Helping governments and people make the most of their natural resources

One billion people live in countries rich with natural resources, yet they are home to a disproportionate amount of the world’s poor. Despite the great potential for revenues from extraction, these resource-rich countries consistently underperform against global average per capita growth. There are numerous reasons for what is sometimes termed the ‘resource curse’, including weak governance, corruption, fluctuating global demand for resources, and the impacts of raw commodity exports on the rest of the economy. 

Even in countries where natural resources do not dominate state revenues, the impact of extractive industries on local communities can be considerable, both negatively through social and political abuses and positively through local service delivery, job creation, and economic development. With the addition of environmental impact and climate change, all of these factors are critical for societies and governments if they are to make a full cost-benefit analysis on how and when to extract. 

Several organisations and initiatives are working to lessen the impacts of the resource curse. A key player in this ecosystem is the Natural Resource Governance Institute (NRGI). NRGI aims to help resource-rich countries reap the benefits of natural resources to support sustainable development through domestic resource mobilisation and accountable policy-making.

Luminate is proud to have supported NRGI since 2013 and is announcing a new grant of $2.25 million over three years. The funding will help it continue building global norms for transparency and accountability in the operations, oversight, and impacts of extractive industries, and supporting stronger governance of those industries at the country level. NRGI also plays a critical intermediate and connecting role in Luminate’s theory of change for financial transparency.

NRGI provides technical assistance and conducts advocacy, currently targeting 22 resource-rich governments, accountability actors (CSOs, journalists, state bodies), and international organisations focused on improving natural resource governance. It works closely with other organisations like Global Witness, Publish What You Pay, the Open Contracting Partnership, Oxfam, and the Columbia Center for Sustainable Investment to increase transparency and good governance in the sector. NRGI makes a unique contribution by providing rigorous research, data, and analysis that generates an evidence base for the field, acting as a trusted broker and convener and advancing policy reform by providing independent and impartial policy advice.

NRGI is presently seeking comment and feedback from its partners and the public on its draft 2020-2025 strategy. The organisation envisages exciting evolutions in its approach, including a deepened focus on anticorruption and the energy transition, woven into NRGI’s already robust support to countries to secure favourable terms for extraction and better manage the resulting revenues in a way that benefits citizens. To learn more and contribute feedback, please read this letter from NRGI president and CEO, Daniel Kaufmann.

NRGI's work focuses primarily on the development of, and incentives for, improved regulations, enhanced participation, and increased transparency. It strives to support those desired outcomes by providing upstream solutions and through partnerships with front-line groups and actors. For example, NRGI’s analysis of oil sales by the Nigerian National Petroleum Corporation (NNPC) contributed to the cancellation of a number of contracts that were grossly skewed in favour of the companies that held them. Subsequently, NRGI advised NNPC directly on redesigning the system. As a result, NRGI believes that Nigeria has saved at least $5 billion from improved governance of these deals since 2015. 

The organisation’s support to media houses and journalists in Nigeria to increase and improve the quality of coverage of the oil sector has also contributed to reducing corruption risks related to oil sales. Following media reporting that raised questions about oil sales, NNPC set up an investigation, reported the matter to the anti-corruption police, and subsequently retired three officials. These examples show how analysing data and exposing corruption and mismanagement can have direct and significant impacts on the reform agenda.

These are the types of tangible outcomes on the accountability side of Luminate’s strategy that NRGI aims to support through greater disclosures and capacity building.

We are also highly supportive of NRGI’s increased attention to state-owned enterprises (SOEs). NRGI has built a global database on financial data on national oil companies (NOCs), which produce 55% of the world’s oil and gas. To give a sense of scale, NOCs that published data on their assets in 2017 reported combined assets of $3.1 trillion - for comparison, the Big 5 tech companies (Facebook, Alphabet, Microsoft, Apple, and Amazon), are now worth around $4 trillion. In 25 countries NOCs contribute over a fifth of the government’s revenues, making their success and integrity vital for delivering public services. NRGI aims to support a substantial improvement in transparency, regulation, and management of these vital national assets.

Solving the resource curse and making natural resources an effective asset for the poor is complex and beholden to competing political and economic incentives. We are backing NRGI’s approach of weaving together strong international norms, empowered accountability actors, and transparent and enabled governments, in partnership with others who play complementary roles of encouraging reform and making corruption and mismanagement a much less attractive option.