By Olanrewaju Osho
Nigeria’s petroleum industry has long been characterized by a difficult relationship between oil companies and host communities. For decades, communities in oil-producing regions have borne the environmental and social costs of petroleum extraction while receiving limited direct developmental benefits. Persistent grievances over environmental degradation, unemployment, and underdevelopment have often resulted in conflict, operational disruptions, and deep mistrust between communities and operators.
In response to these longstanding challenges, the Nigerian government introduced a new framework through the Petroleum Industry Act 2021. One of the most innovative provisions of the Act is the establishment of the Host Community Development Trust (HCDT), designed to create a structured mechanism for channeling benefits from petroleum operations directly to host communities.
The HCDT framework represents a major policy shift aimed at fostering sustainable community development, strengthening community participation in resource governance, and promoting peaceful coexistence between oil companies and host communities.
THE CONCEPT AND OBJECTIVES OF THE HCDT
Under Section 235 of the Petroleum Industry Act 2021, petroleum companies operating in Nigeria’s upstream sector are required to establish Host Community Development Trusts for the benefit of communities where petroleum operations take place.
These Trusts are funded through an annual contribution of three percent (3%) of the operating expenditure (OPEX) of oil and gas companies. The funds are intended to support social and economic development projects within host communities.
The HCDT framework pursues several important objectives:
- promoting sustainable development in host communities
- creating direct economic benefits for affected communities
- strengthening community participation in development planning
- reducing conflicts between oil companies and host communities
- ensuring a structured and transparent mechanism for community development funding
By institutionalizing these objectives, the framework seeks to replace the previously fragmented and often ineffective corporate social responsibility initiatives with a more structured and legally enforceable system.
INSTITUTIONAL STRUCTURE OF THE HCDT
The governance structure of the HCDT is designed to promote accountability and community representation. Typically, the Trust framework consists of three major components:
The Board of Trustees (BoT): The Board provides overall oversight and strategic direction for the Trust. Members are appointed to ensure that the Trust operates in line with its mandate and complies with the provisions of the Act.
The Management Committee: TMC is responsible for the day-to-day administration of the Trust and implementation of development projects.
The Host Community Advisory Committee: The HCAC represents the interests of the host communities and serves as a link between community members and the Trust administration.
Together, these structures are expected to ensure that community development projects are properly conceived, implemented, and monitored. Regulatory oversight is provided by the Nigerian Upstream Petroleum Regulatory Commission, which is responsible for ensuring compliance with the provisions of the Act.
ACHIEVEMENTS RECORDED SO FAR
Since the enactment of the Petroleum Industry Act 2021, several oil companies have made progress in establishing Host Community Development Trusts and beginning the process of implementing community development projects.
Some of the notable achievements include:
Institutionalization of community development funding
For the first time, host community development funding has been placed within a legally binding framework. This reduces the discretionary nature of corporate social responsibility spending and ensures that communities benefit from a predictable funding stream.
Improved community participation
The HCDT structure provides communities with representation in the decision-making process through the Host Community Advisory Committee. This creates a formal channel for community input into development priorities.
Reduction of operational disruptions
In some operational areas, the establishment of Trusts has helped improve relations between communities and operators, thereby reducing tensions and disruptions to oil production.
Structured development planning
Unlike the past where development projects were often ad hoc, the Trust framework encourages more structured and coordinated planning of community development initiatives.
According to Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the Host Community Development Trust (HCDT) has risen to N373bn as of October 13, 2025. The Commission further revealed that at least 536 community projects are ongoing simultaneously across the Niger Delta region. One of the projects is the Obagi Pilot Phase. In line with the PIA, the NUPRC late last year facilitated the delivery of over 10 life-changing projects and the flag-off of more than 10 others under the Obagi Host Community Development Trust (HCDT) in Rivers State, operated by TotalEnergies.
These projects were officially handed over to the communities hosting OML 58 during a two-day project commissioning and flag-off ceremony held from September 24–25, 2025, at Ogbogu Community in Ogba Egbema Ndoni Local Government Area of Rivers State.
This milestone was said to have marked a defining moment in the implementation of the HCDT provisions under Section 235 of the Petroleum Industry Act (PIA) 2021 and stood as a testament to the NUPRC’s commitment to delivering on its mandate.
IMPLEMENTATION CHALLENGES
Despite the progress made, the implementation of the HCDT framework has also encountered several challenges. Some of the challenges that could negatively affect the success of the Trust are as follows:
Community disputes and representation issues
In many communities, disagreements have emerged over representation in Trust governance structures. Questions about who legitimately represents the host communities have sometimes delayed the establishment of Trusts.
