The Petroleum Industry Bill (PIB); insights on Host Communities Development (HCD)

The PIB was signed into law by the Nigeria President on the 16th of August, 2021 which birthed the Petroleum Industry Act (PIA).

Incontrovertibly, a focus area that has raised a lot of controversies is the Host Communities Development (HCD).

Basically, the objectives of the PIA on the HCD is to put in place a framework that will support the development of host communities; to give room for the host communities to directly benefit from the Petroleum activities in their domain; all this in a bid to stimulate economic growth and development in the host communities while also ensuring peaceful and harmonious relationship between the authorized entity and the host community.

The Host Communities Development Trust (HCDT) as a catalyst for the actualization of the objectives of the PIA on HCD.

The PIA directs that a “Trust” should be established in every host community that will consist of a board of directors/ executives who are not necessarily to be indigenes of the host community (that is, the basic requirement for qualification is to be an individual of high integrity and good professional standing).

Every company that possesses a license to operate in a host community is required by the law to contribute a stipulated percentage of its actual operating expenditure of the year immediately preceding the current year (e.g a stipulated percentage of the actual operating expenditure of the year 2020 is paid in the year 2021).

The stipulated percentage is 3% - 5% for companies operating in the upstream sector and 2% for other companies (not operating in the upstream sector).

This newly introduced contribution is independent of the 3% contribution to the NDDC.

The HCDT has a financial year of 1st January - 31st December of every year.

This fund is tax exempted, also, any contribution made by a joint venture partner/ settlor/ grantor/ donor/ trustor, is tax deductible.

Where does the fund in the HCDT go to?

The PIA says that available funds are to be allocated for;

? 75% - Capital projects

? 20% - Reserve; and?

? 5% - Administrative expenses.

However, in the event of vandalism, sabotage, and other civil unrest leading to the decimation of petroleum facilities or disruption of production activities, the host community will be responsible for the cost of repairs.?

Conclusion.

It is believed that the HCDF should limit the outcry of neglect and environmental pollution of the host?communities by the companies operating there and also in a bid to enhance probity and transparency in the allocation of funds to the development of the host communities.

Gray areas/ controversies going forward?

? What is the actual contribution percentage to the HCDF; when does a company operating in the upstream sector contribute 3% and its counterpart contributes 4%/ 5%?

? Is the HCDF really a substantial compensation for the host communities or just a fair compensation with more emphasis on the reduction of cost of production and attracting investors thereby boosting the Foreign Direct Investment (FDI) of Nigeria?

??? Ibrahim Tiamiyu.

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