Cleaning Up Big Oil in Nigeria

Cleaning Up Big Oil in Nigeria

US NEWS & WORLD REPORT 07/31/14
By Michael Shank and Kate Edelen

Oil thefts are growing in Nigeria and threaten stability in the region. An SEC rule could help stem oil-related violence in the Niger Delta.

As America’s news coverage of Nigeria continues to focus on the plight of kidnapped girls, mounting civilian causalities at the hands of the extremist group Boko Haram, and the potential Ebola spillover in West Africa, the threat of renewed violence in the country’s Niger Delta goes unnoticed. Neglect by the international community, however, will come at a great cost. A resurgence of violent conflict in the Delta will equally undermine the country’s unity and stability.

The crisis in Nigeria’s southern Delta region exhibits similar underlying dynamics to the Boko Haram conflict in northeast Nigeria. Both are plagued with a long-standing failure to address root causes and a counterproductive, overly-militarized response by the Nigerian and the United States governments.

It doesn’t have to be this way, as the U.S. government has a real opportunity and unique ability to help the Delta by supporting inclusive and transparent control of oil and gas resources.

The conflict in the Delta originally started with non-violent calls from local groups for a greater share of oil revenue, increased socioeconomic development, and support for the loss of livelihoods (often farming or fishing) from oil spills and pollution. After nearly 50 years of conflict over oil drilling and heavy-handed military intervention, resistance and armed groups came together in 2005 under the banner of the Movement for the Emancipation of the Niger Delta to coordinate attacks in an attempt to disrupt oil and natural gas extraction.

What quelled that uprising, however, was not the military crackdown facilitated by U.S. government support and financed by foreign oil companies. It was, instead, an amnesty program created in 2009 in which the Nigerian government paid combatants to turn in their weapons. Despite the program’s success in reducing violence and restoring oil production, this same program spawned a legacy of criminal profiteering, enhanced marginalization of those most affected by the extractive industry, and greater distrust between the government and the Nigerian population. Short-term solutions to appease foreign investors and limit revenue losses for oil companies were the priority, leaving the long-standing grievances of local populations unresolved. Promises to reduce poverty and youth unemployment, for example, continue to go unrealized. More agitators claiming to be ex-combatants demand entrance into the amnesty program. Numerous reports show that the government has paid too much attention to demobilization and disarmament, inadvertently sending the message that violence pays, and not enough attention to the underlying causes of the conflict.

This lack of political will to address the causes of the Delta conflict now undermines chances for a sustainable peace. With the recent reprisal of kidnappings and violence, the risk of recurring conflict is high and likely to increase after the amnesty period ends next year.

Here’s where the international community could help. Last week marked the four-year anniversary of the passage of the Dodd-Frank Wall Street and Consumer Protection Act. The law included the Cardin-Lugar Amendment, known as Section 1504, which addressed disclosure of foreign investments and mandated that all oil, gas and mining companies that trade on the U.S. stock exchange publicly disclose payments made to host governments during extractive activities.

Section 1504 is exactly the type of initiative that can help to restore accountability and transparency capable of addressing the marginalization of local populations that is central to the Niger Delta conflict. Implementing international regulations that mandate the disclosure of payments can go a long way in resolving some of the exacerbating factors of the conflict. If implemented correctly, disclosure can address the concerns of the majority of Nigerians who were excluded from the amnesty process, while setting a standard for international practice.

The implementation of Section 1504, however, was delayed when the American Petroleum Institute – whose members include ExxonMobil, Chevron, Shell and BP – sued the U.S. Securities and Exchange Commission. The institute claimed that compliance with disclosure rules would translate to increased operational costs.

These costs, however, are arguably negligible compared to the damage that could be incurred if the Movement for the Emancipation of the Niger Delta recommits to bombing infrastructure and siphoning oil unabated. Implementation of Section 1504 thus stands as a crucial piece in addressing Nigeria’s crisis.

Making public the amount of revenue coming into Nigeria from the extractive industry will empower communities and nongovernmental organizations with the knowledge to hold their governments and political officials accountable. Section 1504 holds real promise in disincentivizing corruption and ensuring that profits and benefits garnered from extractives are fairly distributed.

While the SEC has announced it will move forward on drafting new rules after the D.C. District court remanded the SEC’s original plan, greater urgency is needed. If Section 1504 is to contribute to a peaceful transition in a post-amnesty Nigeria, the SEC must prioritize, by the end of this year, disclosure regulations and strong adherence to transparency.

Michael Shank, Ph.D., is associate director for legislative affairs at the Friends Committee on National Legislation and adjunct faculty at George Mason University’s School for Conflict Analysis and Resolution. Kate Edelen, M.Sc., is a Scoville peace fellow at the Friends Committee on National Legislation.