Under the PIA, there are regulations for Host Community Development Trusts (HCDTs), which will channel huge amounts of resources towards community development, and effectively replace corporate social responsibility (CSR) projects for oil and gas companies.

The Federal Government of Nigeria (FGN) estimates that the total contribution to HCDTs will be US$500-800 million per year (NGN200-330 billion), around ten times the average annual CSR spending by oil and gas companies (US$72 million or NGN19 billion). The estimated total allocation to HCDTs is almost as much as the Niger Delta Development Commission’s (NDDC) average annual budget (US$806 million or NGN206 billion), which will continue to be spent in parallel. This creates a huge opportunity for coordinated community development spending.

More funding for community development is welcome, but historically, the main challenge has not been the lack of funds, but the failure to manage this properly, to ensure it benefits communities. The HCDTs mean that these funds are flowing directly to communities, rather than through government institutions, where inefficiencies historically stemmed from. HCDT governance structures are rapidly being established to manage these finances. However, the structure prescribed by the regulator places too much power in the hands of oil and gas companies to determine the projects to be delivered, and the people who will oversee these decisions (the Board of Trustees). This could lead to disputes and increased tensions between communities and companies. Moreover, there will be no transparency in how company contributions are calculated, so communities will not be able to verify if they are receiving what they are due. Contributions should be equal to 3% of operating expenses, but companies do not currently publish this figure.

Most worryingly, the HCDTs seek to incentivise communities to protect the industry’s infrastructure from sabotage, oil theft, and artisanal refining, but do not provide any support to help them achieve this. Instead, they will be penalised under a provision in the PIA which states that deductions can be made to HCDTs for the cost of damage from ‘third-party’ incidents. The regulations expanded the definition to include the cost of products lost and operational costs during the period of downtime. If implemented, these deductions could cost HCDTs up to US$1 billion per year (NGN458 billion) – theoretically wiping out all contributions. This is unjust. Protecting the integrity of infrastructure should be the responsibility of companies and the government. Communities are important stakeholders in these efforts, but would need extensive support to tackle organised criminal networks, which are often armed and working in complicity with the security agencies and some government officials. Lumping this responsibility on communities – then punishing them for the actions of a few – will likely increase hostilities.

Our view is that the current regulations provide basic guidance, but to avoid future disputes, the regulator needs to specify uniform, transparent, and accountable approaches for: calculating operating expenses, clustering communities, distributing allocations among HCDTs, and establishing mechanisms to manage projects. In addition, the 10th National Assembly should amend the provision in the regulations that deducts funds for third-party damage, as is out of step with the PIA. More broadly, SDN maintains that this provision should be removed entirely, as it will not achieve what it intends to, and will lead to tensions across communities.

Commenting on the report, SDN’s Country Director, Florence Ibok-Abasi said:

Effective resource governance is a panacea for community development. Paying lip service to this will only sustain the cycle of deprivation in host communities and further weaken the relationship between citizens and the state which has often led to conflicts in the Niger Delta.