The 2007 Nigerian Minerals and Mining Act (NMMA) introduced a novel practice of mandatory community agreement between mining sector operators and a certain segment of the society referred to as “the host community”. By virtue of this legislation, the concept and practice of Community Development Agreement (CDA) has become an important part of Nigeria’s energy sector legal framework which needs to be understood and implemented.
The Act enacts a regime of mandatory CDA negotiation between minerals exploration and production companies and communities within and around which they operate. The NNMA refers to this unique segment of the Nigerian society as the “host community” of the particular minerals exploration and production activity occurring within the host area.
A CDA is defined as any negotiated agreement between an extractive industry proponent and a community stipulating how that community accesses development initiatives undertaken to be provided by the project proponent. In other words, one of the functions of a CDA is to regulate the manner in which a host community benefits from the resource exploration and production activity occurring on community land.
Nevertheless, the CDA process is also used in many jurisdictions to express a community’s consent and support for a project and to agree how a project proponent engages or relates with the host community during the life cycle of the proposed project.
As a concept, CDA is an emerging or a contemporary community engagement and development tool used by countries and the extractive industry companies to engage with landowning communities within or around the licence area.
Section 116 (1) of the NMMA provides that: “Subject to the provisions of this section, the Holder of a Mining Lease, Small Scale Mining Lease or Quarry Lease shall prior to the commencement of any development activity within the lease area, conclude with the host community where the operations are to be conducted an agreement referred to as a Community Development Agreement or other such agreement that will ensure the transfer of social and economic benefits to the community”
Furthermore, subsection (2) of section 116 stipulates that “the Community Development Agreement shall contain undertakings with respect to the social and economic contributions that the project will make to the sustainability of such community.”
These provisions of the NMMA seem to have instituted a mandatory legal regime in which CDAs serve as instruments for structuring community governance and benefit sharing in the mining sector. Additionally, the provisions established specific objectives which are intended to be achieved by the obligatory CDA process. The direct approach employed by the NMMA in explicitly requiring mining companies to negotiate CDAs is not only groundbreaking, but also indicative of a new resolve to assimilate a contemporary tool towards addressing energy project-induced community challenges in Nigeria.
Also, the assimilation of the concept and practice of CDA into the Nigerian legal system and into the minerals sector indicates a deliberate intention on the part of the Federal Government of Nigeria to avoid some of the foundational errors which were inadvertently allowed to occur at the inception of the petroleum industry in Nigeria. The problem of militancy and the recurrent hostility between petroleum exploration and production companies particular the International Oil Companies (IOCs) and communities in the Niger Delta is largely caused by the failure to institute a system for host community engagement and benefit sharing at the inception of the petroleum industry in Nigeria.
Section 116 (1) of the NMMA quoted above imposes a duty on the holder of a mining lease, small scale mining lease or quarry lease to negotiate and conclude with the host community where the operations are to be conducted an agreement which shall be known as CDA. This mandate on mining companies to negotiate CDAs with their host communities is a deviation from the norm in Nigeria. Before the enactment of the NMMA, the notion of a binding contractual relationship between companies operating in the natural resources sectors and their host communities was alien to our legal system. Accordingly, the IOCs operating in the Niger Delta adopted the practice of executing memoranda of understanding (MOU) whenever they deem it necessary to define their engagement with a community by an agreement. Moreso, all the MOUs existing in the oil and gas industry are voluntary non-binding understanding between communities and the IOCs. As a result, there have been disputes and claims of non-implementation of the contents of most MOUs signed in relation to petroleum exploration and production in the Niger Delta.
One of the imports of a non-binding agreement is that the terms therein contained will be non-justiciable and therefore incapable of grounding any rights or positive obligations enforceable at law. In other words, none of the parties to any of the existing MOUs signed in relation to any particular petroleum operation in the Niger Delta can validly institute a legal action in court and successful enforce any of the provisions of an MOUs. One may argue that the inability of an aggrieved party to ventilate real or perceived grievances could be one of the reasons or inducers of violence and militancy in the Niger Delta. Often times, it is common for people to resort to self-help where there has been a denial or a curtailment of the right of an aggrieved person to seek redress for perceived infractions.
This problem appears to have been identified and the provision of section 116 of the NMMA is an attempt at providing an effective remedy so as to prevent a repeat of the mistakes made in the Niger Delta by failing to structure out a framework for community engagement and development.
However, it must be noted that creating an engagement framework such as the one contained in the provisions of the NMMA is only a good starting point. The other critical component of the solution is the implementation of the provisions of the Act. The stakeholders need to study and understand the provisions of the NMMA on CDA, to recognise their duties and obligations as well as tools necessary to competently comply with the requirements of the Act, otherwise, this very thoughtful provision of law may become a potential show stopper to the crystallization of investment potential in the Nigerian minerals sector.
Obinna Dike, PhD
