A University Don, Prof. Joseph Abugu has said that some sections of the Petroleum Industry Bill(PIB) appears very demeaning and there is also no provision which would have made host community development, a mandatory role for Oil Companies.
These were contained in a key note address on the “Relationship between oil and gas producing communities and International oil companies operating in the Niger Delta: what impact has it made on the people?” at the 27th Conference of the Association of Traditional Rulers of Oil Mineral Producing Communities of Nigeria (TROMPCON) held recently at Asaba, Delta State
According to him, “Section 257 (3) also states that “the basis for computation of the trust fund in any year shall always exclude the cost of repairs of damaged facilities attributable to any act of vandalism, sabotage or civil unrest.”
“This appears a very demeaning carrot and stick approach. Is the Fund a reward for being protective of government assets or meant to compensate and develop the region for exploration activities? The former appears to be the case.
“While we await the passing of the Petroleum Industry Bill, there is sadly, no provision therein which would have made host community development, a mandatory role for Oil Companies. The 2018 PHICD Bill makes non-performance of its provision as regards Host Community Development a mandatory ground for revocation, but the PIB 2020 does not. This speaks volumes as to how committed the Government is to developing Host Community. Apart from the PIB 2020 divesting the Government of responsibility to make its impact in Host Community development, it allows oil-companies the laxity to also perform poorly or not at all, their role in host community development.
“More suspicious is the fact that Chapter three of the PIB Bill does not have any sanction whatsoever expressly stated in it, to deter non-compliance with its provisions by oil companies. It then makes the PIB 2020 a worrisome piece of legislation, with enormous potential for transforming the lives of the Host Communities but lacking the will power to make that transformation happen. It is as good as not included in the Petroleum Industry Bill and it is also a bad image and poor representation of the duty of the Government to promote the welfare and interest of the people, especially the people most affected seriously by oil operations in their host community.
Read the full keynote address below:
THE RELATIONSHIP BETWEEN OIL AND GAS PRODUCING COMMUNITIES AND INTERNATIONAL OIL COMPANIES OPERATING IN THE NIGER DELTA: WHAT IMPACT HAS IT MADE ON THE PEOPLE
Being a Keynote Address
Olorogun (Prof) Joe Abugu, SAN on the 27th Annual Conference of the body of Traditional Rulers of Oil and Gas Producing Communities in Delta State.,
Holden in Asaba, Delta State this 27th day of May 2021.
I am glad to be in your midst today and I have the Confab Committee to thank for it. A Confab of Traditional Rulers in the Oil and Minerals Producing Communities of the Niger Delta is no doubt an assembly of great minds with deep and practical knowledge of the challenges facing oil producing host communities. I have come to speak with only a legal perspective into the relationship subsisting and that which should subsist between multinational oil companies and host communities in the Niger Delta. The topic is topical as the agitation for resource control resonates in the land. Government initiative to reform the entire petroleum industry architecture has also been on for a while, being the main stay of the Nigerian economy. The Petroleum Industry Bill 2020 is before the National Assembly in this regard and the input of all is solicited in enthroning a peaceful and productive petroleum industry in the country. It is my objective therefore to add to your existing perspectives on the subject matter.
The Niger Delta is a terrain characterized by a network of tributaries and creeks, swamp and arable agricultural land. It is endowed with rich oil mineral deposit underneath its lands and waterways. The economic importance of the region cannot be over-emphasized as the region accounts for about 90% of Nigeria’s crude oil extraction and foreign earnings. In spite of the enormous contribution of the Niger Delta to national well-being in terms of its input to the national revenue, the region has been neglected over the years. As a result, it is characterized by: Inaccessible riverine terrain; poor infrastructure; bad network of roads; poor communication system; general dilapidated educational Infrastructure; general dilapidated health care delivery system; absence of or unreliable public system of energy supply; general lack of public water supply system; neglected rural settlements; massive environmental degradation; a fragile state of security; a large number of unemployed and unemployable youths; a large army of restive youths; a populace that is alienated from government; populace that is tired of rhetoric of successive governments to improve their lots; a people who feel exploited by oil producing companies and Governments; a people nonetheless, looking forward to a Messiah to turn around their misfortune.
The theme of this Conference and the assigned title of this paper begins with a Statement and ends with a question: The RELATIONSHIP BETWEEN OIL AND GAS PRODUCING COMMUNITIES AND INTERNATIONAL OIL COMPANIES OPERATING IN THE NIGER DELTA: WHAT IMPACT HAS IT MADE ON THE PEOPLE?
This paper seeks to explore the legal basis for the extant relationship between oil companies and host communities whose livelihoods depend on the environment and its God given resources. The host communities referred to in this paper comprise the entire Niger Delta region impacted by the operations of oil and gas prospecting, exploration and exploitation companies. I have chosen to work from the answer to the question into the Statement. The answer is a collection of known facts and needs little testimony. Greater attention will be paid to exploring the nature of the relationship between Oil companies and host communities – the constitutional structure for that relationship; statutory interventions; and bilateral efforts in defining the relationship. My expose will end with current proposals for reforms and how they will impact on the relationship.
Now, what are the known facts?
The terrain in the Niger Delta region is exacerbated by the toll of oil exploration and exploitation activities on the ecosystem of the region. Waterways have become polluted and unproductive in fishes and other aquatic resources; arable lands have become infertile and decimated agricultural productions. Industrial undertaking that would otherwise engage the workforce displaced from traditional occupations, are lacking. The wealth produced by the region is deplored by the Federal Government in funding a huge annual budget that finances mega projects in the cities of Lagos and Abuja, Kaduna, Kano, Katsina, to mention a few. Niger Delta cities and towns mirror squalor, neglect, congestion and poor living standards bereft of social amenities, motorable roads, public water supply systems and failing health care and educational systems. At a glance one can see the impact of a land holding regime which divests traditional/communal holdings or that further constricts land use by an impoverished people. This is indeed a desperate situation. In a nutshell, this is the story of the Niger Delta and its people.
