AFRICA PROGRAMME AFP BP 05/02 Armed
Non-state Actors Project J U LY 2 0 0 5
How Failures of Transparency and Accountability are Destroying
the Niger Delta
Michael Peel, Chatham House
The socially devastating and economically
disruptive crisis in Nigeria’s Niger Delta raises fundamental concerns about how
Western multinationals behave towards their host country’s people, environment
and government. This paper is not intended as a comprehensive survey of the
Niger Delta’s history and contemporary politics, subjects about which others are
far better qualified to address. Rather, it is an attempt to use my own series
of visits to the Delta and related research to give an overview of what people
think has gone wrong and what they suggest could be done to improve the
situation. I have concentrated on issues of transparency and accountability
rather than on other questions that are equally important but beyond the scope
of this work.
As a series of
annexes, I include examples of particular issues that illustrate wider concerns
about what is happening in the region.
Preamble
The
western Niger Delta town of Odioma is in a setting of almost unreal
picturesqueness. When I visited with colleagues in March 2005, we moored on a
sandy beach that flanked a wide waterway leading into the open ocean. From
there, it was a short walk to the village, where the majority of houses had been
burned to the ground by a fire so intense that it had melted bottles of
Coca-Cola and Star Beer.
Villagers said their home had been razed by the army, which blamed them
for an attack in February on a boat from the nearby community of Obioku in which
twelve people died. The killings followed a visit by a survey vessel chartered
by Royal Dutch/Shell, which was operating in an area whose ownership is disputed
by the two communities. Both communities are grindingly poor and both want
access to some of the material goods that big oil can bring. One of the few
intact structures in Odioma was a large generator donated by Shell that stood on
a barge moored on a jetty at the far end of the village.
In
Odioma, we talked to Chief Daniel Orumieghabari. He was a little constrained by
the presence of soldiers occupying his village and an unidentified plain clothes
official – probably an intelligence officer – who insisted in sitting in on our
interview. The chief started to sing what he said was a Bing Crosby song,
although I couldn’t find it when I looked on the internet. The important things
were the two lines of words he chose:
There was something that was bound to happen and it happened somehow,
And now that something happened, it doesn’t matter now.
I was
struck by the terrible fatalism that those words suggested. They seemed to me to
reveal much about how life is for many people in the Delta. Awful things happen,
they might make the news briefly and then life goes on. Justice is rarely
achieved, disputes fester and the destructive web of relationships between
government, the oil multinationals, the security forces, militias and
communities continues to tighten and suffocate. Most of this goes unreported,
events happening to unnoticed people in remote places.
Yet, of
course, the great paradox of the Delta is that it is rich. In few, if any, other
places in the world are oil companies producing so much oil next to so many poor
people, and in few other places are the perceived failures of the industry and
government to pass on benefits to their host communities so great. This paper
aims to examine some of the reasons why this is so and to look at how they are
being addressed – or not. The government and the oil companies say they are
taking important steps to improve the transparency of what they do, but in
fundamental ways both groups remain much less accountable than many people say
they should be.
Poverty amid plenty
The
Niger Delta comprises a network of swamps and creeks covering some 112,000
square kilometres, depending on how you count it, or almost the size of England.
According to Royal Dutch/Shell estimates, it is home to about 12m people. Oil
multinationals, in their onshore and offshore operations, pump between 2m and
2.5m barrels of oil a day, making Nigeria one of the world’s top ten oil
exporters. About half of the oil goes to the US, where it accounts for about 10
per cent of total crude imports. The multinationals – Shell, ExxonMobil,
ChevronTexaco, Total and Eni – operate in joint ventures that are majority-owned
by the Nigerian government.
The
region is poor, although reliable statistics are hard to come by. The World Bank
estimates that Nigerians’ average income is about $1 a day and it says a fifth
of children die before their fifth birthdays. One of the main problems in the
Delta is the lack of infrastructure and the remoteness of villages from clinics,
schools, shops and other essential services: residents of the community of Soku
told me that they had to pay 500 naira (about £2) to go by speed boat to
Abonnema, the nearest large town with good road links, or else face hours in a
canoe.
The
Delta’s people are, in general, extremely hostile to both oil companies and the
government. They feel they have received little or nothing in return for the
more than $300bn the government has earned from oil production over the last 30
years or so. Many complain of pollution by oil spills and the huge orange flares
that burn off waste gas. Companies and politicians are commonly criticized for
failing to develop infrastructure or provide local people with jobs.
The
problems have turned the Delta into an increasingly uncomfortable place for oil
companies to do business. Community protests frequently stop multinational
production, while ethnic militias – often with bases in communities – have
become increasingly active. In March 2003, a conflict involving the security
forces and members of the Ijaw and Itsekiri ethnic groups led to a ten-day
shut-down of more than a third of the country’s oil production.
The
violence has worsened as weapons have flowed into the Delta and militias and
community members have become more deeply involved in taking oil from pipelines
to sell on the black market – a practice commonly known as ‘illegal bunkering’
(see Annex 1). A confidential Shell-commissioned report, written by a group of
consultants known as WAC Global Services, said in December 2003 that it would be
‘surprising’ if the company was able to continue onshore production in the Delta
after 2008 without breaking its business principles.
