Revenue flow and human rights: a paradox for Shell Nigeria

Introduction: The case describes Shell’s evolution within the context of sensitive human rights issues related to oil exploration and exploitation in Nigeria. Given that much of the revenue from Nigerian oil resources was being diverted by corrupt state governors, the case focuses on issues relevant to government transparency and corruption. It describes Shell’s involvement in the Extractive Industries Transparency Initiative (EITI) and its collaboration with the Nigerian Government to instigate a more transparent reporting on oil revenues.

However, since two senior Shell executives involved in EITI and negotiations with the government are about to retire from the company, the prospect of briefing their successors on the complexity of the Nigerian situation brings a number of issues that need to be addressed. How will Alan Detheridge, the British vice president of Shell’s external affairs and Joshua Udofia, the senior Nigerian corporate advisor contribute to the Dutch company's next steps? How will they portray a more transparent and governance agenda? What other partnerships should they consider? What will they do different to start impeccable like they did 50 years ago? Body:

Undemocratic military regimes, corruption, government inefficiency’s are some of the reasons why Nigeria an “African Paradise for oil pumping” is listed by the NGO transparency International as one of the most corrupt countries in the world. Through an agreement in 1937, Shell was authorized to prospect for oil in Nigeria. Since that date, corruption has been a major concern for Shells operations. It was not until November 1995, where former charismatic leader Saro-Wiwa, leader of (MOSOP) movement for the survival of the Ogoni people, was hanged with eight other Ogonis, that Shell accepted that it had a mayor duty to achieve, and accepted how heavily implicated was the company with such incidents.

The degradation of the environment was also a major concern for Shell, as local communities objected about the well being of the environment, issues regarding oil spills sabotage, access fee charging, the lack of improvement to quality of life, in spite of growing dissatisfaction protests to government’s had proved unfruitful, so Shell was being blamed for such circumstances and this represented a mayor concern for Shell. Moreover, the issues with oil revenue flow were not the only concern but also human rights. In the Niger Delta the major oil producers were: Akwa Ibom, Bayelsa, Delta, and rivers. Still, from the 131 million people living in Nigeria 20 million lived in the Delta from over 40 ethnic groups. These people lived out of the activities of farming and fishing.

As a result, oil revenues received by the government were not reaching the people that needed it the most and the agreed between the ventures was not being respected. The outrage brought malnutrition, power blackouts, and roads in terrible conditions, which made the population protest against these oil companies. Poverty had become much more essential, the Delta was being abused, and the oil distribution a monopoly.

Evidently, Shell had not done anything to alleviate the crisis of human rights and corruption was escalating its massive level, which made the Nigerians realize that it was time for a change. The local communities soon started to object against the degradation of the environment as a result of oil spills, which according to shell was due to sabotage. This kind of sabotage was nothing but a way of motivating a desire of economic gain by the hosts of all of the communities.

These incidents led to a change in strategy by Shells management. “The company moved from a risk and reputation management focus to integrating sustainable development into its general business principles strategies and operations”. It is important to highlight that Shell began to set policies with local and international NGOs and development. In 2000, a Memorandum of Understanding (MOU) to stipulate a method for the sharing of oil revenues was signed between the government and the major oil companies working in the Delta.

As required under the constitution, the Nigerian government returned a significant proportion of the federal revenues it received to the state government (31%) and local government areas (15.2%). In addition, 13% of its revenues from oil and gas were returned to the states where production took place. . Shell began to set policies with local and international NGOs, and development.

Results by the People and Environmental report indicated in 2005 that 86% of the projects where functional and 64% was successful. A margin of 36% represents enough room for improvement. A major event was a voluntary partnership with (EITI) Extractive Industries Transparency Initiative to improve transparency and accountability related to payments of oils, gas, and mining that was done by Shell through active participation.

However, Shell realized that 40 million spent in community development by Shell could not on its own make significant improvements to the lives of all the people in the Delta. A joint effort between the government and Shell would be necessary and better use of the substantial funds available to the state and local governments was needed urgently. On the other hand the EITI worked towards improving transparency in government budget practices as well as empowering ordinary citizens to hold their governments to account for the use of revenues. In summary:

Shell’s long-term initiatives and partnerships in Nigeria will continue to deepen, as the company will face new challenges. Since also the government did his part by setting up two statutory bodies with power to investigate and aliminate corruption related crimes, so everything is getting better.