Oil companies are commonly multinationals operating in several jurisdictions across the globe. The core of their business is exploration and exploitation of natural resources. Their activities influence the fortunes of thousands of the world’s poorest people through investment and trade. Whether they should behave responsibly in relation to their stakeholders, the environment and immediate community has been a moot issue. Companies have all too often pursued profit at the expense of people and the environment, thereby undermining development. There is a crucial need to ensure oil companies and their directors behave with far greater consideration for the impact of corporate actions on other stakeholders. There is urgent need for companies not only to share more information with stakeholder groups but also to address these groups’ concerns and grievances. There is a substantial groundswell of concern about the impact businesses have on vulnerable peoples’ lives.
The Constitutional and Legal Structure of the Relationship
The business of oil exploration and activities in Nigeria is regulated by a number of legal instruments comprising the 1999 Constitution and several statutes. These include the Companies and Allied Matters Act, the Petroleum Act, Nigerian Minerals and Mining Act 2007, Oil Minerals Act, Nigerian National Petroleum Corporation Act, Environmental Impact Assessment Act, Oil Pipelines Act, Petroleum Profits Tax Act, Deep Offshore and Inland Basin Production Sharing Contracts Act, and varied regulations on Oil prospecting Licenses, leases and Production sharing agreements within the groundswell of international multilateral treaties and declarations.
Section 44(3) of the Constitution provides for the sequestration of all proprietary interests in oil and mineral resources and the vesting of same in the Federal Government of Nigeria. It provides thus:
The entire property in and control of all minerals, mineral oils and natural gas in under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation and shall be managed in such manner as may be prescribed by the National Assembly.
The above sections form the core of contentions on the role of Oil Companies in Host Community.
First, it can be deduced from the foregoing that owners of land, whether an individual, community or even a company do not own the underlying oil, minerals or natural gas. This resource control is reflected in principal legislations beginning with the Petroleum Act 1969. Section 1 of Petroleum Act provides thus:
“S.1(1) The entire ownership and control of all petroleum in, under or upon any lands to which this section applies shall be vested in the State.”
The resource control powers vested in the Nigerian Government can be said to be on behalf of the Nigerian people, as gleaned from the Preamble “We the people of the Federal Republic of Nigeria …. Do hereby make, enact and give to ourselves the following Constitution. It negates the principle of indigenous control of own resources as you would find in a normal federation. It is known fact that we the people of Nigeria did not collectively agree on this sequestration of mineral rights.
This resource control position does not reflect international instruments on control of natural resources. For instance, the African Charter on Human and People’s Rights provides otherwise in its Article 21 that
“Article 21(1) All peoples shall freely dispose of their wealth and natural resources. This right shall be exercised in the exclusive interest of the people. In no case shall a people be deprived of it.
(2) In case of spoliation the disposed people shall have the right to the lawful recovery of its property as well as to an adequate compensation.
(3) The free disposal of wealth and natural resources shall be exercised without prejudice to the obligation of promoting international economic co-operation based on mutual respect, equitable exchange, and the principle of international law.
(4) States Parties to the present Charter shall individually and collectively exercise the right to free disposal of their wealth and natural resources with a view to strengthening African Unity and solidarity.
(5) States Parties to the present Charter shall undertake to eliminate all forms of foreign economic exploitation particularly that practised by international monopolies so as to enable their peoples to fully benefit from the advantage derived from their national resources.”
However, a close look at the above Article and section 44 (3) of the 1999 CFRN seems to evoke an image of contrasting provisions. Arguments may be put forth that the African Charter says “All peoples shall freely dispose of their wealth’, it didn’t say individuals, thus identifying a collective right of ownership claim on oil resources. It can also be argued that the African Charter does not provide the standard by which we judge who owns the wealth and natural resources, is it ownership by identity or ownership by proximity. The Constitution however provides a lead as to the nature of ownership under consideration.
“S. 162(1) The Federation shall maintain a special account to be called “the Federation Account” into which shall be paid all revenues collected by the Government of the Federation, except the proceeds from the personal income tax of the personnel of the armed forces of the Federation, the Nigeria Police Force, the Ministry or department of government charged with responsibility for Foreign Affairs and the residents of the Federal Capital Territory, Abuja.
(2) The President, upon the receipt of advice from the Revenue Mobilisation Allocation and Fiscal Commission, shall table before the National Assembly proposals for revenue allocation from the Federation Account, and in determining the formula, the National Assembly shall take into account, the allocation principles especially those of population, equality of States, internal revenue generation, land mass, terrain as well as population density;
Provided that the principle of derivation shall be constantly reflected in any approved formula as being not less than thirteen per cent of the revenue accruing to the Federation Account directly from any natural resources.”
The above section which has and is still the subject of serious contention and debates, when read alongside Section 44 (3) CFRN 1999 depicts that the Government of the Federation, having been vested with the ownership and control of natural resources including oil and gas, does derive revenue from them, and then distributes it according to the derivation formula and principle in the Constitution and other related legislations. The provisions of the Petroleum Act are clear that revenue is generated through the grant of Oil Mining, Exploration or Prospecting licences and leases. A further interpretation of this is that though Oil and Gas resources are located majorly in the Niger Delta region, they are vested in the Government of the Federation which includes the Northern Region, the South-Western Region and even the South-Eastern Region. It also means that all other states of the Federation share revenue from the oils and natural gas resources in the South-South, being joint-owners in the natural resources, of which such ownership can be said to be by identity, that is the states or persons identifying with the Government of the Federation. Hence, the concept of host communities – Hosts and not owners!
It is important to reiterate again that the permanent sovereign right of natural resources enshrined in the constitution has and still generates serious tension and contentions at the Federal, State and Local levels. It has been the series of legal battles and communal conflicts, which are not so much within the scope of this paper.
Consequences of the Sequestration on the Role of Oil Companies in Host Communities
The implication of vesting a physically located oil and natural gas resources in a federal government and thereby allowing the concept of Ownership by Identity to dictate the sharing of resources derived from such oil, has and still has grave implication on the role of Oil Companies in Host Communities, both positively and negatively.
The positive side of vesting oil and natural gas resources in the Government is that there is the capacity and possibility to make it compulsory that Oil Companies must play a role in the development of Oil communities. Attendant to this is that Government has the power to make the performance of their stated role or roles a condition precedent for the commencement or continuation of oil activities by the oil companies. Furthermore, the Government of the Federation, can ensure also that the paramount interest of the people, for whose welfare it exists, is placed first and far above the interest of the oil companies, thus, making sure that there is sustainable impact from the role oil companies play in their host community.