A 2004
report for the UK’s Department for International Development found that the
western Delta oil city of Warri was the major focal point of weapons imports in
Nigeria. ‘It is evident that new and second-hand foreign weapons enter the
country through the Niger Delta ports and their availability is a function of
competition between ethnic militias for access to illegal oil-bunkering,’ the
report said. ‘This would not be possible without the complicity of some senior
government personnel for whom this is evidently profitable.’ In January, two
navy rear-admirals were expelled from the force after being found guilty at a
court martial of involvement in the 2003 disappearance of an impounded tanker
carrying stolen crude oil.
As a
friend put it, the problem in the Delta is partly poverty but partly the
marginal richness that comes with the arrival of oil and attracts people to the
places where crude is found. The complexity of the problem, the
interrelationships between the various parties involved and the cynicism this
has inspired were summed up by one Western diplomat in a statement that tells
something of the Delta, and also of foreign attitudes to a conflict that it
sometimes suits outsiders to present as intractable. ‘Nobody is clean,’ this
person said. ‘Everybody is on the make and on the take.’
No
condition is permanent
One
only has to see a tokunboh – or second-hand – car being fixed on a Nigerian
roadside to realize that even tricky, apparently irredeemable, problems can be
solved. Or, to put it another way and adapt a well-loved Nigerian aphorism, no
condition need be permanent. I want to try to suggest some straightforward and
remediable ways in which the Delta conflict is the product of human
self-interest rather than of some atavistic, visceral rivalry of the type that
some outsiders lazily and insultingly describe as the sources of conflict in
African countries. In doing so, I want to focus on three groups who, I believe,
have the most wide-ranging influence and therefore the greatest moral obligation
to do better: the Nigerian government, the oil companies and the international
community. These parties are not the only ones who are criticized, but they have
much more ability to effect change than most in a region in which the vast
majority of people are politically powerless.
Oil-barrel politics
Visiting the Delta before and after the April 2003 national elections, I
have been struck by how many people say one of the main causes of conflict is
the lack of credibility of supposedly elected leaders who came to power by
ballot-rigging and intimidation (see Annex 2). On the eve of polling in Bayelsa
state, Governor D.S.P. Alamieyeseigha was openly using government property to
campaign. On the gates of Government House in Yenagoa, the state capital, a
banner proclaimed ‘DSP: your knowledge is our strength’.
Up the
road in Sagbama, burnt-out cars surrounded one of the governor’s lodges, which
was still festooned in Christmas decorations but had been gutted by fire.
Officials told me this was the product of a little local difficulty between
ruling party supporters and their opponents. In elections the previous week for
the House of Representatives seat of Brass/Nembe, the 131,335 valid ballots cast
in a crushing victory for the governor’s People’s Democratic Party exceeded the
129,535 registered electors.
Opposition supporters had claimed the Sagbama lodge was being used as a
headquarters to rig the polls. On the ground outside the lodge, another
journalist and I saw an official document used for tallying spoiled and rejected
ballot papers. A saturated ballot paper lay in the back of a white Toyota
pick-up, its windscreen caved in as if hit by a heavy weapon. There seemed no
plausible reason why these election materials should have been found there.
Governor Alamieyeseigha is a controversial figure who has been heavily
criticized by opponents over the way he has run the state. He spent time during
his first term completing a doctorate in strategic management from the
University of Northern Washington, according to Freston Akpor, then chief press
secretary to the state government. The only University of Northern Washington
revealed by an internet search is a Hawaii-based institution that offers
distance learning courses and ‘focuses on preparing graduates for a career in
business administration’.
Mr
Akpor said the governor often travelled the state’s network of creeks in a
publicly-funded 16capacity Sunseeker yacht. The spokesman added that the vessel
was too big to sail on some of the smaller waterways.
Mr
Akpor denied Mr Alamieyeseigha had done anything wrong in the way he ruled the
state or behaved during the elections. The spokesman did, however, give a frank
account of the governor’s huge resource advantage in political campaigning. ‘If
you count [50] billboards, the governor has maybe 45 and the other parties have
maybe five,’ he said. ‘In almost every community you go to, you have a piece of
the governor’s campaign machinery – either posters, billboards or a campaign
office.’
Official data published at the time of the elections in the Niger Delta
suggested that President Olusegun Obasanjo took 96 per cent of the vote in
Bayelsa state. Elsewhere in the Niger Delta, he won 93 per cent in Rivers state,
94 per cent in Delta, and 98 per cent in Cross River. Those states alone – just
four out of Nigeria’s 36 – provided well over 4m of the president’s votes, or a
third of his victory margin over General Muhammadu Buhari, his nearest
challenger. To get this information, I had to refer to my hand-written notes of
the time: the poll results had been removed from the Independent National
Electoral Commission website, for reasons officials could not explain to me when
I called them.
