Senate on July 15, 2010. According to section 1504 of the Act, t it ledDisclosure of Payments by Resource Extraction Issuers,

Not later than 270 days after the date of enactment of the Dodd-Frank Wall

Street Reform and Consumer Protection Act, the Commission 1 shall issue f inal

rules that require each resource extraction issuer to include in an annual

report of the resource extraction issuer information relating to any payment

made by the resource extraction issuer, a subsidiary of the resource

extraction issuer, or an entity under the control of the resource extraction

issuer to a foreign government or the Federal Government for the purpose of

the commercial development of oi l, natural gas, or minerals,2 including

(i) the type and total amount of such payments made for each project ofthe resource extraction issuer relating to the commercial development

of oi l, natural gas, or minerals; and

(i i) the type and total amount of such payments made to eachgovernment.

1The US Securities and Exchange Commission (SEC).2 The term commercial development of oil, natural gas, or minerals include exploration, extraction, processing,export, and other significant actions relating to oil, natural gas, or minerals, or the acquisition of a license for any such

activity.

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The term resource extraction issuer is defined as an issuer of securit ies that

is

(i) required to f i le an annual report with the SEC; and(i i) engages in the commercial development of oi l, natural gas, or

minerals.3

As this provision also relates to payments made to foreign governments by a

subsidiary or entity under the control of the issuer, the implication for

Nigeria is that al l major payments made by IOCs whose parent companies are

regarded as issuers or who are control led by issuers to the Nigerian

government or its agencies to further the commercial development of oi l,

natural gas, or minerals would, after the issuance of the proposed final rules,

be required to be included in the annual report of such companies to be f i led

with SEC.

This provision supports the Extractive Industries Transparency Init iative

(EITI) which aims to strengthen governance by improving transparency and

accountabil ity in the extractives sector. 4 In 2007, Nigeria enacted the

Nigerian Extractive Industry Transparency Init iative (NEITI) Act 2007 as a

subset of the global EITI aimed at fol lowing due process and achieving

transparency in payments by Extractive Industry companies to governments

and government l inked entit ies and in the revenues received and reported by

those governments and entit ies.5

In l ine with the objective of NEITI and the global EITI, the government

through its oi l and gas industry institutions and the NNPC is bound by the

principles of the NEITI Act, 2007. Of particular relevance is one of the

functions of the NEITI Act 6 i .e., to disseminate by way of publication of

records, report or otherwise any information concerning the revenue received

3 This automatically includes most of the major IOCs.

4 See the EITI website at http://eiti.org/eiti

5 See the NEITI Handbook on Transparency and Reform in the Oil, Gas and Solid Minerals Sector.

6 See Section 3(h).

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by the Federal Government from all extractive industry companies, as it may

consider necessary.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (HR 4173)

thus provides another avenue for monitoring transparency (at least in the

area of payments made by subsidiaries of US issuers to government and its

agencies) in the Nigerian oi l and gas industry.

W e h o p e y o u f i n d t h e i n f o r m a t i o n c o n t a i n e d h e r e i n u s e f u l . Th i s N o t e

i s f o r g e n e r a l p u r p o s e s a n d g u i d a n c e o n l y a n d s h o u l d n o t b e r e g a r d e d

a s l e g a l o r p r o f e s s i o n a l a d v i c e . A n y q u e s t i o n s , c o m m e n t s o r

c l a r i f i c a t i o n s m a y b e d i r e c t e d t o :

M i s s A d e r e m i O g u n b a n j o

Te l - + 2 3 4 8 0 9 9 9 2 7 4 0 8

e m a i l a d e r e m i . o g u n b a n j o @o d u j i n r i n a d e f u l u . c o m