The Petroleum Industry Act (PIA) 2021 introduced the Host Community Development Trusts (HCDTs), under which it allocated three per cent of oil companies’ annual operating expenses to local development. This direct pipeline of funds was meant to address long-standing grievances in oil-bearing communities by ensuring that oil and gas companies set aside funds for development projects in their host communities. Sadly, however, more than three years down the line, administrative bottlenecks and pervasive lack of transparency are said to have plagued the implementation of this seemingly progressive framework. AMBROSE NNAJI reports.
It wasn’t for nothing that the Petroleum Industry Act (PIA) 2021 was hailed as a transformative milestone for Nigeria’s oil and gas industry. The Host Community Development Trusts (HCDTs) particularly gladdened the hearts of communities bearing the environmental and social brunt of the activities of oil and gas companies.
This is so because the HCDTs concept, at its core, envisioned a direct pipeline of funds from oil and gas operations to oil-bearing communities for development projects.
These trusts, once established, would manage and disburse funds for development projects, ensuring resources are effectively utilized for the benefit of the local population. It was a framework aimed at addressing long-standing grievances in oil-producing communities by allocating three per cent of oil companies’ annual operating expenses to local development.
With billions of Naira said to have been held in trust coffers, the stage appeared set to change the fortunes of host oil communities and ultimately, to a large extent, assuage their age-long agitation. However, more than three years after, the envisaged benefits of this critical and progressive framework in the PIA have yet to manifest.
Rather than do so, the impact of the introduction of HCDTs, which is central to the Act, remains a subject of intense controversy. While official figures boast of 140 HCDTs incorporated and nearly 200 projects said to have been initiated, the on-the-ground impact remains disappointingly minimal.
Some of the HCDTs includes the Warri Kingdom Coastal Host Communities Development Trust, Warnog Host Community Development Trust, Wakirike, Uzef Host Community Development Trust, Utrew Host Community Development Trust, Ibeno Clan Host Communities Development Trust, NEPl/Seplat Ethiope Host Communities Development Trust, and NEPL/Seplat Ekugbe Host Communities Development Trust.
The Nation, however, learnt that despite the sheer number of approved HCDTs that span the Niger Delta region, development deficit in the oil-bearing communities is still evident. Delays, administrative bottlenecks, and a pervasive lack of transparency are said to have continued to plague its implementation.
The National President of Host Communities Nigeria Producing Oil and Gas (HOSTCOM), High Chief Dr. Benjamin Style Tamaranebi, raised the alarm over what he perceived as the persistent development deficit in oil-producing areas despite the HCDTs.
Tamaranebi, who spoke at a recent Town Hall Engagement with HCDTs and Settlers in Rivers State, organised by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), urged HCDTs to prioritise projects that genuinely uplift communities from the “crushing poverty they endure, despite bearing the brunt of years of oil exploration and production.”
The HOSTCOM National President’s concern stemmed from the fact that while billions of naira has been paid into trust coffers, the tangible impact on community development remains elusive.
“Money has been paid to these trusts, and each of them holds billions. Yet, no trust in the Niger Delta can point to even a billion naira’s worth of visible projects, despite these funds being meant for development,” Tamaranebi charged.
He expressed dismay over the prevalence of “frivolous projects, duplication of efforts, and the siting of projects outside the communities,” stressing the urgent need for “proper utilization of funds on projects that truly benefit the people,” including investments in education and human capacity development through scholarships.
The roadblocks to the implementation of this progressive framework in the PIA are multifaceted, involving a complex interplay of responsibilities and shortcomings from various stakeholders. One of the significant hurdles lies in the unremitted contributions from oil companies.
For instance, HOSTCOM estimates that over N1 trillion is still owed to these trusts, a staggering figure that highlights a fundamental breach of the PIA’s mandate. In some instances, the Federal Government itself also failed to form or inaugurate the necessary trust structures, effectively precluding oil companies from remitting funds even if they were inclined to do so.
Beyond the issue of unremitted funds, the governance and management of existing HCDTs have raised serious concerns. Allegations of funds being hijacked by local elite and a pervasive lack of participatory planning have eroded community trust.
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Critics have also voiced apprehension about the NUPRC’s perceived overreach into the day-to-day management of HCDTs, fearing it could dilute community autonomy and drain vital resources. Coupled with limited awareness of the PIA and its provisions in many communities, skepticism and disengagement from the process are understandable outcomes.
That’s not all. The transition from the previous Global Memoranda of Understanding (GMoUs) system to the HCDT framework has also been fraught with complications. The suspension of earlier engagements without the effective implementation of HCDTs has left many communities in a developmental limbo.
While the NUPRC plays a crucial supervisory and regulatory role, the primary onus of forming and inaugurating HCDTs falls squarely on the shoulders of the host communities themselves. This involves extensive mobilisation, consensus-building, and structural formation.
However, as the former Chairman of the House Committee on Local Content, Emmanuel Ekon, noted, delays in establishing these structures often stem not from technicalities, but from “personal and sectional selfish interests that prioritize individual or group gains over the collective good.”