European Union observers found that elections in Rivers, Delta and Cross
River lacked credibility. They did not go to Bayelsa or Akwa Ibom, another
oil-producing state. In the three states they visited, the EU observers said
‘appropriate measures must be taken to provide voters with a truly democratic
electoral process’. Apart from the annulling of the results in a handful of
districts, no such action has been taken.
This
fake democracy has insidious as well as obvious negative effects. One activist
made the point that opposition was in some ways more effective under the
military regime of General Sani Abacha than now, because it was simpler to
generate international condemnation for a dictatorship than for a civilian
regime that is widely seen as failing in serious ways on issues such as human
rights, corruption and improving living standards. While there have been
important gains under civilian rule in areas such as freedom of speech and much
more marginal improvements on a limited number of corruption issues, some
Nigerians argue that the country’s governing structures are more conducive than
ever to graft and abuses of power. As centralized military control has relaxed,
so politicians at the state and local levels have more power to run their
territories autonomously and unaccountably.
One
point that is perhaps not as widely appreciated as it should be is the economic
power of the governors of oil-producing states, which receive an enhanced share
of national oil revenues under a supreme court ruling. The federal authorities
keep roughly half the revenues for themselves and distribute the rest to state
and local governments.
The
official figures for the March 2005 distribution, the most recent available,
give a sense of how well the oil-producing states do relative to others. The
distribution includes VAT, but the revenues are dominated by oil. Rivers
received N8.6bn (almost £35m), Bayelsa received N9.3bn and Delta N6.3bn. By
contrast, Lagos state, the most populous in the country, received just N2.5bn.
Under a draft deal agreed by a national constitutional conference in July 2005,
the share of revenue the oil-producing states are allowed to keep from the oil
they produce would rise from 13 per cent to 17 per cent. Representatives of oil
states, who had demanded a 50 per cent share, walked out of the conference in
protest at the result.
This
enrichment of Niger Delta governments has been exacerbated by the way in which
benefits from the oil price rises over the past year accrue in large part to the
authorities. Shell figures illustrate how the multinationals have focused on
protecting their income at low oil prices rather than taking advantage of
windfalls when the price is high. The calculations from the Shell-operated joint
venture, which is 55 per cent owned by the state Nigerian National Petroleum
Corporation (NNPC), 30 per cent by Shell, 10 per cent by Total and 5 per cent by
Eni, take into account the sharing of production in proportion to equity stakes,
royalty payments and taxes on company profits. Shell says the authorities take
51 per cent of the revenue from the joint venture at $10 a barrel, 74 per cent
at $20 a barrel, 80 per cent at $30 a barrel and 88 per cent at $50 a barrel.
The industry’s share falls from 9 per cent at $10 a barrel to 4 per cent at $50
a barrel. The remainder of the revenue per barrel – that is, the money remaining
once the government and industry shares have been taken out – is counted as
production costs. Deep offshore fields, on which Nigeria is likely to rely
increasingly in the future, are more expensive to exploit and use a different
set of financial structures.
Of the
other multinationals, ExxonMobil said more than 93 per cent of revenues from its
joint ventures accrue to the government, once all payments and taxes are taken
into account, although it gave no further details. Other companies declined to
provide details of their revenue-sharing agreements with the government. The
finance ministry declined to comment.
A
question of responsibility
This is
the political and financial atmosphere in which the oil multinationals have
decided they are prepared to operate. The companies argue they work separately
from the process of governing the country. It is quite common to hear
multinationals criticizing the government for failing to execute the kind of
water, power, health, education and road projects that Delta people demand from
the oil companies.
Yet, in
fundamental ways, many people in the Delta see this as a false dichotomy. All
the onshore joint ventures run by the oil multinationals are majority-owned by
the government. The two parties – official and private – are bound together,
often in ways that lack accountability and transparency.
One
example is the relationship between oil companies and the government security
forces. The role of the Supernumerary Police, who guard multinational
installations, is instructive in understanding why oil companies and governments
have become one and the same in many people’s minds. According to the oil
companies, these police are employed by the Nigerian state but are allocated to
work for the company in jobs such as driving, under an existing law that
provides for such an arrangement. Shell says such officers do not carry guns.
The
officers are generally described by the evocative – and unintentionally
suggestive – acronym of ‘Spy’ police (a truncation of ‘Supernumerary Police’).
When I visited Shell’s Port Harcourt office complex last year, there was visual
evidence of the special relationship and loyalty that the company has tried to
build in its designated officers. On the door of one building, a sticker said
‘Proud to be a SPY-policeman’. ‘Be practical, be obedient, be loyal … be
courteous, be efficient,’ ran the message, which was printed alongside the
company’s distinctive logo.
There
is evidence that officers, too, feel an attachment to the companies they work
for. Fifteen employees of ExxonMobil’s Spy police force have sued the company in
the southeastern city of Uyo to win benefits such as pensions, arguing that they
should be considered employees. ExxonMobil has insisted that the police are
employed by the Nigerian state.
It is
clear that, in some respects, the officers do much better out of working for oil
companies than they would from being normal police officers. According to Shell
officials in Port Harcourt, the company provides transport, housing and medical
care and pays the officers’ monthly salaries directly to them. Shell says it
used to pay the salaries via the national police structure, but stopped doing
this because of delays that were occurring in making payments. ‘We didn’t want
to have a demotivated police force,’ said a company official.
