Before Oil Majors Relocate to Niger Delta, By Obo Effanga

The news report over the weekend indicates that the Federal Government has “directed” oil companies operating in Nigeria to relocate their headquarters to the Niger Delta where their main exploration and production activities take place. This directive was ascribed to Acting President, Yemi Osinbajo, while speaking at a town hall meeting in Uyo, Akwa Ibom State, a potential beneficiary of such relocation.

The demand for the siting of the head offices of oil companies in the areas of petroleum exploration has been a major demand of oil producing states in Nigeria, over the years. This reported move would therefore be a most welcome one.

Although the reports talked about a “directive”, the reality is that the operationalisation of such a “directive” would certainly take a while in coming. In fact, reading between the lines, one notices that the Acting President urged the Minister of State for Petroleum Resources, Ibe Kachikwu, to start engaging the oil companies towards actualising the relocation and added that he thought “it is the right thing to do”. Truly, it sounds like one of those politically correct things to say at a gathering, and not necessarily a directive or government’s policy. But it is all the same a good starting point which would allow agitators to push government to show a will and commitment to such relocation.

The reason for the quest for the relocation of the headquarters of oil corporations to the Niger Delta area are various and compelling. The first reason is that conventionally, a company should have its main offices where its major production is. For instance, ExxonMobil has its international headquarters in Texas, where its main operation field is just as Chevron has its headquarters in California, where it also carries out major operations.

What this is likely to do for the corporations is that it creates a deeper connection between them and the areas of their operations in terms of community relations and environmental protection and responsibility. Much of the conflicts between oil production companies in Nigeria and their host communities have centred on environmental degradation. This is because it is all so easy for an oil company not on the ground to treat the environment with contempt. Apparently, that is what our oil producing areas have been going through. Their oil production communities therefore become mere conquered territories only useful for exploitation by the oil companies who become like pirates who simply loot and escape to enjoy the loot elsewhere. But if the oil companies have their headquarters in the location of the operations, they stand the chance of suffering the physical and environmental consequences of their operations and would be expected to act more responsibly.

The above may not however be the only reason for the call for relocation. After all, even the local communities, their chieftains and local and state governments are equally complicit in the environmental degradation of the Niger Delta and oil producing communities. Much of the acts of sabotage, poor quality illegal refining and illegal oil bunkering leading to more environmental degradation are committed with the active involvement and collusion of principal members of the local communities. In fact, many of the local chiefs, community leaders and “youths” have benefitted through several illegal and environmentally unfriendly activities that go on there.

The bigger reason for the demand for relocation is however pecuniary. Under our laws, company tax is often paid where a company has its head office. Thus, while the production and revenues of the oil corporations come from the oil producing states, the corporations pay their company taxes where their head offices are: mainly in Lagos and Abuja. And to the extent that many of the staff receive their salaries from the head office locations, it also follows that their personal income taxes are paid in those city centres (Lagos and Abuja) where the companies are headquartered.

What is therefore happening here locally is similar to what some of us have complained about many multinational corporations. Some of those companies carry out a majority of their revenue-earning activities in Nigeria and other poor countries of the global South. But they unscrupulously repatriate the profits to tax havens where they have set up their ‘international headquarters’ in one-room or post office box addresses. They thus deny Nigeria and similar countries the benefit of receiving appropriate revenue from the companies in taxes. This relocation move therefore makes good sense and is likely to lead to some form of social justice through resource reallocation and redistribution.

Apart from the direct tax benefits to the state governments in the Niger Delta region, the relocation of the headquarters of the oil companies to the production states will also boost the local economies as the staff and facilities to be moved in there would consume products from the local markets. And there are vast markets in terms of food, household items and services etc. to benefit from this, whenever the relocation eventually happens.

The relocation will not entail only the positive. There will certainly be some negative implications for this also. It may lead to inflation and high cost of goods and services in the region, with negative consequences for the poor and low income earners. The higher level of inequality between those in the oil industry and those outside is also likely to lead to more violent crimes like kidnapping. Residents in those areas and the relevant governments must therefore brace up to that possible reality and start planning how best to manage that situation, before it arrives.

While I support this move, there is also a converse responsibility we expect the government and peoples of the region to come to terms with. For the state and local governments, they would need to upgrade infrastructure and improve on their service delivery, commensurate with the pressure that would come with such relocation.

We must also work on the typical entitlement mentality of many people, especially the youths and ‘community leaders’ in the Niger Delta areas who would often look to the oil companies as under a duty to meet all their needs, regular and irrational, rather than look to their governments for service delivery and infrastructure provisions.

It is for this reason that I advocate that companies be made to pay all appropriate taxes due to the relevant governments and when that happens, they be freed from further unnecessary responsibilities and demands. Too often, members of communities try to not only pressure private companies to provide corporate social responsibilities (CSR) but even decide for them where to channel such efforts, demanding them as entitlements. A balance would need to be struck in that area to ensure harmony.