He said these internal conflicts hinder unity and compromise the smooth establishment of the HCDTs. And compounding this internal strife is the complicity of some operators who, for various reasons, exploit or even instigate community divisions.
By doing so, they deliberately delay the process of structure formation, perhaps to maintain control, avoid accountability, or prolong their influence without community oversight. “This intentional or passive sowing of disunity undermines the spirit and intent of the PIA, which seeks to empower host communities and promote sustainable development,” Ekon observed.
The PIA mandates that 75 per cent of HCDT funds are allocated for capital projects, 20 per cent for reserves, and five per cent for administrative costs and special projects. A controversial provision stipulates that if vandalism, sabotage, or civil unrest in a community causes damage to petroleum facilities or disrupts production, that community will forfeit the cost of repairs.
Recently, the Ghana National Petroleum Corporation (GNPC) Professorial Chair in Oil and Gas Economics and Management at the Institute of Oil and Gas Studies, University of Cape Coast, Professor Wumi Iledare, identified the lack of a clear legal definition of who qualifies as a host community as a crucial challenge.
He said this discretion, largely left to operating companies, can lead to inconsistencies in the interpretation and application of the matrix used to assess affected communities. Beyond identification, Professor Iledare also highlighted a critical issue in fund utilization namely, the failure to consider “intergenerational equity.”
This principle, crucial for sustainable community development, emphasises meeting current needs without compromising the needs of future generations.
While the law mandates a three per cent investment in community infrastructure, overseen by a Board of Trustees appointed by oil companies, and with projects proposed by communities, reviewed by a Management Committee, and then approved and funded by trustees, oversight and accountability remain significant concerns.
There is also no clear enforcement mechanism or sanction system for misused funds. Historical precedents of mismanagement of funds allocated to the Niger Delta region (through state or local governments) further fuel skepticism.
The PIA attempts to address this by mandating the fund breakdown, allowing communities to save for larger future projects, and empowering community advisory groups to guide decision-making based on community priorities.
However, the basis for calculating the three per cent fund, tied to a company’s operating expenditure, remains a point of contention. Some argue it should be linked to revenue generated from different regions to ensure fairness and consistency, especially in years where operational costs are low.
It’s crucial to understand that the benefits of the HCDT framework are not universally applicable to all oil and gas operations. As Professor Iledare clarified, if a company is operating under an old lease governed by the Petroleum Act rather than the PIA of 2021, the host community provisions of the PIA do not apply.
This obligation only extends to businesses whose assets were either issued after the enactment of the PIA or who have voluntarily converted to the new fiscal terms under the Act. Companies operating under the old regime still rely on the older GMoUs to support community development.
While some companies have already begun receiving community funds as compliance is a prerequisite for obtaining development approval from the Commission, others hold leases that predate the Act and cannot be compelled to switch until their leases expire.
A pressing concern, according to Professor Iledare, is the tendency of some communities to focus too much on immediate survival needs rather than utilizing funds for sustainable infrastructure development.
He emphasised that the host community fund is not intended as a mere transfer payment but as a capital investment aimed at long-term development – projects that benefit future generations.
However, the NUPRC, through its Chief Executive Officer, Gbenga Komolafe, has reiterated its commitment to regulatory oversight, policy support, and technical assistance to ensure host communities thrive.
Komolafe acknowledged the NUPRC’s achievements, including the incorporation of 140 HCDTs and the funding of 79, leading to the execution of approximately 192 ongoing projects. He also highlighted the development of a monitoring portal for real-time tracking of trust activities.
The NUPRC boss, however, admitted to ongoing challenges such as “governance and accountability concerns in managing HCDTS funds; delays in project execution due to bureaucratic hurdles; community grievances and stakeholders’ conflicts over representation and resource allocation.”
The sentiments echoed by HOSTCOM, NUPRC, and other stakeholders point to the need for judicious use of the trust funds, with Tamaranebi, for instance, urging communities to prioritise their developmental blueprint and invest in sustainable projects, such as linking roads between communities, providing scholarships, and sponsoring youth empowerment and economic diversification programs beyond oil and gas.
The Deputy Executive Director of the Environmental Defenders Network (EDEN), Mr. Abiye Johnson, shed light on challenges faced by littoral communities along oil block lines, particularly those not yet captured in the Trust despite being affected by profiling. He advised affected communities to channel their problems to the respective operators.
Ultimately, the success of the PIA’s host community provisions hinges on a fundamental shift in mindset and a concerted effort from all parties. The law, while intentionally broad to allow for flexibility, needs robust regulations to provide specific details.
Crucially, advisory committees within the HCDTs must be constituted by respected, community-focused individuals, not through political patronage or self-serving interests.
The consensus of stakeholders is that the true measure of the PIA’s success will not be in the number of trusts incorporated or projects initiated on paper, but in the tangible improvements in the lives of the host communities.
The vision of sustainable prosperity, direct social and economic benefits, and peaceful coexistence between oil companies and communities remains close, yet frustratingly out of reach. For the PIA to truly deliver for locals, there must be renewed commitment to transparency, accountability, and a genuine embrace of collective good over individual gain.
Only then can the promise of the Host Communities Development Trusts move from paper to tangible reality.
