Beyond the 3 Percent: Building Transparency and Trust in Nigeria’s Host Community Development Trust Funds
Communications
26 November 2025
By Uchenna Kingsley Agu
When I walked through an oil-producing community in the Niger Delta earlier this year, a local youth leader pointed to a broken classroom block and said, “We have plenty of laws but little change.” His words stayed with me because they captured a painful truth: while the Petroleum Industry Act (PIA 2021) promised a new dawn for host communities through the creation of Host Community Development Trust Funds (HCDTFs), the change has been slow, opaque, and often misunderstood.
As a governance and public policy practitioner working with Connected Development (CODE) (FollowThe Money), I have seen firsthand how communities can reclaim power when transparency meets participation. Our recent report, Connected Development’s research on the implementation of Host Community Development Trust Funds in Nigeria’s oil-producing regions, examined how these trust funds are unfolding and what must be done to make them work.
The Petroleum Industry Act (PIA 2021) requires oil companies to contribute 3 percent of their annual operating expenditure (OPEX) to a Host Community Development Trust Fund. The goal is noble: to create a sustainable financial mechanism that communities themselves manage to implement projects improving local livelihoods, like schools, clinics, roads, and small enterprises.
But noble intentions do not automatically translate into impact. What we have seen is that, nearly four years after the PIA’s passage, many oil companies are yet to fully operationalise their Trusts. Some have established foundations in name only. Others operate without clear disclosure of their annual OPEX, leaving communities in the dark about what 3 percent actually means in Naira terms. When a company fails to disclose its OPEX, it erases the community’s right to plan. How can a host community design an annual development plan if it doesn’t know the size of the fund? How can local committees prioritise projects or monitor expenditures without that baseline? This lack of transparency undermines trust, fuels suspicion, and sometimes sparks the same conflicts the PIA was meant to prevent.
“Transparency is not charity; it is the currency of trust.”
Oil companies must realise that community development via the HCDT is not a corporate social responsibility gesture; it is a legal and moral obligation under the PIA. Publishing annual OPEX data should be standard practice, displayed in community halls and online dashboards so that residents can track their 3 percent entitlement in real time. Equally important is helping communities themselves to develop the governance skills to manage these funds. Many host communities are new to concepts like project design, procurement oversight, or impact evaluation. Without capacity support, the Trusts risk becoming tokenistic.
The PIA defines oil companies as “settlors” obligated to establish a Trust before operations commence. Yet, CODE’s field findings in Rivers, Bayelsa, and Delta reveal that several companies continue operations without compliant Trust structures. CODE’s research shows that on this issue of the punishment of offenders, the Peer-learning context also covered challenges associated with failure to sanction Settlors for failing to incorporate an HDCT within the prescribed time by the PIA. Sections 9 (1) and (2) of the PIA 2021 clearly provide for a penalty on Settlors for failing to incorporate an HCDT within set timelines. Such penalty accrues to 2,500 USD monthly (or Naira equivalent) within the first 30 days and an additional sanction from regulators (i.e. NUPRC- The Nigerian Upstream Petroleum Regulatory Commission) by way of recommendation of the revocation of Settlor’s license 45 days after the expiration of the initial 30 days. However, the peer-learning context showed that no Settlor has been sanctioned by this provision.
“The NUPRC must do more than issue reminders; it must enforce compliance”.
Our work at CODE has shown what is possible when people are empowered. In partnership with local civil society groups, we have trained community representatives across the Niger Delta on transparency tools, how to read budgets, track contracts, and publish community scorecards using NOMtrac. These are small steps, but they have begun to build a culture of local accountability. To scale this, I recommend that the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) develop a national framework for community governance capacity building, funded through a small percentage of the HCDTF contributions. They should also update and enhance the functionality of the Hostcomply HCDT portal of the commission. This will ensure that every Trust is managed by people who understand fiduciary responsibility, not political patronage.
Regulation should be proactive, not reactive, just like the public HCDTF Compliance Dashboard, Hostcomply of NUPRC, showing which companies have established Trusts; it should be enhanced to show settlors who have not set up theirs, as this would create a competitive incentive for transparency. Civil-society organisations and the media could then amplify compliance data, rewarding responsible settlors and spotlighting defaulters.
At the heart of all this is the idea of rebuilding the social contract between extractive companies and the people whose lands they occupy. The PIA’s 3 percent is not just money; it represents acknowledgement that development must be co-created, not imposed. When communities can see, plan, and participate, they shift from passive beneficiaries to active partners, creating a collective voice that changes the communities’ development outcomes.
Standing on the stage at the 2025 OGP Global Summit in Vitoria-Gasteiz, Spain, I shared Nigeria’s story of community resilience. I argued that sustainable development cannot exist without transparency and participation. The applause that followed was not for me but for the thousands of Nigerians who still believe that accountability can build peace. The Host Community Development Trust Funds are not just another bureaucratic mechanism; they are a chance to correct decades of exploitation. If we get this right, the Niger Delta could become a case study in how inclusive governance transforms natural-resource economies.
We owe it to the children of those oil communities who still walk past abandoned classrooms to prove that a law on paper can become hope in practice.
Uchenna Kingsley Agu is a Public Policy and Governance Expert and currently the Director of Programs and Community Engagement at Connected Development (CODE).