This also means that the Government of the Federation with its enormous enforcement machineries can adequately sanction erring oil companies for non-performance or unsatisfactory performance of their roles. It is also not impossible that the roles of Oil companies in host communities can be made into a piece of legislation using the machineries of the legislature and enforcement through the courts of law, thus putting a permanence and the seal of law to policies affecting the role of oil companies in the host communities.
On the other hand, the negative impact of this federal ownership control structure is that the laxity or complacency of the Government of the Federation to the role of Oil companies in host companies may provide a lee way for oil companies to avoid or abandon their roles in host communities. It also means that the oil companies need just find their way through the government or through key government offices to avoid sanctions or compulsion from performing its role.
Another negative consequence of this ownership by identity is that the Oil companies are only accountable to the Government in the performance of their roles. The host communities are excluded from determining what role the oil company can and should play that will be of tremendous benefit to them. A greater implication of this is that there can be a reality disconnect between the Government and the people such that the Government mis-identifies what development the host communities need, to which the oil companies follow in implanting their roles, and at the end of the day, you have roles well played but with little or no impact and evident result.
Fundamental Objectives and Directive Principles of State Policy Viz a Viz The Role of Oil Companies in Host Communities
What, however, could have being a good way to balance the positive and negative consequences of State Ownership is in Chapter 2 of the 1999 CFRN which provides for the Fundamental Objectives and Directive Principles of State Policy.
Chapter IV of the Constitution of the Federal Republic of Nigeria provides for the Fundamental Rights of a citizen, some of which may apply to Oil companies as corporate citizens. These include, right to fair hearing, right to freedom of expression and the press, right to freedom from discrimination, right to acquire and own immovable property, right to peaceful assembly and association. Some others, such as the right to life may not apply totally due to the incorporeal nature of oil companies, as those rights are exercised and enjoyed by physical persons.
The opening section 13 of the Constitution seems to beam a ray of hope:
“S. 13. It shall be the duty and responsibility of all organs of government, and of all authorities and persons, exercising legislative, executive or judicial powers, to conform to, observe and apply the provisions of this Chapter of this Constitution.”
Section 14 restates earlier discussions that the powers by which the State gives or grant
licenses to oil companies is derived from the people, including the people occupying the land
from which it mines, explores or prospects for oil, even though such powers are not used to reflect such. It states that
Section 14 (b) drives home the undisputable fact that security and welfare of the people is the primary purpose of government since power derives from the people. Thus, there is inevitably a role to be played by the oil companies in the host community, a role which will promote the security and welfare of the people of Nigeria, including in particular, the people with proximity to the physical sites of oil activities.
Section 16 underscores the Economic Objectives of the State while section 17 provides for the “Social Objectives.” These cumulatively contain laudable guidelines which will drive effective performance of the development roles of oil companies in their host community. By section 17:
- (1) The State social order is founded on ideals of Freedom, Equality and Justice.
(2) In furtherance of the social order-
(a) every citizen shall have equality of rights, obligations, and opportunities before the law;
(b) the sanctity of the human person shall be recognised and human dignity shall be maintained and enhanced;
(c) governmental actions shall be humane;
(d) exploitation of human or natural resources in any form whatsoever for reasons, other than the good of the community, shall be prevented; and
This section balances the activities of the oil companies as against the interest of their host communities, and also guides the actions of Government in dealing with the host communities for and on behalf of the oil companies. Subsection 3 of Section 17 equally contains appreciable provisions which if implemented and enforced as relating to the role oil companies are to play in their host community, a whole lot of issues and contentions would have been avoided.
It is equally worthy to mention that section 18 on Educational Objectives, section 19 on Foreign Policy, section 20 on Environmental Objectives and section 21 on Directive on Nigeria’s Culture are all commendable standards to design and demand roles from the oil companies to be played in their host community. However, the influence of Chapter 2 has been seriously affected by its un-enforceability or non-justiciability, which renders it a toothless bulldog in the arena of oil companies playing their roles in their host community. The mischief behind making Chapter 2 un-enforceable attest to the wealth of direction and the possibility of implementation embedded it. It can be safely deduced that if the fundamental objectives were to be justiciable, the present political and economic upheavals recorded in the country from time to time due to changes in the government would have become history, as citizens can hold the government accountable and have a template to judge the impact of a government in power. Those in power as at the time of drafting the constitution must have foreseen a floodgate of litigation which the chapter 2 was likely to cause. It is therefore not surprising that right before stating the objectives in chapter 2, they already made it non-justiciable in Chapter 1 under the Powers of the Federal Republic of Nigeria. However, as limited as human foresight can be, the effect of this is glaringly found in the field of discourse on the role of Oil companies in host communities. How great would it have been, if the provisions of Chapter 2 had been referred to as the standard and piloting provisions in regard to exploiting natural resources and the activities of the companies so involved. It would have added to the beauty of the constitutional provisions which outlines the presence of a role oil companies are to play in their host community.
Oil Companies as corporate citizens under the Constitution
Firstly, I want to underscore the relevance of the Companies and Allied Matters Act to this discuss. The corporate personality which clothes the oil companies and their operations is provided for in the Companies and Allied Matters Act. The Act midwives the birth of companies and their winding up.
Without incorporation, an oil company cannot be in existence, and if not in existence, there is no way it can be granted or given oil licenses to operate. Two provisions of the CAMA can be said to breathe life into every company incorporated in Nigeria. These are sections 42 and 43 of the Act.
“S. 42 As from the date of incorporation mentioned in the certificate of incorporation, the subscriber of the memorandum together with such other persons as may become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the powers and performing all functions of an incorporated company including the power to hold land, and having perpetual succession, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound up as is mentioned in this Act.”
S.43 (1) Except to the extent that the company‘s memorandum or any enactment otherwise provides, every company shall, for the furtherance of its business or objects, have all the powers of a natural person of full capacity.”
These sections not only give life to companies, but also secures for them the powers of a natural persons, giving oil companies, in this particular case, the opportunity to enjoy the corporate citizenship status. Hence, oil companies have responsibilities as citizens and residents of their host communities.
