Nigerian lawmakers probe oil firms' failure to remit operational expenditure to host communities

The House of Representatives has directed its Committee on Host Communities to investigate oil and gas companies operating in Nigeria for failing to remit three per cent of their annual operating expenditure to host communities as required by the Petroleum Industry Act (PIA), 2021.

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The resolution followed the consideration of a motion moved by Hart Godwin during Wednesday’s plenary.

Presenting the motion, Mr Godwin recalled that the PIA, enacted in 2021, provides a comprehensive legal, regulatory, and fiscal framework for the governance of Nigeria’s petroleum industry.

A key feature of the Act is the establishment of the Host Communities Development Trust Fund, a mechanism designed to ensure that oil-bearing communities benefit directly from petroleum operations in their areas.

He noted that Section 235(1) of the Act makes it mandatory for every licensee or lessee whose area of operation is located within a host community to incorporate a Host Communities Development Trust Fund for the benefit of that community.

Similarly, Section 236 stipulates that such Trust Funds must be incorporated within 12 months from the effective date for existing oil mining leases.

Mr Godwin further cited Section 240(2) of the PIA, which requires each company referred to as a settlor to contribute annually to the Trust Fund an amount equal to three per cent of its actual annual operating expenditure for the preceding financial year.

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He expressed concern that several oil companies have violated these provisions by either refusing to incorporate the Trust Funds or failing to remit the mandatory three per cent contribution stipulated by law.

“Some oil companies violate the provisions of Section 236 of the PIA by failing to incorporate the Host Communities Development Trust Fund in their areas of operation within the period stipulated in the Act, while others have bluntly refused to incorporate the Host Communities Development Trust Fund as required by the law as at when due,” he said.

Mr Godwin lamented that the continued non-compliance has deepened underdevelopment and discontent in host communities, which continue to suffer the adverse impacts of oil exploration and environmental degradation.

He further drew attention to Section 297(1) of the PIA, which prescribes administrative penalties for breaches of the Act, and Section 238, which empowers the federal government to revoke licences or leases where a company fails to incorporate a Host Communities Development Trust.

Following his presentation, the motion was adopted without debate. Speaker Abbas Tajudeen presided over the session.

The House subsequently mandated its Committee on Host Communities to investigate both the regulatory agencies for their failure to enforce compliance and the oil companies for refusing to remit the required three per cent and establish the Trust Funds.

The committee is to report to the House within four weeks for further legislative action.

The Petroleum Industry Act

The Petroleum Industry Act, 2021, is a landmark reform law that seeks to promote transparency, accountability, and sustainable community development in Nigeria’s oil and gas sector.

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Among its objectives is the empowerment of host communities through direct participation in resource benefits, while fostering peace and mutual trust between oil companies and their host regions.

The Act represents one of the most comprehensive overhauls of Nigeria’s petroleum framework since independence, providing a clear structure for governance, fiscal management, and equitable distribution of resources.