As a way to address local grievances, improve community development and promote positive corporate-community relations, multinationals operating in the oil and gas sector in Nigeria have engaged in a series of initiatives to enhance community development in the oil bearing communities. In this piece, ADETOLA BADEMOSI examines the amount spent by oil firms on Corporate Social Responsibility (CSR) in three years.
In three years, international and indigenous oil firms spent over $2.2 billion on Corporate Social Responsibilities (CSR) projects, data from Nigerian Extractive Industry Transparency Initiative (NEITI) has shown.
Corporate sustainability expenditures according to the transparency agency are contributions made by companies to promote development or fund community projects in the communities they operate.
The expenditure may be mandatory or non-mandatory. Mandatory payments are made to the Niger Delta Development Commission (NDDC) and Nigerian Content Development and Monitoring Board (NCDMB) in line with their respective Acts.
On the other hand, non-mandatory social expenditure is the voluntary social payment made by companies in the host communities and across the country.
It covers social amenities such as roads, borehole water, health centres, skills acquisition and education, among others.
Nigerian economy is heavily reliant on the revenues accruing from the oil and gas sector but over the years the relationship between host communities and oil companies have not been cordial.
Some of the negative consequences of their operations include gas flaring, oil spills, environmental pollution, leading to distrust and restiveness.
The hostilities, according to the Price water house Coopers (PwC), may also have contributed partly to the massive theft of crude oil, vandalism of pipelines and the incessant shutdown of major oil fields.
As a result, oil firms developed Corporate Social Responsibilities (CSR) initiatives in an effort to mitigate the negative consequences.
However, despite the moves, host communities have repeatedly complained about neglect by oil multinationals whose activities bear negative impacts on their livelihoods.
But data contained in the NEITI audit report showed that between 2018 and 2020, 40 oil firms reported over $2.2 billion as social expenditure.
A breakdown of the figures showed that from 2018 to 2020, the total non-mandatory expenditure (voluntary) was $181 million with 1,198 projects executed within the period.
In 2018, 12 companies voluntarily expended $59.3 million on 344 projects while $843.393 million was posted for mandatory contributions to make an estimated total of $905 million.
Likewise, in 2019, 34 firms executed 690 voluntary projects amounting to a total of $81.3milion while the mandatory contribution was put at $816 million.
Similarly in the year 2020, despite the COVID-19 pandemic, the audit report showed that 19 oil companies executed 164 projects for a total $40 million while the mandatory contribution was $367.15 million.
Data provided by the transparency organisation also revealed that some firms executed more projects with little sums compared with others who did little but expended more.
For instance, the combined number of projects carried out by Shell Petroleum Development Company (SPDC) in 2018 and 2019 was 274 at $15 million but Sterling Oil Exploration and Energy Production Limited had implemented seven projects at $20.6 million in 2018 alone.
Also, in 2020, the NPDC spent $4 million on 22 projects while Chevron Nigeria Unlimited expended $9.6 million on 18 projects.
Host communities, oil firms many hostilities
For several years, the major source of conflicts between host communities and multinational oil companies has been non-adherence to the Global Memorandum of Understanding (GMoU) they sign with the communities for social development.
In most cases, the hostilities often result in vandalism of oil installations and shutting down of oil facilities among others.
For instance, in April, members of a host community in Isoko, Delta State threatened to attack installations if oil firms operating in the community failed to accede to their demands.
Also recently, ex-agitators of the Presidential Amnesty Programme threatened to shut down critical oil infrastructure in the Niger-Delta if their demands were not met.
However, while some resort to the use of violence to draw attention to their plights, others look on with the hope that help will come sooner or later
This is the case of Ekorinim, a host community in Cross River State, Calabar. The Nigerian Tribune had in 2021 reported how residents continue to suffer the adverse effect of hosting a petroleum pipeline that runs through the heart of the community.
As a result of oil spill, the community suffers both ground and river water contamination as well as air pollution, a menace they have had to contend with for over two decades.
PIA’s attempts to address CSRs in host communities
There is no gainsaying that host communities play key roles in the successful operations in Nigeria’s petroleum industry but for the hostile relationship which could be partly attributed to the lack of/or snail paced development in these communities.
The Federal Government (FG) has at various times sought to address this issue with initiatives which have had varying degrees of successes.
First is the setup of the Derivation Fund – Funded with 13 per cent of oil revenue from the Federation Account and paid to oil-producing states.
Second was the creation of the Niger Delta Development Commission (NDDC) in 2000 – Funded with NDDC Levy of three per cent of total annual budget of oil producing companies and creation of the Ministry of Niger Delta Affairs in 2008.
In addition to its efforts, the FG also established the Amnesty to Niger Delta Militants Programme in 2009.
The latest is the Petroleum Industry Act (PIA) which introduced the establishment of a Host Communities Development Trust (HCDT).
The fund is to be set up for the benefit of communities that are situated in or belonging to the area of operation of petroleum companies or operators.
It is expected to address infrastructural development and economic empowerment of host communities.
“The concept of the HCDT is not totally new to the Nigerian petroleum industry. There is an earlier iteration in the Global Memorandums of Understanding (GMoUs) used by some international oil companies (IOCs) to execute projects within host communities under their corporate social responsibility (CSR) initiative,” PwC in its analysis on the PIA’s attempt at addressing host community restiveness says.
The tax bites authored by Ayo Akinduyite, Associate Director Tax Reporting and strategy, Kelechi Anugwa Manager Tax Reporting and Strategy and Russel Eraga Senior Associate Regulatory Compliance and Advisory explained that the PIA has standardised the CSR initiative, making it mandatory.
This story was produced under Dataphyte Data and Development Reporting Fellowship 2022.
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