It is therefore not surprising that the very primary Act regulating the operations of Oil Companies in Nigeria, the Petroleum Act provides that a licence or lease to be granted under Act shall only be to a company incorporated in Nigeria under the Companies and Allied Matters Act or any corresponding law. Oil companies, like companies in other sectors are thus subject to the provisions of the CAMA in their operations. It also means that the Corporate Affairs Commission in exercise of its powers also extends to the operation of oil companies.
The concept of making an oil venture become incorporated under the CAMA, enjoying the incidents of incorporation, and particularly becoming endowed with the powers of a natural person can be tagged ‘Corporate Citizenship’. This implies that an Oil company is therefore a natural person who has become a citizen of the Federal Republic of Nigeria. This also implies that an Oil company is not only subject to the CAMA, but also subject to the Constitution of the Federal Republic of Nigeria, having been granted the powers of a natural persons, having a personality in law albeit corporate. It therefore means that it is subject to the overriding provisions of the Nigerian Constitution. The constitution thus provides some guidelines on the role of Oil companies as corporate Citizens.
In exploring the scope of these responsibilities reference must be made to the provisions of S. 305 of the CAMA 2020. It provides for the duties of the Directors in a company thus:
“S. 305(3) A director shall act at all times in what he believes to be the best interests of the company as a whole so as to preserve its assets, further its business, and promote the purposes for which it was formed, and in such manner as a faithful, diligent, careful and ordinarily skilful director would act in the circumstances and, in doing so, shall have regard to the impact of the company‘s operations on the environment in the community where it carries on business operations.”
A Director under CAMA is said to be a person duly appointed by the company to direct and manage the business of the company. Implying that shareholders and directors of companies are responsible for its decisions and actions The CAMA does recognize the limitation of the Juridical personality conferred on Oil Companies in that companies themselves as a corporate persons, do not take decisions on their own, but through the human agents behind it. The CAMA 2020 therefore, does not just say that the company shall act at all times in the best interest of itself and shall have regard to the impact of the company’s operations on the environment, rather, it directs the Directors, who do oversee the day-to-day decisions of the company to act in the best interest of itself and the community. It therefore means that the CAMA highlights the fact that the role of Oil companies in the host community need not be seasonal or periodical or occasional but can also be daily.
However, whether daily, or periodically, the director when so acting shall act in the best interests of the community where it carries on business operations.
While the constitution emphasizes that benefits derived from Oil can be through ownership by identity, that is, by identifying with the Government of the Federation, the CAMA 2020 highlights in addition that benefits can be derived from Oil companies operation by proximity, that is being at or around the area of the companies operations. However, how much benefits that is enjoyed by proximity will be subject to the dictates of the ownership by identity. This singular truth is one of the flashpoints of communal crises in the Oil producing regions of the country.
In another light, for the Director and ultimately the company to have the best interest of the host community, at heart, they are bound not just by fundamental provisions in the constitution, but also in CAMA 2020. The operating word used here in S. 305 CAMA 2020 is that they “SHALL have regard to the impact of the company‘s operations on the environment in the community where it carries on business operations” denoting mandatoriness. The mandatory guideline that the CAMA gives is however expected, considering the robust provision in the Constitution which makes the role of oil companies in their host community a constitutional one, though not expressly stated. The CAMA however does not go further to give a description on what kind of role or how it is to have regard to the impact of the company’s operation on the environment. This is probably safe and wise for the CAMA to do.
This is because, the Constitution, despite making the role of the Oil companies a fundamental constitutional one, and also did a beautiful job in providing a role description for Oil companies to play in their host community, yet, in the same vein, it does renders ineffective the application of those role guidelines as seen under Chapter 2 of the 1999 CFRN through the non-justiciability of those Fundamental objectives.
Other than the general duty to consider environmental interest in the management of the affairs of companies, the did not lay down any description of role as to regarding the interest of host community. Such a description would also go a long way in guiding the Oil companies as to the nature and type of role to be played in their host community.
In the light of the foregoing and the avowed objective of Trompcom, it should fervently join the clamour for a constitutional review that makes enforceable and justiciable the fundamental objectives and directive principles of state policies enshrined in chapter 2 of the Constitution.
Investigation Powers of Cac and the Role of OC’s in HC’s
Without wanting to be seen as casual on the role of companies in their community, the extensive powers of the Corporate Affairs Commission (hereafter referred to as “the commission”), comes to play in the relationship of oil companies and their host community.
“S. 8 (1) of CAMA provides thus that:
“The functions of the Commission shall include-
(c) arrange or conduct an investigation into the affairs of any company, incorporated trustees, or business names where the interest of shareholders, members, partners or public so demands;
(d) ensure compliance by companies, business names and incorporated trustees with the provisions of this Act and such other regulations as may be made by the Commission;
(e) perform such other functions as may be specified in this Act or any other law; and
(f) undertake such other activities as are necessary or expedient to give full effect to the provisions of this Act.”
While the omnibus provisions of subsection (1)(e) & (f) as highlighted above places emphasis on the role that CAC plays in the affairs of the operation of oil companies, subsection (1) (c) of Section 8 as stated above highlights the role that host communities can play in the operations of the Oil Companies.
The host community cannot be separated from the public. The CAMA does not define who the public is, but for the avoidance of doubt, the Black’s Law Dictionary defines ‘public’ as
“1. Relating or belonging to an entire community, state, or nation.
- Open or available for all to use, share, or enjoy.
- (Of a Company) having shares that are available on an open market.”
This definition highlights the fact that public can be both external and internal in nature. The external category of ‘public’ as defined by Blacks Law, and also placed in context, will be the Government of the Federation and its constituent states and then the host community of the oil company. The internal category of public will be the members of the company or the shareholders of the company which may include or not include the Directors.
It therefore means that the Host community as a “public”, can petition the Commission for an investigation into the affairs of an or many oil companies, of which petition can be to make the Commission (d) ensure compliance by companies,….with the provisions of this Act and such other regulations as may be made by the Commission; and also that the Commission should (f) undertake such other activities as are necessary or expedient to give full effect to the provisions of this Act.”
