October 10, 2019
October 14, 2019

Optimizing revenues from hydrocarbon is the main policy emphasis for Nigeria’s the petroleum industry; the entire regulatory regime sits on this but at great expense. The regime, failing to pay due respects to effects of the business on the ecosystem, decimates expected benefits from the industry. Putrid conditions resulting from decades of unethical exploration and production in the Niger Delta (ND) have caused inexpressible miseries for present and future generations.

In Eleme LGA, “8 cm layer of refined oil was observed floating on the groundwater which serves community wells.”[1] Oil pollution occurring over the past half-century has destroyed vegetation “leaving roots coated in a bitumen-like substance sometimes 1 cm or more thick”[2], which may become irreversible over time. Pollution on the surface water in the creeks in Ogoniland has destroyed aquatic life and stultifying fish farming, the main economic stay of host communities (HC).[3] Illegal oil bunkering and artisanal refining[4] have become survival responses of HC.[5] Benzene, a carcinogen, is present in outdoor air and drinking waters in all communities, in concentrations far above national and international limits.[6] In Nsisioken Ogele levels of Benzene in drinking water was at least over 900 times above WHO limits.[7] The restoration of Ogoniland may cost about $1billion and would span 20-30, with much more needed to clean-up the entire ND.[8]

In the ND, oil spills and gas flaring are daily occurrences. Even with the heart wrenching and ongoing “state-of-emergency” situation, governmental action is minimal. “Amnesty payments” to militants to prevent hostilities is no solution. The Petroleum Industry Bill (PIB) 2012 fails to amply address the issues[9]. The PIB contains no clear strategy to clean up, stop, and prevent hydrocarbon pollution.

The ideas of responsibility and accountability directs on strategy. The polluter pays principle (PPP) stands on faultless theories of economic efficiency, liberty and justice, and the right to life.[10]  The pollution producer is responsible and accountable if s/he/it (is made to) delivers a commitment or ensures an outcome by taking initiative with exhaustive follow-through.[11] The person accountable takes ultimate praise or required to remedy any failure.[12] Subject to disputation, Oil companies (OCs) (72%)[13] on one hand, and illegal oil tappers, illegal refiners, and pipeline vandalizers (28%)[14] on the other are responsible for pollution. But because the 28% directly results from actions of the 72%, OCs including the NNPC who holds federal government stakes in production, should be held accountable on PPP and on corporate social responsibility (CSR)[15] being defined as the duty of a company to consider the full scope of the impact of their activities on communities and the environment when making decisions, balancing the need to make a profit.[16]

The “save face”[17] CSR activities like scholarship awards, school and hospitals, and bridges and jetties construction, portable water and electricity supply[18] are hypocritical[19] and at the expense of the abjectly poor. Priority must be located where it belongs. This failure, however, results from imbalance and misplaced priorities of the fiscal regime.[20]

An overhaul must give deserving weight to revenue generation, environmental preservation, and value addition[21]. The current regime bags extravagant fortune (high taxes, royalties, signature bonuses), leaving investors with all costs and risks, duty to provide expertise, and to build and utilize Nigerian Content[22].

State participates in exploration and production by collaboration arrangements between the NNPC and MOCs,[23] in which NNPC holds around 45-55% of the venture with the investor solely bearing risks. OCs (in addition to cost of licenses) pay tax at 85% or 65.75% within the first 5 years of operation. For companies under a Production Sharing Contract (PSC) and deep offshore operations, the rate is 50%. In addition, certain license holders pay royalties between 4% and 20% of oil produced in cash. These companies also pay an annual 3% of their total budget to the Niger Delta Development Levy.

These companies have therefore pay upfront for their polluting activities on the polluter pays principle,[24] internalize the external costs of their business[25], and shifting accountability to the State. However, with levels of corruption in government, it is futile to wait for governmental action. A solution would be an overhaul that (1) legislates accountability on OCs[26] who would maintain prescribed environmental standards and installations; (2) requires investors to establish infrastructure according across the value chain; and (3) require investors to develop build and utilize Nigerian Content. Tax rates should be as charged to other companies. Prudent investors will fulfil these requirements while maximizing profit. The monitoring and enforcement apparatus must also have access to rich data, be independent[27], and adequately financed. To clean-up existing pollution, government must take initiative with funds from its coffers and OCs.


