Fair Finance Nigeria Case Study Report Reveals How Financial Institutions Hinder Development in Oil-Rich Communities

A new report from the Fair Finance Nigeria (FFNG) Coalition reveals that despite the significant profitability of the NNPCL and oil companies in Nigeria supported by billions of naira provided by financial institutions, host communities in Nigeria's oil-rich regions still continue to face severe environmental, social and governance (ESG) challenges. The report is FFNG first case study to spur a “race to the top” among financial institutions behavior by focusing financed-backed oil companies' operation in four communities in Akwa Ibom and Bayelsa states. It highlights a troubling lack of transparency, systemic corruption, and a breakdown of ESG accountability among oil companies, and financial institutions.

The case study found that the Host Communities Development Trust (HCDT), a key provision of the Petroleum Industry Act (PIA) 2021 designed to channel a portion of oil companies profit back into communities, is being undermined by bureaucratic bottlenecks and a lack of transparency. The report details community frustrations over ESG implementation and their belief that financed-backed oil companies, as "Settlors," exert undue influence over fund allocation and project implementation thereby affecting sustainability.

"For decades, our communities have borne the brunt of oil extraction, suffering from oil spills, gas flaring, and the destruction of our land and water," said a community youth representative from Ibeno LGA, Akwa Ibom, whose experience is documented in the report. "Despite the promises, we still see our environment being destroyed and no one is held accountable. When a recent oil spillage occurred, we protested, but nothing has been done to clean it up."

The report also sheds light on how these gaps are connected to illicit activities (crude oil theft), with communities alleging that pipeline installation companies and security agencies are complicit in these crimes. It further notes that while IOCs are divesting from onshore assets, communities feel they are being shortchanged and will not receive proper compensation for environmental damage.

We are calling on all stakeholders, from government to financial institutions, to commit to genuine transparency and accountability that puts communities first.

The report calls for actionable recommendations, including stricter adherence to global ESG reporting standards, revisiting investment policies for financial institutions, enhanced disclosure of financial dealings with oil companies, and greater community involvement in the design and implementation of development projects in line with sustainable project principles.

About Fair Finance Nigeria (FFNG)
Fair Finance Nigeria, the Nigerian chapter of Fair Finance International (FFI), is part of a global network that assesses, reports on, and campaigns for more responsible investment policies and practices by financial and public institutions. The coalition is supported by the Swedish international development agency, Sida, and consists of: BudgIT, Civil Society Legislative Advocacy Center (CISLAC), Connected Development (CODE), Oxfam in Nigeria, Policy Alert, and Steps to Sustainable Transformation and Empowerment Foundation (STEPS).