If having agreed that S. 305 CAMA 2020 is salient and crucial in the operation of companies. The Commission can, at the instance of the host community ‘the public’, launch full investigation into the affairs of oil companies, in view that the company acting through it directors has failed to heed the mandatory directive of having regard to the impact of the company’s operations on the environment in the community where it carries on business operations, especially oil companies. This then implies that the oil companies by virtue of incorporation have become community members and as expected in any communal setting, each member is to play an active role in the advancement and development of their immediate community. There is no evidence that host communities have ever explored or tested this investigative powers of the Commission over the environmental impact of the activities of oil companies in host communities.
In the light of the above, what is the situation of the ground?
Uchechukwu Nwosu in a 2017 study of The Relationship Between Oil Industries and Their Host Communities in Nigeria’s Niger Delta Region, made some sterling findings.
The study assessed the relationship between the Oil companies operating in Nigeria’s Niger Delta Region and their host communities. In so doing, the researcher evaluated the problems and prospects prevalent as a result of the presence of Oil companies such as Exxon-Mobil, Chevron, Agip, Elf, etc. on the inhabitants of the Oil bearing communities in the entire Niger Delta region of Nigeria. In order to guide the study, three hypotheses were formulated which emanated from the main variables of the study. The design adopted for the study was Ex-Post-Facto. Data was collected using a researcher developed instrument called Oil Industries and Host Community Relations Questionnaire (O.I.H.C.R.Q.). Using a Stratified Random Sampling technique, a sample of 293 subjects, the hypotheses were tested with Pearson Product Moment Correlation Coefficient (r) at 0.05 level of significance. Results obtained revealed that: there is a significant relationship between Niger Delta indigenes’ attitude and the scope of activities of Oil companies in the Niger Delta region; there is also a significant relationship between the company-community relations and the scope of activities of Oil companies in the Niger Delta region; and that there is equally a significant relationship between the host communities’ perception of the employment policies of Oil Industries operating in the Niger Delta region and the scope of activities of the various companies. It was therefore concluded that the relationship between Oil companies and their host communities is significant in ensuring a peaceful and productive undertaking of their activities. It was finally recommended among other things that there is an urgent need to strengthen the relationship between Nigeria’s Oil companies and their host communities to engender an improved and symbiotic relation that will improve industrial output and growth without violating the rights of the host communities.
Evidence on ground however indicated that the relationship has not been very symbiotic or healthily beneficial to host communities. For many years, community development efforts were philanthropic in nature and were seen as separate from business goals, not fundamental to them. Doing good and doing well were seen as separate pursuits. Charity was not considered part of the objectives of the company and gratuitous actions must be measured by reference to what is for the benefit of the company. Hence there is unrest in the land. The people and the youths of host communities can no longer bear the pain of living in squalor while alien companies exploit their resources and, in many cases, live nearby in serene and ordered environments oozing with wealth and comfort.
The need for institutionalizing the role of Oil Companies
The need for institutionalizing the role of oil companies in host communities is one of urgency and emergency. Since the discovery of Oil at Oloibiri Community in Niger Delta, Nigeria has been experiencing mixed fortunes of prosperity and poverty, and even the oil companies have not been spared both. The Oloibiri Community had the historical privilege of having the first oil well in Nigeria named after it. One would have thought that this naming of the first oil well after the community would have been the fulfilment of the words of an ancient wise king who said “A good name is rather to be chosen than great riches, and loving favour rather than silver and gold” and “A good name is better than precious ointment;” Unfortunately, the Oloibiri experience may have proved the ancient King wrong. This is because the best that remains of Oloibiri is the good name of producing the first oil well in Nigeria and nothing more. The great riches, favour, silver and gold and even precious ointment which is to follow the good name has since deserted Oloibiri and its people. Today, the Oloibiri, without basic amenities is a shadow of its prosperous self, a dark contrast to the fortunes it brought the entire Nation and even the World at large.  This and many other instances has sparked rife contentions on resource control of oil resources resulting into armed conflicts.
More unfortunate is the fact that Oloibiri was only a foretaste of what was to become of many host communities arising from the inevitable and irreversible effect of oil operations in host communities. The extent of impact generated by oil operations reached the global level following the case of Shell and Ogoni. The people of Ogoni spearheaded a global advocacy on the plight of host communities in the face of oil explorations, with little or no result of the Government and the impact of Oil companies in their locality. This unprecedented advocacy named “Movement for the Survival of the Ogoni Peoples (MOSOP) formed in 1990 was ably championed by the legendary author and playwright, Professor Kenule Saro-Wiwa. One of the key documents to have emerged from this struggle, though non-binding yet very influential and instructive was the historical Ogoni Bill of Rights (OBR) signed on 26th August 1990 and presented to the government and people of Nigeria in November 1990.
The reaction of the administration then, to the Ogoni Movement fell short of providing a lasting peace to the crisis in the Oil producing regions and Host communities in Nigeria. The crisis and tension resulted in disruption of oil activities and caused an economic downturn for the country, being an oil-dependent country, and also led to frightening armed conflicts and confrontation between the military and the youths of the Oil producing region. It included the execution of Professor Ken Saro-Wiwa and his fellow Ogoni compatriots, and several other military operations in Ogoni and other host communities. The Amnesty Initiative of the Late President Shehu Yar’adua was very influential as it doused the tension in the region and allowed normalcy to return to the oil producing regions as well as oil producing activities.
All these goes to show that there is so much that needs to be done as regards the development of Host Communities that makes it inevitable for Oil Companies to have a role to play.
The disruption of oil operations in times past was a result of the absence of visible impact that the host communities were having as regards to the fortunes and prosperity being exploited in form of crude oil from their land, which has affected their means of livelihood and yet they have little or no compensation. These adverse effects of the presence of oil operations seems contrary to Article 21 of the African Charter of Human and People’s Right and offends the provision of the 1999 Constitution which guides the Government in seeking the welfare and security of the people above all else. However, it will be beyond the scope of this presentation to delve into the intricacies of resource control and agitations.
The Amnesty Programme of the Federal Government as well as every other initiative taken by subsequent Government or regimes in the country as regards the welfare and wellbeing of the Host Communities highlights the fact that the role to be played by stakeholders in the development of the Host Community is more than a casual role. It’s a role that requires extra commitment and financing, with dedicated interest in seeing positive result from every effort so made. The Government of the Federation vested with the ownership and control of such oil resources has itself undergone so much backlash locally and internationally over its lack of adequate commitment to playing its developmental roles effectively. This will also apply to Oil Companies who have had a fair share of troubles and terror following communal uprising against what is perceived by the Host Community as exploitation and injustice and a deadly dis-interest in their welfare and well-being.