Oil
companies and their agents make other payments to security force members, such
as modest food and overnight allowances, according to a security consultant to
the oil industry. He also claimed that if an oil company representative
approached an armed forces garrison commander to ask for extra security, the
officer would expect payment for his services. ‘If I want 100 navy personnel to
guard a dockyard, then I have to pay for it,’ the consultant said. ‘Then there
might be a payment that needs to be made as a kind of deal-maker. That’s how it
works. Any company that thinks it’s going to come to Nigeria and operate
effectively without paying for those services is surely mistaken.’
Leaving aside the huge questions about corruption this statement
implies, the relationship raises all sorts of issues about the way the oil
companies work with security forces that have a popular reputation for brutality
and impunity. The army has carried out massacres that have killed many hundreds
of people since the return of civilian rule, including in 1999 in the Odi
community in Bayelsa state. According to official figures, the national police
killed more than 3,000 armed robbery ‘suspects’ in 2003 as part of a crackdown
known as ‘Operation Fire for Fire’.
One
activist characterizes the opaque and ambiguous relations between the oil
industry and the security forces as an attempt by the multinationals to ensure
strong protection of their facilities while retaining the ability to remain
separate from any human rights abuses. ‘When there is a problem they will
distance themselves,’ he says. ‘They will say: ‘that’s a police matter’. So on
the question of trying to punish somebody, they will stand aloof.’
Shell
says any police officer guarding its facilities receives a briefing on behaviour
and conduct. The company ‘reports errant police officers to the top hierarchy
and, indeed, asks for their removal’. Asked if any officers had been disciplined
this way, Shell said that two policewomen had recently been removed from the
Port Harcourt Industrial Area. This seems a small number compared with the
number of Spy police working in the Delta, but the judgment is impossible to
make because Shell officials in Port Harcourt say information on the total
number of Spy police the company employs is confidential.
Responding to the observations detailed above, a Shell official said Spy
officers often risked their lives. Some had been killed by robbers who were
trying to steal pipes and other equipment from company installations. The
official said these kinds of security arrangements were inevitable in a country
that did not have the resources to fund enough police to protect sites of
economic importance. He added that the police were ‘not as brutal as people
think’.
Shell
also said it did not make payments to police or army officers in exchange for
allocations of personnel, but that it did cover the cost of accommodation,
transport and daily allowances for security force members assigned to company
sites.
I
cannot report much of what the other companies think, because hardly any of them
answered questions I first sent them in February on this and other issues. Some
promised replies but never gave them. A Total official gave me the initial
response that many people in France were on holiday when I posed the questions.
A British public relations company working on behalf of Eni called in April to
apologize for the delay and promise a response, but I heard nothing further.
ExxonMobil finally replied in April: on the issue of Spy police and their
status, the company said somewhat enigmatically that it respected the rule of
law and was sensitive to the needs of its employees, contractors and their
families. It declined to respond to a question about the lawsuit brought against
it by the Spy police in Uyo.
In my
experience and that of other journalists, the companies’ attitude reflects a
wider pattern of nondisclosure and piecemeal and partial disclosure in the
industry in Nigeria. Only Shell publishes an annual report, known as People and
Environment, which provides some information on issues such as payments made by
the company to government, pollution incidents involving the company’s
operations, and the number and nature of security problems such as
hostage-taking.
The
data are limited and sometimes disputed by communities, but at least there is
something out there around which to crystallize a debate. I am not aware of any
similar, standard disclosures made by any other multinational oil company in
Nigeria. The reason I cannot state this definitively is that none of them
answered my questions on this issue either, except Exxon, which pointed me
towards its in-house quarterly employee magazines.
This
opacity extends beyond the oil companies themselves into the vast hinterland of
deals that surround the industry in areas from building contracts to oil
trading. At a community level, companies are paying large sums: Shell’s
community spending alone amounted to a total of almost $100m in 2002 and 2003.
Chris
Finlayson, Shell's chief executive officer for exploration and production in
Africa, admitted it was very difficult to know who were the ultimate beneficial
owners of some companies that received Shell contracts, because shareholder
registers did not always reveal these people's identities. Another Shell
official said there were huge numbers of contracts, in areas ranging from
building to grass cutting, making vetting very difficult. 'We know the
information that is published,' Mr Finalyson said. 'Do we go in doing detective
work? No, we don't.’
The
financial dealings between multinationals, government officials and community
members are a controversial subject in the oil industry. A probe in 2004 by the
US Senate permanent sub-committee on investigations discovered a network of
highly embarrassing relationships between US oil companies operating in
Equatorial Guinea and members of President Obiang Nguema Mbasogo’s ruling clan.
Companies entered into business joint ventures with companies partly or wholly
controlled by the president, his officials or their relatives. Multinationals
also made payments that benefited officials and their family members in areas
such as land lease agreements and school fees.
