Five years on, PIA struggles to ease host community woes

…Lawmakers seek increase of host communities fund from 3% to 6%

Five years after the Petroleum Industry Act (PIA) was signed into law, many oil-producing communities in Nigeria’s Niger Delta say the landmark legislation has failed to substantially improve living conditions or address decades of environmental degradation, poverty and economic exclusion in the region.

The PIA, passed in 2021 after nearly two decades of debate and legislative delays, was widely celebrated as a major reform of Nigeria’s oil and gas sector. Central to the law was the creation of the Host Communities Development Trust Fund, designed to channel direct benefits to communities impacted by oil exploration and production activities.

Under the Act, oil companies operating in upstream petroleum operations are required to contribute three percent of their actual annual operating expenditure from the preceding financial year to host community development trusts established for affected communities. Profits and interest accruing to the reserve funds of the trusts are also expected to be added to the development pool.

The law further empowers oil companies, described as “settlors,” to establish the trusts, determine the composition of the Board of Trustees in consultation with host communities, and set operational guidelines, including procedures for meetings, financial regulations and remuneration of trustees, subject to regulatory approval.

However, stakeholders and community advocates argue that the structure of the law has concentrated excessive powers in the hands of oil companies while leaving host communities with limited control over their own development process.

Lawrence Dube, national coordinator of the National Civil Society Coalition for Oil, Gas and Mining Host Communities, told BusinessDay that the framework governing the Host Communities Development Trust appears fundamentally flawed and incapable of delivering justice to oil-bearing communities.

According to him, allowing oil companies to establish and manage the trusts creates an inherent conflict of interest because corporations driven primarily by profit cannot effectively oversee community development.

“The power given to oil companies to implement the host community development trust is not serving justice to the communities,” Dube said. “The authority to conceive and register these trusts should not rest with the companies. That responsibility should be in the hands of the communities themselves and the regulatory agencies.”

He argued that many provisions of the PIA have created room for exploitation rather than development, insisting that sections of the law require urgent amendment.

“A bad law does not produce good outcomes. The current structure already creates opportunities for injustice and further exploitation. Asking oil companies to register and control host community trusts is like handing over community development to institutions whose primary objective is profit-making,” he said.

Dube added that even where consultations with communities are required under the law, the balance of power still tilts heavily in favour of operators, leaving many host communities unable to effectively influence decisions that directly affect their welfare.

A petroleum industry analyst, who spoke on condition of anonymity, said the lofty promises that accompanied the passage of the PIA have yet to translate into meaningful relief for many communities in the Niger Delta.

According to the analyst, the three percent allocation to host communities has been widely criticised as grossly inadequate considering the extensive environmental destruction and economic losses suffered by residents over decades of oil exploration.

“At the heart of the PIA is the Host Communities Development Trust, which was supposed to bring development closer to the people. But implementation has raised serious concerns,” the analyst said.

“Three percent of operating expenditure is insignificant when compared with the scale of pollution, destroyed farmlands, damaged fishing livelihoods and rising poverty levels in the region. A law that does not proportionately address the suffering of the people risks becoming another chapter in the history of unfulfilled promises.”

The analyst noted that several communities continue to grapple with declining agricultural productivity, worsening health conditions linked to environmental pollution, youth unemployment and rising social frustration despite being located in the nation’s wealth-producing region.

“These realities reinforce a painful contradiction — the same communities that generate enormous wealth for the country remain trapped in poverty,” the analyst added.

Beyond the structural shortcomings of the law, the analyst also blamed weak local leadership for undermining the implementation of development initiatives in some communities.

“The success of any framework depends largely on those entrusted with its implementation. Unfortunately, some local elites have converted opportunities intended for collective development into instruments for personal enrichment,” he said.

Amid mounting criticisms, lawmakers are now pushing for a review of the PIA’s host community funding formula.

At a recent roundtable meeting held in Imo State, members of the Joint House Committees on Host Communities and Public Petitions proposed an amendment to the PIA to increase the statutory contribution to the host communities fund from three percent to six percent.

The lawmakers argued that the current allocation is no longer sufficient to address growing development needs, strengthen security and sustain peace in oil-producing areas.

During the meeting monitored by BusinessDay, the committee moved a motion to sponsor an amendment bill seeking an upward review of the funding provision.

The lawmakers also called on key institutions in the oil and gas sector, including the Federal Ministry of Petroleum Resources, Nigerian National Petroleum Company Limited (NNPCL), Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), and the Federation Account Allocation Committee (FAAC), to support the proposed amendment.

According to the committee, increasing the host community allocation to six percent would help deepen economic development, reduce tensions in oil-producing communities and strengthen stability in the Niger Delta.