In a bid to foster a harmonious and productive environment, Oil companies were constrained to enter into Agreements or Memorandum of Understandings (MOUs) with host communities in the nature of collective bargaining agreements. But results shown so far is that that will not be enough to make the presence of oil companies visible felt, because oil companies like every other individual will always put their business interest first and above any other interest including that of the Local Community. Equally because of the enormous wealth generated, they cannot so much be trusted with their operations and openness in dealing with the Host Community without an external governing authority and power. Several State governments have also complained of potential and real conflicts been projects prioritization of the State governments and those obtained by Host communities under MOUs with Oil companies. A litany of MOUs pervades the relationship with varying degrees of compliance. These simply attests to an unregulated terrain lacking in synergy.
I must also mention the efforts of the Federal government in improving the assuaging the environmental impact of the activities of Oil companies and thus improve the lives of the people of the Niger Delta. The first initiative was in the creation of an Oil Minerals Producing Areas Development commission (OMPAEDEC) in 1992. The tasks of the Commission was to rehabilitate and develop oil mineral producing areas, to tackle ecological problems that have arisen from the exploration of oil minerals, to liaise with the various oil companies on matters of pollution control and to carry out several other duties listed in section 2 of the Act.
In 2000, under the presidency of Chief Olusegun Obasanjo, OMPAEDEC transmuted into the Niger Delta Development Commission (NDDC) with a mandate similar to that of OMPAEDEC of developing the oil-rich Niger Delta region. Furthermore, In September 2008, President Umaru Yar’Adua announced the formation of a Niger Delta Ministry, with the Niger Delta Development Commission to become a parastatal under the ministry. One of the core mandates of the Commission is to train and educate the youths of the oil rich Niger Delta regions to curb hostilities and militancy, while developing key infrastructure to promote diversification and productivity. The ministry has a Minister in charge of the development of Niger Delta area, and a Minister of State in charge of youth empowerment. The existing Niger Delta Development Commission (NDDC) was to become a parastatal under the ministry. President Yar’Adua said that the Ministry would coordinate efforts to tackle the challenges of infrastructural development, environment protection and youth empowerment in the Niger Delta.
In December 2008, President Yar’Adua appointed Ufot Ekaette as Minister of Niger Delta Affairs and Godsday Orubebe as Minister of State. The Permanent Secretary was Dr. Yahaya A. Abdullahi. In July 2009 Yar’Adua appointed Larry Koinyan of Bayelsa State, a retired Air Vice Marshal, as the Chairman of the NDDC. Several other prominent sons of the Niger Delta have been appointed Managing Directors of the NDDC including a retired technocrat from Shell Petroleum Developing Company of Nigeria Limited, Mr. Godwin Omene. Others include Mr. Timi Alaibe and Mr. Emmanuel Aguariavwodo, Dr Akwagaga Enyia, Dr. Joi Nunieh, Professor Nelson Braimbraifa, Prof. Kemebradikumo Pondei, et al.
In November 2009, Senator James Manager, was the Chairman of the Senate Committee charged with oversight over the operation of the NDDC. In April 2010, Peter Godsday Orubebe was appointed Minister of Niger Delta, when Acting President Goodluck Jonathan announced his new cabinet.
A March 2012 report in the Vanguard indicated that relatively little had been accomplished in the first four years. Projects to improve roads, build skills acquisition centers and improve water and electricity supplies were far behind schedule. Large amounts had been budgeted and spent for projects related to waterfront development including dredging and port development but nothing tangible had been done. There was also a large gap between federal promises and amounts released. A spokesman for the ministry said the priority would be on completing existing projects rather than starting new ones. The Ministry denied allegations of project duplication. Since 2012, the story has not changed. The NDDC continues to be a cesspool, house of commotion, political favoritism and corruption with little impact in the life of the people. Recent events in the public domain attest to this conclusion.
I have undertaken this brief escort on government efforts to address the needs of the Niger Delta host communities to demonstrate that the problem is not always with the Nigerian State but with our own people. Let us ask our people who have dominated the life of NDDC in various capacities why there is no visible improvement in the lives of the people of the Niger Delta. You receive them warmly in your Royal Palaces, give them front seats at community functions and in many cases confer chieftaincy titles on them. Not bad but please ask them questions on the plight of host communities!
LEGISLATIVE ATTEMPTS AT INSTITUTIONALISING THE ROLE OF OIL COMPANIES IN HOST COMMUNITIES
Corporate Social Responsibility (CSR) Bill
A laudable attempt at institutionalising the role of Oil companies in host communities came with the introduction of a Bill on Corporate Social Responsibility, sponsored by Senator Uche Chukwumerije before the National Assembly in 2009. The Bill sought to provide for comprehensive adequate relief to communities which suffer the negative consequences of the industrial and commercial activities of companies operating in their areas and to create a specific body for the execution of this highly important social responsibility. It also provides for penalty for any breaches of corporate social responsibility. The Bill was to create a Corporate Social Responsibility Commission, which will be charged with providing standards, integration of social responsibility, and international trade issues. It aims at establishing a supervisory organ that will mandate companies and companies to spend 3.5 per cent of their profit before tax on Corporate Social Responsibility (CSR).
Highlights of Bill:
The Bill seeks to ensure that companies/companies:-
- Contribute to economic, social and environmental progress with a view to achieving sustainable development of affected communities,
- Respect the human rights of those affected by their activities in keeping with Nigeria’s international obligations and commitments.
- Encourage local capacity through close co-operation with local community, including local business interests, as well as developing appropriate linkage lines of their corporate activities to the benefit of the communities.
- Develop and apply effective self regulatory practices and management systems that foster a relationship of confidence and mutual trust between enterprises and societies in which they operate.
- Support and uphold good governance principles and practice, and
- Abstain from any improper involvement in local political activities.
Criticism of the bill was rife. The multinationals through their lobby infrastructures mounted heavy resistance to the contents of the Bill. Suffice to say that it died in the Assembly where it was proposed.