In
Nigeria, many oil companies offer annual scholarships. Each year, Shell gives
2,600 secondary school scholarships of N50,000 (about £200) each and 800
university scholarships of N75,000 each, according to the company. This means
that each year more than 13,000 young people are studying under Shell’s
secondary school scholarships scheme and more than 2,500 under the company’s
university scheme.
These
kinds of schemes raise important questions about whether companies use
scholarships as a means of pacifying opposition or winning favours from
community leaders. For example, according to company records, in 2000–01 Texaco
funded Bello Oboko, a highly controversial Ijaw ethnic militant and critic of
the oil industry, to do a one-year MSc course in environmental science at the
American University in Washington. The confidential internal report prepared for
Shell in 2003 said that ‘scholarships and employment opportunities are often
presumed divided among people that have connections with [Shell] staff’.
One
consultant working for an oil company on development issues said local chiefs in
crude-producing areas were given money for scholarships for their children. He
said the company had paperwork to suggest the leaders were actually spending the
money on scholarships, although he admitted: ‘We don’t know about it for sure.’
Shell
was the only company to give a detailed response to questions about how it gives
out scholarships. It said it did not distribute scholarships as perks to staff,
adding that it regularly held events to explain to oil-producing communities and
the public how the awards system worked. The scholarships were advertised in
newspapers and were awarded on the basis of written tests administered by
recognized Nigerian examination authorities. Shortlisted candidates’ names were
published in newspapers and the awards were made ‘purely on academic merit’.
At a
government level, campaigners say there is little or no disclosure of who
benefits ultimately from many official contracts to buy crude and sell it for
export. Given that Nigeria reckons it earned about $25bn from oil sales last
year, the potential for graft can be imagined.
Other
statistics offer similar shafts of light into the scale of problems stemming
from a culture of corruption and non-disclosure. A building consortium led by a
subsidiary of Halliburton of the US is being investigated in Nigeria, the US and
France over allegations that it agreed to pay more than $170m in bribes to
secure contracts to build the huge Nigeria liquefied natural gas (LNG) plant
(see Annex 3). One person I spoke to about this expressed wry surprise that the
sum was so low: given that the contracts could be worth $5bn or more, the
alleged amount would represent a cut of well under five per cent of the contract
price.
A
Western problem
Cases
like these remind us both why the Delta preoccupies Western countries
economically and why they have little commercial interest in acting strongly
against alleged and proved corruption in which their companies are implicated.
That rich nations are taking more notice of what is going on in the Delta is not
in doubt: ambassadors from Britain, France, Italy and the Netherlands – in other
words, the countries of origin of the European oil multinationals operating in
Nigeria – visited the region in 2004 to meet companies, politicians,
non-governmental organizations and others. In December, Britain announced a
programme to shut or downgrade 30 embassies and consulates around the world to
save money and release funds for other priorities, including an extra diplomat
based in Nigeria to cover energy issues. The UK Foreign Office said in February
that the plan had been amended slightly: the post would now be London-based,
providing an ‘energy expert for west Africa’ to complement similar new positions
for Asia and the Middle East. Unpromisingly for those hoping for an imaginative
response to the Delta’s problems, the Foreign Office description of the post is
soaked in the wonderfully obfuscatory language of consultant-speak: London says
the job will provide a ‘joined up approach to energy better reflecting our
strategic priorities launched 14 months ago’.
The US
has been offering increasing assistance to the Nigerian military, despite
atrocities by the armed forces. Washington has donated Second World War coastal
patrol boats to the Nigerian navy, ostensibly for use in stopping oil theft. I
asked a US official at the time of the delivery of the first two ships more than
two years ago whether Washington was concerned these boats could be used to
carry out human rights abuses; she told me she had wondered that herself. When I
posed the same query to the US embassy in Nigeria in February, I received no
reply.
If
these concerns do exist, they are being well hidden in public. In 2004, the US
gave Nigerian troops military training in and around the eastern Delta port of
Calabar. At the January 2005 African Union summit in Abuja, Chris Mullin,
Britain’s then Africa minister, said London would ‘look favourably’ on any
request by Nigeria for help with military training or technical support in the
Delta.
Rich
nations have shown little enthusiasm for pressing the Nigerian government to
introduce political reforms and combat the human rights and electoral abuses
that so many of the country’s people complain about. Asked about the criticisms
by many Nigerians of the system of civilian rule as currently constituted,
Hilary Benn, Britain’s international development minister, said in 2004 that the
‘merit of a democracy’ was that people had the power to change their governments
if they didn’t like them. Challenged that this simply was not true in many parts
of the country such as Rivers state, he suggested what happened there was not
necessarily typical. He claimed ‘other states were different’.
Another
British official who covers west Africa was much more critical of London’s
reluctance to challenge Mr Obasanjo’s government over election fraud and other
abuses of power. ‘We have said nothing to him’, this person said, ‘about the way
he throws democratic principles away on a daily basis.’