Michelle Chikezie
Senior Associate,  SimmonsCooper Partners.








[1] United Nations Environmental Programme, Environmental Assessment of Ogoniland August 2011, Page 12, 191
[2] Id 12
[3] Id 10
[4] Which further contributes to pollution, Id 104
[5] Id 175-182
[6] Id 190-192
[7] Id 13
[8] Id 17, 226-228
[9] Section 200 of the Bill merely requires oil companies to submit environmental quality management plan for approval with financial consequences for failure. Section 201 which merely provides that gas flaring carries penalties. Other sections criminalize the act but requires the polluter to determine the extent of pollution – i.e. provide data on its own pollution.
[10] Oludayo G. Amokaye, Environmental Pollution and Challenges of Environmental Governance in Nigeria, BJASS Vol 10, No. 1 (2012) 29-35;
[12] Neha Singhal, Corporate Social Responsibility – Role of Government, IJCCR Volume  4 Issue 1 (January 1, 2014)
[13] 21% during operations, 50% from pipeline and tanker accidents, and 1% as a result of inadequate or non-functional production equipment There is currently no technology to accurately measure and attribute pollution to each legal or illegal oil producer.
[14] Sabotage
[15] There is no generally accepted definition of CSR; definitions traditionally refer to the commitment by businesses to improving the quality of life of the workforce and the community.
[16] Adeyanju, Olanrewaju David, An Assessment of the Impact of Corporate Social Responsibility on Nigerian Society: The examples of banking and communication industries, Universal Journal of Marketing and Business Research Vol 1(1) May 2012, pg 19. The paper quoted Kenneth Andrews Steiner’s definition of CSR as “the intelligent and objective concern for the welfare of the society that retains the individual and corporate behavior from ultimately destructive activities, no matter how immediately profitable and leads to the directions of positive construction of human betterment.” This definition does not interfere with maximizing shareholder value and does not introduce a second bottom line of impact investing. It ensures that companies internalize the external costs of their business and CSR activities may be strategically designed to maximize shareholder value.
[17] Eweje found out that oil companies embrace development initiatives primarily in order to demonstrate that they are socially responsible. Gabriel Eweje, Multinational oil companies’ CSR initiatives in Nigeria: The scepticism of stakeholders in host communities, International Journal of Law and Management, Vol. 49 Iss: 5/6, pp.218 – 235.
[18] My primary legal education was on a merit award sponsored by Elf Petroleum
[19] O. F. Alabi, Oil Companies and Corporate Social Responsibility in Nigeria: An Empirical Assessment of Chevron’s Community Development Projects in the Niger Delta, BJASS Vol 4. (no. 2) 2012, 367-372
[20] Including the PIB
[21] In terms of both infrastructure and human resources
[22] Nigerian Content means “the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capabilities through the deliberate utilization of human, material resources and services in the Nigerian oil and gas industry.” §106, Nigerian Oil and Gas Industry Content Development Act 2010.
[23] Arrangements include Joint ventures, Production Sharing Contracts, Service Contracts, and Marginal Field Concessions.
[24] Roy E. Cordato, The Polluter Pays Principle: A Proper Guide for Environmental Policy, Institute for Research on the Economics of Taxation Studies in Social Cost, Regulation, and the Environment: No. 6, April 2001.
[25] Oludayo G. Amokaye, Environmental Pollution and Challenges of Environmental Governance in Nigeria, BJASS Vol 10, No. 1 (2012) 29-35
[26] Artisanal refining can be licensed at reduced costs, provided with finance, and required to meet environmental standards.
[27] Unlike the current situation in the Environmental Standards and Regulations Enforcement Agency (Establishment) Act of 2007 (NESREA Act) gives those who are being regulated opportunities to be on the Governing Council of the regulator, advising the regulator on direction and strategy.
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