Petroluem Host and Impacted Communities Development (Phicd) Bill 2018
The Petroleum Host and Impacted Communities Development Bill 2018 which is divided into Six Parts, is to provide for a Petroleum Host and Impacted Communities Trust and for other related matters.
Part 1 of the Bill provides for the Objectives of the Act; Part 2 covers the Incorporation of Petroleum Host and Impacted Communities Development Trusts, structure, etc. and funding of the Trust; Part 3 covers Governance of the Petroleum Host and Impacted Communities Development Trust; Part 4 covers financial year, accounts, audits, reporting etc.; Part 5 entails dispute resolution while Part 6 is the Transitional provisions.
Much would not be said about the Bill as it has been overtaken by events. Events refer to the processes of passing the new Petroleum Industry Bill (the PIB) 2020 into law. The PIB 2020 contains a near verbatim replication of the PHICD Bill 2018 in it.
Petroleum Industry Bill (Pib) 2020
The Petroleum Industry Bill 2020 is a Bill for an Act to provide legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry, the development of host communities and for related matters. It has a preamble that is very inviting and gives a beam of hope in respect of making oil companies accountable for their role in host communities.
The PI Bill has 319 Sections divided under 5 chapters unevenly. Each Chapter carries its own objectives as they relate to the Oil or Petroleum Industry. Chapter 1 of the Bill provides for the Governance and Institutions, Chapter 2 provides for Administration, Chapter 3 provides for Host Communities Development, Chapter 4 covers the Petroleum Industry Fiscal Framework, and Chapter 5 entails the Miscellaneous provisions.
Whilst the PIB may be applauded as an attempt to review the legal architecture of the petroleum industry, upstream and downstream, it began with a clear invocation of the provisions of Petroleum Act and the Mineral Oils Act that sequestrated all oil and mineral resources in Nigeria from the host communities to the federal pouch. It thus put paid to all the clamour for Resource Control.
Chapter 1, on Governance and institutions created two principal regulatory bodies; the Nigerian Upstream Regulatory Commission (Section 4) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (Section 29). The composition of these bodies in sections 11 and 34 respectively negate the interest of host communities. There is neither provision for representation of oil producing states nor of oil producing communities. The Ministry of Niger Delta Affairs as well as the NDDC are not represented. Some form of affirmation action for the interest of impacted oil communities ought to have been considered. The end result would be that these two bodies will be populated by persons from the dominant ethnic nationalities to the chagrin of the oil producing communities.
Another agency created in section 52 of the Bill is the Midstream Gas infrastructure fund, designed as a body corporate with a governing council to regulate gas infrastructures. Its composition is evidently another army of occupation.
The NNPC Limited to be created pursuant to section 53 of the Bill is another case in point. Some assets, interests and liabilities of the extant NNPC are to be transferred to this company. It shall operate as an agent of the NNPC charged with regulatory powers. The Composition of the Board of the NNPC Limited is also not representative of the interest of oil producing states and their communities. The NNPC Limited shall inter alia carry out petroleum operations on a commercial basis with power to lift and sell royalty oil and profit oil for commercial fees, payable by Government, at the request of the Commission and pay the corresponding revenue to accounts indicated by the Commission. One would have thought that this is a Board where representatives of impacted oil producing states ought to be, if indeed it is not a continuation of the agenda to occupy all resources to the exclusion of the Niger Delta Oil producing communities.
Chapter Two of the bill deal with the administration of petroleum assets, particularly upstream Operations – license of Exploration Licenses, and Oil Prospecting Licences; the Bidding and Award processes. Notwithstanding the hue and cry that oil licenses are presently held by individual and companies with little affiliation to the Niger Delta, no effort seem to have been put into the PIB to address the issue. Some provision, for instance, that oil prospecting companies must have at least 25% shareholding interest by indigenes of Oil producing communities would have been apposite. Similarly, a percentage of Oil exploration and prospecting licences should be reserved for State owned Oil Prospecting Companies. These would encourage oil producing states to set up State owned Oil companies. Such provisions would be a tacit acknowledgement of the goose that lays the golden eggs. It would engender and sense of collective participation as opposed to the present outlook of an army of occupation.
The Chapter 3 of the PIB 2020 which covers Host Community Development has been object of much discussion in the public domain. Many believe that this is of most relevance to host oil communities. The Chapter which runs from sections 234 to sections 257 of the Bill is an exact replica of the Petroleum Host and Impacted Communities Development Bill 2018. While it is laudable that the PIB 2020 contains provisions on Host Community Development, it seems to be reflections of the alleged long-standing poor commitment of the Government or Political class towards the Development of the Host Communities.
The objectives of the Chapter Three on Host Communities Development is provided thus:
“S. 234. Objectives and regulations
(1) The objectives of this Chapter are to –
(a) foster sustainable prosperity within host communities;
(b) provide direct social and economic benefits from petroleum operations to host communities;
(c) enhance peaceful and harmonious co-existence between licensees or lessees and host communities; and
(d) create a framework to support the development of host communities.
(2) The Commission and Authority may make regulations with respect to this Chapter on areas within their competence and jurisdiction as specified in this Act.”
The Commission and Authority as mentioned here in this section are two different bodies.
The Authority as provided for in this Bill is “The Nigerian Midstream and Downstream Petroleum Regulatory Authority”; while the “Commission” means the Nigerian Upstream Petroleum Regulatory Commission established under this Act. Thus, establishing two bodies providing oversight on the implementation of Chapter three of the Bill. The composition of these two bodies should be of concern to oil producing communities.
It is noteworthy that asides the mention of the Commission and Authority, there is nothing in the chapter that borders on the contributions of the Government to the development of the host community. An overview of the bill reveals that only Chapter three borders on the Host Community development, and the responsibility for that development has been wholly foisted on the oil companies. It seems the Government had divested its duty of promoting the welfare of the host community to non-governmental enterprises, which are the oil companies.