The
report published in March 2005 by the 17member international Commission for
Africa set up by UK Prime Minister Tony Blair alludes to the role that rich
countries must play in improving the behaviour of companies in industries such
as oil and mining. The document recommends support for existing EU and United
Nations initiatives on transparency and corruption, and adds: ‘Developed country
governments, company shareholders and consumers should put pressure on companies
to be more transparent in their activities in developing countries, and to
adhere to international codes and standards of behaviour.’
As one
international human rights activist has observed, the language seems
disappointingly moderate compared with, say, ChevronTexaco’s self-criticism
about the way it has run its development projects in Nigeria (see Annex 5). In a
political environment where corrupt vested interests still control much of what
goes on, outside countries have a privileged position in being able to insulate
themselves from the bribery and intimidation. Their responsibility is all the
greater when it is their companies that are involved in problems on the ground.
As one
activist puts it, in remarks aimed at Shell but applicable to the other oil
multinationals in Nigeria: ‘What Shell need is what the government needs, which
is major external pressure to crack down on these things. Then they can react to
that. Shell will respond. But if they start it themselves, they probably won’t
survive it.’
Where
does the money go?
The
Nigerian government has acknowledged some failings in its approach to the Niger
Delta although, as with the oil companies, many people argue the mea culpa
goes nowhere near far enough. At the time of the October peace deal between
the government and Alhaji Mujahid Dokubo-Asari, an Ijaw militia leader,
President Obasanjo condemned ‘undue militancy’ in the Delta, although he
admitted the region’s people had legitimate grievances and he criticized unnamed
local officials for failing to bring development. He said: ‘The obvious
assessment so far is that not much impact has been made on the lives and living
standards of most ordinary people of the Niger Delta.’
At a
federal level, the Nigerian government has just begun a series of reforms that
it claims will improve the financial transparency of transactions involving the
country’s oil money. It has also just relaunched its Niger Delta Development
Commission, a body that is jointly funded by the authorities and the oil
companies but has been heavily criticized as ineffective and corrupt. The NDDC
was created by Mr Obasanjo after the failure of a series of predecessors. It has
the potential to spend a lot of money: ExxonMobil, which produces between a
quarter and a third of the country’s oil, says the joint venture it operates
contributes an average of $30m a year to the commission.
Critics
of the NDDC’s 15-year strategy claim that, for all the desirability of its
goals, some of it is unrealistic in a region where corruption is endemic and
many areas have little or no contact with government. One target is to reduce
mortality among children under five by two-thirds and to cut maternal mortality
by three-quarters, although the document gives no baseline figures in either
case. Another policy is to set up science parks, such as those in Western
countries, Singapore and South Africa, as part of a plan to create an
‘attractive investment environment for hi-tech multinationals’.
It is
too early to say whether the NDDC will be successful in any of its more modest –
but fundamentally important – aims, such as developing internet access to allow
market information to be sent to farmers, fishermen and traders. Yet there are
already worrying signs, most notably the lack of obligation for oil state
governments to part-fund the commission. There had been some political pressure
to change this, but as at 14 July the NDDC’s website gave no indication that the
policy had changed. This exemption is widely seen as severely damaging the
commission’s credibility.
At a
federal level, the finance ministry received applause for its progressive
decision in 2003 to publish details of how oil revenues are allocated to
federal, state and local governments. Yet the figures on the ministry’s website
were not updated for nine months after June 2004. When I asked Ngozi
Okonjo-Iweala, the finance minister, about this in April, she expressed anger at
the lack of disclosure, describing it as ‘nonsense’. She called in an official,
who told her that an information technology consultant employed by the ministry
had refused to hand over the passwords needed to alter information on the
website.
As of
14 July, the site had been partially updated, but figures for nine of the last
12 months were still not available. No data at all were available for the second
half of 2004, when the international oil price began touching record highs.
One
activist thought that publication of revenue-sharing details was in any case
insufficient if there was no means to force state governments to explain and
justify what they are doing. Given this lack of accountability, the disclosure
process could be seen as a cynical attempt by the federal government to divert
attention from itself to the state government. The ultimate effect could be that
any public anger at corruption would be directed not against the authorities but
against more accessible targets, such as oil company operations in the swamps.
‘I am
not saying [publication] is a bad thing on its own,’ the activist said. ‘But it
has to be complemented by some other things. If you are saying to people, “you
are paying this much to the state government”, there has to be some
accountability.’
The
government’s decision in March to appoint Hart Group, a British consultancy, to
do a long-awaited audit of the state Nigerian National Petroleum Corporation and
the oil multinationals also needs to be welcomed with some caution. This is part
of a programme based on the British-backed Extractive Industries Transparency
Initiative, which aims to increase disclosures of the financial relationships
between oil and mining companies and the governments of the countries in which
they operate. The Nigerian initiative has taken some time to organize; some
participants attribute this to resource shortages and the fact that the
programme is rightly aimed at including a wide range of people from areas such
as civil society and the trade unions, some of whom have needed time to
familiarize themselves with the oil industry. Oil companies, including Shell,
are members of the working group.
But
the longer the delay to the project, which was announced in 2003, the greater
will be the suspicion that the government is stalling to protect itself. One oil
executive puts it bluntly: ‘We have heard all kinds of stories about things
disappearing – but if you can’t see the books it’s irresponsible to make those
statements.’