Capacity constraints
Many community representatives lack adequate training in governance, financial management, and project planning. Without sufficient capacity building, the effectiveness of Trust management may be limited.
Delays in trust formation
Some operators have experienced delays in completing the administrative processes required to establish Trusts and begin project implementation.
From 2021 till date, 155 Host Community Development Trusts have been incorporated across oil-producing communities. These Trusts are legally registered corporate entities created by oil and gas companies (known as Settlors) for host communities. 80 HCDTs are currently funded and operational through settlor contributions.
The gap between the registered and the operational HCDTs reflects the evolving implementation process. Some trusts are incorporated but still completing their funding or governance requirements.
TRANSPARENCY CONCERNS
Concerns have also been raised about transparency in the management of Trust funds, particularly in relation to procurement processes and project selection.
HIGH COMMUNITY EXPECTATIONS
Host communities often expect immediate large-scale development projects once the Trusts are established. However, development outcomes typically take time to materialize, which can create frustration among community members.
STRENGTHENING THE IMPLEMENTATION OF HCDTS
To ensure that the Host Community Development Trust framework achieves its intended objectives, several key measures are necessary.
STRONG STAKEHOLDER ENGAGEMENT
Oil companies, community leaders, and regulators should maintain continuous engagement to resolve disputes and build consensus on Trust operations. Regular dialogue platforms can help address emerging concerns before they escalate into conflicts.
COMMUNITY EDUCATION AND CAPACITY BUILDING
Training programs should be organized to educate community representatives on governance responsibilities, financial management, project planning, and monitoring. When community representatives are properly equipped with the necessary knowledge and skills, they can participate more effectively in the governance of the Trust and ensure that development initiatives are properly implemented.
TRANSPARENT FINANCIAL MANAGEMENT
Trust administrators should adopt strong financial transparency measures such as regular public reporting of expenditures, independent audits, and open procurement processes. These practices will strengthen public confidence in the Trust and reduce the risk of mismanagement of funds.
CLEAR REGULATORY OVERSIGHT
Effective regulatory oversight remains central to the success of the Host Community Development Trust framework. The Nigerian Upstream Petroleum Regulatory Commission plays a critical role in ensuring that both oil companies and Trust administrators comply fully with the provisions of the Petroleum Industry Act 2021.
So far, the Commission has made commendable progress in establishing the regulatory architecture required to supervise the Trusts. A notable step in this direction is the deployment of HostComply, a digital compliance portal developed by the Commission to monitor the establishment, funding, governance structures, and operational activities of Host Community Development Trusts. The platform provides regulators with improved visibility into how Trust funds are managed and how projects are implemented across host communities. Such technology-driven oversight represents an important advancement in strengthening transparency and accountability in the management of community development resources.
However, the scale of underdevelopment that persists in many oil-producing communities places a higher responsibility on the regulator. Communities that have hosted petroleum operations for decades continue to struggle with limited infrastructure, environmental challenges, and widespread poverty. For this reason, regulatory oversight of the HCDT framework must go beyond routine compliance monitoring. It must be driven by a deeper commitment to ensuring that the Trusts truly deliver measurable and transformative development outcomes.
The Commission must therefore sustain rigorous monitoring of Trust performance, enforce regulatory standards without compromise, and provide clear operational guidance to both operators and community representatives. Where implementation gaps emerge, the regulator should intervene early with corrective measures and capacity support.
Ultimately, the success of the Host Community Development Trust framework will depend not only on the availability of funds but also on the strength, vigilance, and commitment of regulatory oversight. With sustained professionalism, innovation, and firm enforcement, the Nigerian Upstream Petroleum Regulatory Commission has the opportunity to ensure that the HCDT initiative becomes one of the most successful community development mechanisms in Nigeria’s petroleum sector.
CONCLUSION
The Host Community Development Trust framework introduced under the Petroleum Industry Act 2021 represents one of the most significant policy innovations in Nigeria’s petroleum sector in recent decades. By creating a structured mechanism for channeling development resources directly to host communities, the framework has the potential to transform the relationship between oil companies and the communities in which they operate.
However, the long-term success of the initiative will depend largely on effective implementation, strong governance structures, community capacity building, and consistent regulatory oversight. If these elements are carefully managed, the HCDT framework can serve as a sustainable model for promoting inclusive development, reducing conflict in oil-producing areas, and ensuring that host communities share more equitably in the benefits of Nigeria’s petroleum resources.
Olanrewaju Osho is a change strategist, development advocate and transformation apostle. He is passionate about national rebirth and sustainable development in Nigeria and Africa.