Oil companies are to put aside 2.5 per cent of their annual expenditure for the development of their host communities; The firms are to deploy 75 per cent of the budget in a Development Trust fund to implement capital projects in such communities with an understanding that the beneficiaries would watch over the projects. To benefit from the projects/fund, a host community must have a near-zero vandalism incidence as a case or cases of vandalism or hostility against oil facilities means loss of any right to be a beneficiary of the development project(s) through the trust fund. It recommends that communities where oil facilities are located or where oil exploration and production takes place protect are to protect such facilities and operations at all cost. The proposed PIB states that the special vote would be used to fix damaged facilities in any community that allows vandalism of oil installations in its domain. Section 257 (2) of the proposed law states that “where, in any year, an act of vandalism, sabotage or other civil unrest occurs that causes damage to petroleum and designated facilities or disrupts petroleum activities within the host community, the community shall forfeit its entitlement to the extent of the cost of repairs of the damage that resulted from the activity with respect to the provisions of this Act within that financial year.”
Section 257 (3) also states that “the basis for computation of the trust fund in any year shall always exclude the cost of repairs of damaged facilities attributable to any act of vandalism, sabotage or civil unrest.”
This appears a very demeaning carrot and stick approach. Is the Fund a reward for being protective of government assets or meant to compensate and develop the region for exploration activities? The former appears to be the case.
The oil companies classified as Settlers in the Bill are expected to carry out a need assessment of their host communities after they are granted any license or lease. Such assessment will be based on the social, environmental and economic needs of the communities. The need assessment is expected to determine the specific needs of each host community, ascertain the effect that the proposed petroleum operations might have on the community and provide a strategy for addressing the needs and effects identified.
Every settler is expected to develop a host community development plan based on the findings of the needs assessment which shall be submitted to the relevant government agency for proper monitoring.
According to the proposed law, the objective of the Host Community Development Trust Fund is to foster sustainable prosperity, provide direct social and economic benefits from petroleum operations, enhance peaceful and harmonious co-existence and create a framework to support the development of every host community.
The oil companies are expected to incorporate a trust in the community where they operate within 12 months from the effective date of their operations.
Section 238 of the bill states: “Failure by any holder of a licence or lease governed by this Act to comply with its obligations under this chapter may be grounds for revocation of the applicable licence or lease.”
The Government role as seen under S. 238 of the Bill relates only to sanctions for non-compliance with the provisions of the Bill. Other Governmental regulations are expected to be carried out by the Commission and Authority as designated in the Bill. But very worrisome is the lack of will power on the path of the Government to hold Oil company accountable. The provision of S. 238 of PIB 2020 says:
“S. 238. Failure to incorporate host communities development trust Failure by any holder of a licence or lease governed by this Act to comply with its obligations under this Chapter MAY be grounds for revocation of the applicable licence or lease.”(emphasis mine)
This section qualifies how well all other sections are implemented, because by making it optional for the Government to see or take-up non-compliance with Chapter three, even as grounds for revocation, does not speak well of the Government. Infact, it is as good as not putting that section or the whole Chapter 3 of PIB 2020 there.
The implication of this is that the entire Chapter 3 may not be implemented by an oil company and no consequence will follow.
While we await the passing of the Petroleum Industry Bill, there is sadly, no provision therein which would have made host community development, a mandatory role for Oil Companies. The 2018 PHICD Bill makes non-performance of its provision as regards Host Community Development a mandatory ground for revocation, but the PIB 2020 does not. This speaks volumes as to how committed the Government is to developing Host Community. Apart from the PIB 2020 divesting the Government of responsibility to make its impact in Host Community development, it allows oil-companies the laxity to also perform poorly or not at all, their role in host community development.
More suspicious is the fact that Chapter three of the PIB Bill does not have any sanction whatsoever expressly stated in it, to deter non-compliance with its provisions by oil companies. It then makes the PIB 2020 a worrisome piece of legislation, with enormous potential for transforming the lives of the Host Communities but lacking the will power to make that transformation happen. It is as good as not included in the Petroleum Industry Bill and it is also a bad image and poor representation of the duty of the Government to promote the welfare and interest of the people, especially the people most affected seriously by oil operations in their host community.
The only ray of hope is that the PIB 2020 is still a draft legislation, following which changes and review can be made.
It is important at this point to highlight the PIB 2020 definitions of key words as they affect our present discourse. The bill defines “Host Community” to mean “any community situated in or appurtenant to the Area of Operation of a Settlor, and any other community as a Settlor may determine pursuant to Chapter Three of this Act”.
It further defines a “Settlor” as “a holder of an interest in a petroleum prospecting licence or petroleum mining lease or a holder of an interest in a licence for midstream petroleum operations, whose area of operations is located in or appurtenant to any community or communities;”
The PHICD Bill 2018 gives a variant definition of “Host Community”. It does not shorten the nomenclature as the PIB did, but rather states fully that “Petroleum Host and Impacted Community” means “any of the Communities situate in the settlor’s area of operation and ALONG THE PIPELINE RIGHT OF WAY, and any other communities as the settlor may determine:” (Emphasis mine).
A seemingly insignificant difference in these definitions but which is highly consequential is the omission of the communities “along the pipeline right of way” of the oil company. Where a community hosts the pipeline right of way of an oil company and then suffers as result of oil spillage or fire or any unfortunate circumstance which could only have arisen because the pipeline of the oil company is located in their community, the PHICD Bill gives such community a chance to be adequately compensated for, drawing from the Host Community Development Trust Fund or even the Reserve Fund. Unfortunately, such communities will be denied any form of compensation under the PIB 2020. They are left to nurse their wounds and seek alternative ways of getting the oil company who owns the pipeline to duly compensate them. This mischief works more in favour of the Oil companies who have less communities to spend on or implement developmental projects in.
This is besides the sole discretion given oil companies to either determine or un-determine an impacted community as a host community. This enables the Oil Companies to avoid responsibilities of development in communities which are though heavily impacted but are not in the area or appurtenant to the Area of operation of a settlor. Evident examples would be host communities of pipelines.
In conclusion, whilst the stated objectives of the PIB 2020 include the promotion of sustainable prosperity within host communities, there is a lot more to be provided in the Act to secure the attainment of this objective. Trompcon should commission a study of the PIB 2020 and make submissions to the national Assembly on the subject as it affects host communities.
From the foregoing, we shall conclude with the words of our great African Nobel Laurette on the quest for liberation and freedom from the chackles of those intent of making us slaves in our land: IT IS STILL A LONG WALK TO FREEDOM.
My respect Royal fathers, I thank you for listening.
Olorogun (Prof) Joe Abugu, SAN
May 27, 2021.