The Dawn of Host Community Development in Nigeria’s Oil and Gas Sector: A 2024 Overview
The year 2024 marked a significant stride in Nigeria’s oil and gas sector, particularly concerning community development initiatives. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) reported a substantial N57.07 billion remittance to Host Community Development Trusts (HCDTs) by operating oil and gas companies. This contribution, representing 3% of the companies’ annual expenditure in the preceding year as mandated by the Petroleum Industry Act (PIA), underscores a growing commitment to fostering sustainable development in communities impacted by oil and gas operations. This substantial injection of funds brings the total contributions to HCDTs to N65.15 billion, including the N8.45 billion remitted in 2023, signifying a significant leap towards fulfilling the PIA’s objectives.
The NUPRC’s report highlighted significant progress in establishing and operationalizing HCDTs. A total of 207 applications were received, with 154 trusts approved and 136 successfully registered with the Corporate Affairs Commission. This indicates a robust response from communities and a concerted effort by the NUPRC to facilitate the establishment of these vital development vehicles. Furthermore, the approval of 32 fund managers to oversee the disbursement of funds and the ongoing implementation of 187 projects across various trusts demonstrate a commitment to ensuring effective fund management and project execution. These figures reflect a burgeoning ecosystem of community-led development initiatives, fostering local ownership and participation in managing resources and driving sustainable growth.
Despite the notable progress, the NUPRC acknowledged certain challenges and areas requiring further development. The development of HostComply, the commission’s digital portal designed to enhance transparency and efficiency in HCDT management, faced delays in integrating key modules. Modules for fund distribution matrices, conflict resolution, and Environmental, Social, and Governance (ESG) performance reporting are yet to be fully operational. The integration of these modules is crucial for ensuring robust governance, equitable resource allocation, and effective conflict management within the HCDT framework. Furthermore, the commission highlighted the need to complete modules related to fund managers, vendors, conflict resolution, fines and penalties, record keeping, notifications, incident management, ESG integration, operating expenditure calculation and distribution, and billing and sabotage valuation.
Another significant hurdle identified by the NUPRC was the impact of petitions and litigations, which hindered the incorporation of some HCDTs and delayed the setup of governance structures. These legal challenges underscore the complexities of community engagement and the need for robust dispute resolution mechanisms. The delayed deployment of the HostComply portal further compounded these challenges, limiting the NUPRC’s ability to effectively monitor and support HCDT operations, and hindering stakeholder access to critical information. Addressing these challenges is essential to ensure the smooth functioning of HCDTs and the realization of their development objectives.
The PIA 2021, the legislative backbone of the HCDT framework, aims to address the historical neglect of host communities and foster a more equitable distribution of the benefits derived from oil and gas operations. The act mandates a 3% contribution from oil companies’ operating expenditure towards community development, marking a significant shift in the industry’s approach to community relations. This contribution is intended to fund projects that address critical needs within host communities, including infrastructure development, education, healthcare, and environmental remediation. By empowering communities to participate in their own development, the PIA seeks to create a more sustainable and inclusive model for resource management.
HCDTs represent a novel approach to community development in the oil and gas sector. By placing the responsibility for development in the hands of the communities themselves, the framework encourages local ownership and fosters greater accountability in the use of funds. This community-driven approach is expected to lead to more impactful and sustainable development outcomes, addressing the specific needs and priorities of each community. The successful implementation of the HCDT framework has the potential to transform the relationship between oil and gas companies and host communities, creating a more harmonious and mutually beneficial partnership. The overall success of this initiative hinges on addressing the identified challenges, ensuring effective fund management, and fostering robust community participation in the decision-making processes. The NUPRC’s ongoing efforts to refine the HostComply portal and strengthen its monitoring and support mechanisms will be crucial in ensuring the long-term sustainability and effectiveness of the HCDT framework. The progress made in 2024, while significant, marks the beginning of a journey towards achieving sustainable development and peaceful coexistence in Nigeria’s oil-producing communities.