It is
these structural issues that will ultimately decide whether Nigerians and
outsiders take the government’s anti-corruption campaign seriously. The
prosecutions begun recently against high-profile individuals such as Tafa
Balogun, the former police chief, and Adolphus Wabara, the former Senate
president, are welcome but hardly sufficient, particularly as they appear to
many Nigerians to be highly selective. London and Abuja both acknowledge that
other senior Nigerian officials are under investigation for money-laundering
overseas, but no names are mentioned apart from Joshua Dariye, the pariah
governor of Plateau state. Domestically, many cases have withered away into
obscurity; these include the prosecution of the Bayelsa governor, which was
recommended in 2003 by the national anti-corruption commission set up by the
president. Two multinational executives told me that oil companies had been
asked for bribes by parliamentarians in exchange for favourable treatment.
For
now, the oil industry in the Niger Delta still lacks the fundamental
accountability that would allow the behaviour of the multinationals, government
officials and other parties to the conflict to be properly scrutinized. Until
these relationships are brought much more into the open, it is hard to see how
the old, acknowledged patterns of corruption will be changed – or, even if they
do change, whether people will believe they have done. Any company or official
complaints about commercial confidentiality should be set against the
considerable public interest of knowing which officials at state and local level
and which people in communities are receiving money, and from whom.
If
things still fail to improve, the pressure for violent solutions is likely to
increase in the absence of obvious peaceful ways of achieving change. Rich
countries have in the past supported sanctions on west African blood diamonds
and blood timber, but forgoing a sparkling ring or finely-polished teak table
hardly demands the same kind of sacrifice as boycotting the oil that helps
satisfy the West’s energy lust. If levels of conflict were the sole determinant
of international policy, then much stronger action would already have been
taken: the confidential report completed for Shell in 2003 estimated that about
1,000 people a year die in violence in the Delta, putting the region on a par
with Chechnya and Colombia in terms of numbers of deaths.
In a
letter to Shell in March 2005, Odioma community leaders said the army assault on
them was the ‘direct result’ of Shell’s exploration and production in the area.
Giving some background as to why Shell had continued to operate in the area,
Chris Finlayson, Shell’s chief executive officer for exploration and production
in Africa, told me the company often worked in places where there were land
disputes but had found that they tended not to have the deadly outcome seen in
Odioma.
As long
as that gap in perspective between the oil industry and its hosts remains, the
Delta is not going to become a better and fairer place to live and is more
likely to become even worse. As I think about the burned houses of Odioma, I am
reminded of what one activist told me as the armed resistance of Alhaji Asari,
the Ijaw militia leader, with his promises of an uprising called ‘Operation
Locust Feast’, came to a climax in 2004: ‘One day we are all going to roast in
this gas and oil. Because there are people poised to set fire to this thing:
there is an insurgency here, there is a revolution.’
Recommendations
Many
fundamental issues in the Delta urgently need addressing but are beyond the
scope of this work. These include land reform, pollution from oil spills and gas
flaring, and the influx of arms to the region. Without progress in these areas
and others, many people see little hope for improvement in this Delta.
This
report – necessarily a brief overview of the situation – will concentrate
instead on reccommending quickly achievable changes that could bring short-term
benefits as well as contributing to meeting some of the long-term aims. All my
suggestions relate to the improvement of transparency and accountability among
the three most influential institutions in the Delta – government, the
multinational oil companies and the international community.
The
oil companies
• One
way of making oil companies more accountable would be to establish that
memoranda of understanding to provide benefits for communities are formalized as
contracts, enforceable by law. Penalties for failing to honour the promises
should be agreed beforehand and should form part of the contract. Such contracts
would define clearly the oil industry’s ongoing responsibilities for maintenance
and running costs. As well as protecting the interests of people in
oil-producing communities, this would show that the oil industry wants to act
responsibly. It would also make companies think twice about offering projects
such as clinics or schools that sound superficially impressive but are never
maintained because no one pays the running and repair costs.
Bill
Knight, a long-time Delta activist, says a model for this kind of relationship
could be the Bayelsa state community of Akassa, which is widely acknowledged as
pioneering. There the community has formed the Akassa Development Foundation,
which is registered with the Corporate Affairs Commission in Abuja, the national
capital. The foundation has a constitution, trustees, members, committees, a
bank account, an accounting system and external auditors. It can sue and be
sued. In short, it is subject to the kind of scrutiny and accountability that
almost all deals between oil companies and communities currently lack.
•
All oil companies should, at minimum, publish a document similar to Shell’s
People and Environment report. In addition, all oil companies, including
NNPC, should disclose clearly the following basic information that it is in the
public’s interest to know. If companies’ contracts with government present legal
obstacles to disclosing some of this information, then the two parties should
agree to remove these.
-
How much the
companies pay each year to the government through various means, including
production-sharing and petroleum profits tax. All mechanisms by which money is
transferred from oil companies to the authorities should be clearly explained.
-
Benefits
provided to communities, the cost of these and the contractors appointed to do
the work.
