Fixing the Flaws in the PIA: How Petroleum Companies Hijack Community Funds and Trusts and Why Nigeria Must Act Now

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viaExperience

By Felix Osemwengie Isere, Esq.

The Petroleum Industry Act (PIA) of 2021 was introduced with the hope of reshaping the long-strained relationship between host communities and petroleum companies. Through the establishment of the Host Community Development Trust (HCDT), the Act promised empowerment, transparency, and the direct delivery of development funds to the very communities whose lands produce Nigeria’s petroleum wealth. Yet, in practice, the implementation of the PIA has revealed serious structural weaknesses, and nowhere is this failure more evident than in Edo State.

During my tenure as the Special Adviser to the Edo State Governor on Petroleum, I embarked on a study visit to the Senate Committee on Host Communities. What I discovered was deeply troubling. While several states across the country had achieved a minimum implementation rate of about 75%, Edo State was struggling at a mere 35% . Infact, I had the opportunity of reading through all the performance reports of other States, but Edo State was the only State whose report I didn’t see. The implication of this poor performance is that many of the key safeguards, structures, and governance mechanisms envisioned by the PIA were either non-existent, poorly implemented, or completely hijacked by petroleum operators. Edo communities, as a result, were left dangerously exposed to corporate manipulation and systemic neglect. I remember raising this serious concerns openly with the Civil society leaders in Edo State during one of my engagement where we hosted them to an interactive session. 

One of the most glaring loopholes in the PIA is its silence on who should open and control the bank accounts of Host Community Trusts. This omission has enabled petroleum companies to exploit the system with ease, and in a state with only 35% implementation, the vulnerabilities became even more pronounced. Many companies took advantage of this gap by opening Trust accounts on behalf of communities, selecting the banks themselves, withholding account details, and sometimes even placing funds in interest-bearing accounts that benefitted them rather than the communities. Some went as far as withholding funds altogether under the pretext of administrative delays, even when money had already been budgeted.

My experience with some communities Ovia Local Government exposed these issues in their rawest form. A host community approached my office with a troubling complaint: despite repeated assurances from the operating company that contributions had been made over the years, the community had never received a single alert not even once. Their Trust account was essentially invisible to them. When I intervened, I discovered that the company had withheld over ₦104m million belonging to the community for more than four years. Within one week of engagement, I was able to compel them to release part of it . 

What shocked me even more, however, was the behaviour of the Trust’s own Chairman. Rather than advocating for the community he was appointed to represent, he appeared to defend the company’s position more aggressively than the company’s representatives themselves. His conduct made it clear that he was compromised, and at a point out of sheer frustration and in the interest of fairness — I had to walk him out of the meeting. That incident was a painful reminder of how companies, empowered by ambiguous provisions in the PIA, often influence or effectively handpick trustees, turning the Trust into an extension of the operator rather than a vehicle for community development.

The PIA, particularly Section 235, states that trustees should be appointed by the settlor (the petroleum company) but nominated by the community. Unfortunately, in practice, the power of appointment consistently overshadows the right of nomination. In Edo State, where implementation remains weak, this imbalance is even more problematic. Some companies simply reject genuine community nominees and replace them with pliable individuals who will protect corporate interests rather than community welfare. This undermines the very spirit of the Act and creates a system where communities feel sidelined, disempowered, and unheard.

For the PIA to achieve its intended purpose, these structural gaps must be urgently fixed. The law should be amended to clearly mandate that host communities themselves, through their duly constituted Board of Trustees, must independently open and control their bank accounts without any interference from companies. Petroleum companies should have absolutely no role in choosing banks, opening accounts, or managing Trust funds. Furthermore, the appointment of trustees must be the exclusive prerogative of the communities. Companies should only verify eligibility criteria, not determine leadership or manipulate the nomination process.

These reforms would restore genuine community ownership, prevent financial manipulation, and significantly reduce the conflicts that arise when communities feel excluded or deceived. They would also strengthen accountability by ensuring that Trust officials serve the people they represent, not external interests. But beyond legislative amendments, Edo State’s implementation rate must be urgently improved. A state that is home to critical petroleum and gas assets cannot afford to operate at just 35% implementation when others are at 75% and above. Strengthening compliance, oversight, and enforcement will help ensure that communities in Edo State finally begin to benefit from the protections and development structures envisioned by the PIA.

The PIA remains a landmark law, but like all legislation, it must evolve to reflect realities on the ground. My experiences in Ovia and across Edo State reveal that unless these structural weaknesses are addressed, the promise of the PIA will remain unfulfilled. Amending the Act to protect community autonomy, financially and administratively is not just good policy; it is essential for justice, equity, and the sustainable development of the communities whose lands sustain Nigeria’s petroleum wealth.

(Extract from my book, Oil and Gas Politics in Nigeria to be released in 2026)