Fair Finance Nigeria (FFNG), the Nigerian chapter of Fair Finance International (FFI), is a network dedicated to assessing, reporting on, and campaigning for more responsible investment policies and practices by financial and public institutions. The organization's mission is to empower citizens to hold financial institutions accountable for adopting socially responsible, fair, and sustainable practices. It achieves this by benchmarking investment policies against international standards in critical areas such as human rights and climate impact. The goal is to foster a "race to the top" among banks and financial institutions, promoting better adherence to Environmental, Social, and Governance (ESG) principles, transparency, and human rights benchmarks. This report was financed by the Swedish international development agency, Sida.

The FFNG coalition is composed of the following organizations;

This new case study sheds light on the challenges faced by host communities in Nigeria's oil-rich regions. The report, "Oil companies, ESG Compliance and the financial sector through the eyes of host communities," details the experiences of communities in Akwa Ibom and Bayelsa states, highlighting the significant socio-economic and environmental impacts of oil company operations.

Despite the substantial profits of entities like the Nigerian National Petroleum Company Limited (NNPCL) and the significant financial backing they receive from both local and international financial institutions, the communities where oil extraction occurs continue to suffer from hardship and environmental degradation. The report reveals a troubling lack of transparency, with details about financial dealings and loans remaining opaque to the public.

A key focus of the report is the Petroleum Industry Act (PIA) of 2021 and its provision for a Host Communities Development Trust (HCDT). The HCDT mandates that a percentage of oil company operational expenditure (OPEX) be directed towards community development. While this initiative aims to channel funds for social infrastructure like health clinics and schools, the report notes that many projects are incomplete or poorly executed, and in some cases, corruption and mismanagement have eroded the intended benefits. The case study also found that IOCs often use alleged community sabotage as a pretext for not providing necessary compensation to communities.

The report's findings reveal a cycle of challenges:

  • Health and Livelihoods: Communities report increased health issues, such as respiratory complications and cancer, which they link to gas flaring. Decades of environmental destruction from oil spills and deforestation have contaminated water sources and destroyed farmland, leading to a loss of vegetation and biodiversity.
  • Crude Oil Theft: The study found that individuals involved in illegal oil theft are often outsiders with technical expertise and financial resources that local residents lack. It also reports widespread collusion between security forces and crude oil thieves, with security personnel viewing their postings near oil companies as financially rewarding.
  • Limited Accountability: Community members express frustration that their concerns are often ignored by both oil companies and government agencies unless they resort to protests. They also feel that IOCs have too much influence in the selection of HCDT members, which fuels corruption in project design and implementation.

To address these issues, the report provides actionable recommendations for stakeholders. It calls for enhanced disclosure from oil companies, stricter investment policies from banks and investors, and an optimization of the Petroleum Industry Act (PIA) by governments and regulators to minimize undue influence from oil companies. It also urges communities to establish clear practices for fund utilization and to partner with oil companies and regulators on joint initiatives to address oil theft and spillage.

This case study spotlights the urgent need for greater transparency, accountability, and community engagement to mitigate the negative impacts of oil operations and ensure sustainable practices in Nigeria's extractive sector.

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