-
Details of
individuals who have received academic scholarships from the companies, how much
money they have been given and what they are supposed to use it for.
-
Any cash
payments made by companies or their contractors to community members and the
justifications for these payments.
-
Any ransom
payments made by companies or their contractors to secure the release of
hostages.
-
Any joint
ventures entered into with local companies, including details of the beneficial
owners on the Nigerian side.
The
international community
• The
UK and Nigerian authorities should use their increasingly close collaboration to
prioritize the pursuit of suspected cases of corruption and money-laundering
involving government officials from oil-producing states. The way investigators
from the two countries have worked together in the case of alleged
money-laundering against Joshua Dariye, Plateau state governor, has shown what
can be achieved with a will on both sides. Unless action is taken against
officials in the country’s richest states, many Nigerians simply will not
believe that the federal government and Western countries are serious about
tackling corruption and money-laundering.
-
There should be
a moratorium on all Western military aid to the Nigerian armed forces in the
Delta until the worst human rights abuses – such as the Odi massacre – are
investigated, the reports published and those responsible punished.
-
Western
countries should clearly acknowledge the gross fraud and human rights abuses
that took place during the last elections in the Delta. Rich countries should
direct aid towards independent bodies, such as credible non-governmental
organizations, that propose reasonable projects to help improve the conduct of
the 2007 national elections. Many people in west Africa point to the example of
the 2000 election of Senegal, where it is widely thought that some ballot fraud
was circumvented because polling stations phoned their preliminary results into
district vote collation centres. These verbal results could then be checked with
the written tally once it arrived at the centre, meaning that any tampering done
en route would be obvious.
-
The deeper
problems seen in some parts of the Delta – such as armed thugs stealing ballot
boxes and results sheets, or results being fixed at voting centres – should be
documented by domestic and foreign observers and then criticized publicly in the
strongest possible terms.
-
Delta officials
who are credibly implicated in corruption or human rights abuses should be
prevented from entering the US, UK and other countries that have significant
commercial interests in the Nigerian oil industry.
-
Western
countries should provide funding to credible NGOs that commit themselves to
scrutinizing the finances of state governments and raising concerns about
corruption. This would require rich nations to provide training in areas such as
financial analysis and also to exert diplomatic pressure against any state
officials implicated in the harassment of NGOs that were seen as critical.
Funding is in theory available through programmes such as the UK Department for
International Development’s ‘drivers of change’ initiative, although an official
admitted that the department’s decision to offer support to civil society
organizations had not led to much action yet.
The
federal government and the National Assembly
• The
federal government should address the fundamental concerns about the conduct of
the 2003 elections in the Niger Delta. President Obasanjo has publicly
criticized the ballot fraud in the governorship election of the eastern state of
Anambra. He should do the same in Rivers and should appoint independent
investigators to look into the reports of ballot fraud across the oil-producing
states.
-
An
act of parliament should be passed compelling state governments to publish
widely and make available on the internet details of how they spent the money
allocated to them from the federal government. A further act should be passed
compelling the multinational oil companies and NNPC to publish the information
outlined above.
-
The
constitutional provision conferring immunity of prosecution on senior officials,
including the president and the governors, should be abolished.
-
The 1977 Land
Use act, which gives government ownership of all underground minerals and oil,
should be reviewed and revised if necessary to take account of Delta community
demands for greater resource control. One option would be to amend the current
law so that the enhanced share of revenues that go to oil-producing states do
not go to state governments but to special funds that would be highly
transparent and would allocate money to development programmes.
-
The government
should hold a full public inquiry into the issue of oil theft and who is
profiting from it. The inquiry should have extensive powers to compel disclosure
of information and should be headed by a respected individual from outside the
world of Delta politics. Those identified as culpable should be prosecuted. The
international community should offer to provide funding for the inquiry.
-
If the finance
ministry’s claims of greater transparency are to be credible, it must keep
updating the information on its website in a timely fashion.
-
Preliminary
information from the audits of the state oil company and the private
multinationals should be released as soon as possible, to demonstrate the good
faith of all parties involved in the process.
-
The Niger Delta
Development Commission should concentrate on small, community-based developments
rather than unlikely plans to make the Delta into an attractive base for non-oil
multinationals.
State and local governments
-
State
governments should start to pay contributions to the Niger Delta Development
Commission. The body will simply not be credible if they make no commitment to
it.
-
State
governments should prepare detailed accounts, at least once a year, showing how
they have spent the oil money allocated to them. This should be made available
on the internet.
-
Local
governments and community ruling structures should be more involved in
developing and implementing the government’s national economic development
strategy (NEEDS) and its state economic development strategy (SEEDS). This would
help ensure that the existing plans do not fall into the same trap as the oil
companies, by funding projects that are irrelevant or harmful to communities’
needs. This approach would require funding, perhaps from international
organizations and governments, for the training of people at local level in
accounting and other skills. In other words, the new approach could be similar
to that suggested for the relationship between the oil companies and
communities.
Michael Peel is
former Financial Times west Africa correspondent and an associate fellow,
Chatham House.
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