Economics Project Topics

Corporate Social Responsibility Practice and the Nigeria Oil and Gas Sector: Legislation, Constraints and Opportunities

Corporate Social Responsibility Practice and the Nigeria Oil and Gas Sector Legislation, Constraints and Opportunities

Corporate Social Responsibility Practice and the Nigeria Oil and Gas Sector: Legislation, Constraints and Opportunities

Chapter One

Preamble to the Study

Corporate social responsibility has become a common practice among most oil and gas organizations in Nigeria. It is one of the newest management strategies where companies try to create a positive impact on society while doing business. Holme and Watts (2000) defined CSR as the continuous commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large. Businesses can use ethical decision making to secure their businesses by making decisions that allow for government agencies to minimize their involvement in the corporation. Several reasons have been advanced to explain why commercial institutions voluntarily engage in social activities. Most companies practice social activities to satisfy their primary needs of presenting themselves as legitimate members of society (Bowen, 1953). This legitimacy has led companies to pursue their primary purpose of seeking sustainable profitability.

Pitiably, most of these countries are richly endowed with mineral resources and several other natural resources which are tradable across the continent and the world over but they largely depend on foreign companies for their exploitation and transformation of which Nigeria is not an exemption. Nigeria highly depend on transnational and multinational companies like Shell, Chevron Texaco, Mobil, Total, Elf, etc for the exploration of her richly endowed crude oil in theAkwa Ibom state region.



Conceptions and Characterization of the Corporate Social Responsibility

The concept of CSR as a social obligation was first advocated by Carroll (1979). Carroll (1979) CSR pyramid is one of the best-known CSR concept which covers economic, legal, ethical and philanthropic expectations that a society has in relation to a company. According to Rendtorff and Mattson (2012), companies are perceived as human communities that use social practices in order to achieve common goals. These objectives are realized through bond of trust and authentic relationships with customers. The most important ethical principles that promote good life of customers are customer’s autonomy, dignity, honesty, customer’s vulnerability that represents basic presumption for decent access to customers.

Yeung (2011) defines key elements of CSR in the oil and gas sector to include as understanding of financial services complexity, risk management, ethics in the oil and gas business, strategy implementation for financial crisis, protection of customers’ rights and channels settings for customer complaints. Macdonald and Rundle-Thiele (2008) examine a relationship between

CSR and customers’ satisfaction in the organization. According to the conclusion of their study, customers’ satisfaction is more affected by pro-client-oriented events than CSR activities. And if the organization decides to develop CSR activities, focus of these activities has to be properly chosen.

Robin (2008) states that society would like to have an economic system that creates opportunities for the growth of economic welfare and a happy life of people. The mission of ethics is to minimize the abuse of companies’ power in the bilateral exchange relations and to reduce a negative impact on a people’s daily live. A fundamental issue of business ethics is how to make capitalism more ethical. According to Sigurthorsson (2012), risk of CSR consists in the fact that it tends to become an excuse for soft law and corporate self-regulation. Icelandic organizations implement their CSR concept through a financial support of charitable activities and they did not pay attention to a formation of socially responsible practices but reduced CSR tools only for public communication. Corporate socially responsible practices should focus more on processes that make socially responsible profit and not on its distribution. Fassin and Gosselin (2011) also report that large institutions have a strong CSR and ethical culture.

CSR models present company’s social obligations as comprising economic, legal, ethical and philanthropic responsibilities. Carroll (1991) notes that businesses were created as economic entities driven by a profit motive, thus economic performance undergirds the other three CSR components. Legal responsibility involves businesses complying with federal, state and local government laws and regulations (Carroll, 1991). This was followed by ethical responsibilities, those standards, norms and expectations that reflect a concern for what consumers, employees, shareholders and the community regard as fair, just and respectful of stakeholders’ moral rights (Carroll, 1991). Finally, philanthropic responsibility was the expectation that businesses be good corporate citizens, actively engaging in programs to promote human welfare and goodwill (Carroll, 1991). A considerable amount of research effort has been directed towards identifying the positive impact of CSR initiatives on customers.

CSR as philanthropy in Nigeria could also be tied to some religious influences. Nigeria is a very theistic country. The belief in the supernatural or some spiritual realities is central to an average Nigerian (Adi, 2006). It can be argued, therefore, that since gifts and sacrifices are core to religion, the same beliefs could have easily found an outlet/expression in the Nigerians’ understanding and practice of business society relations.

For many years, the concept of corporate social responsibility remained alien to the Nigerian oil and gas industry, as the overriding emphasis was profit and nothing else (Amaechi, 2009). As at the time in question, organizations’ management never bordered about the customer or the environment within which business is being operated, and that created a lot of problems for the various institutions. That was largely because the customer had little or no option, as the number of organizations then was relatively small. Moreover, the literacy level and consciousness of the organization customers was quite low and so many things were taken for granted. Indeed times have changed a great deal and awareness about organizations corporate social responsibility has continued to grow steadily ever since. It is no longer an issue to be toyed with in the policy making processes in the organizations, as policies, products and services can only be introduced after evaluation and consideration of the responses, from the society and business environment. There have always been fears that without such considerations, organizations are bound to record product or service failure. Today, corporate social responsibility profile of organizations is being used as marketing tool in a competitive industry.

CSR is part of the business ethics which accountants and management are concerned with because the interested in the factors that facts the profitability of the business. CSR can be defined as the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time (Carroll & Buchholtz, 2003). CSR is a means of analyzing the inter-dependent relationships that exist between businesses and economic systems, and the communities within which they are based. CSR is a means of discussing the extent of any obligations a business has to its immediate society; a way of proposing policy ideas on how those obligations can be met; as well as a tool by which the benefits to a business for meeting those obligations can be identified (CSR Guide).




Corporate Social Responsibility in Nigeria

Emphatically, attainment of Socio-economic growth and development in a country requires a concerted approach, involving actors in both public and private sectors. The role of government as a major player in public sector stands to be pivotal. With the provision of public policies and use of other instruments, government can initiate and influence welfare development for citizens; whereas, business community and other relevant private organizations make their contributions via Corporate Social Responsibility (CSR).

Corporate social responsibility in Nigeria is beginning to assume some reasonable relevance among stakeholders in the Nigeria’s economy. It is at its infancy, waiting to be groomed into maturity. CSR as an organized practice in Nigeria started with activities of non-governmental organizations and later expressed as responses by multinationals, especially in the oil and gas, to remedy the effects of their extraction activities on the local communities. The firms operating in this sector have sporadically provided pipe borne water, hospitals, feeder roads, schools and educational facilities, electricity and other infrastructure. As stated in the Christian Aid Reports (2004), these provisions have been on ad-hoc basis, and not sustained. The Christian aid reports on Shell activities in the Niger-Delta region confirmed that some of the social amenities claimed to be provided by some of the firms in the oil and gas have been abandoned or could not meet the needs of the communities they were meant to support (Ameshie et al., 2004).



Corporate Social Responsibility in United Kingdom

It is known that CSR was born in the British Isles around the time of the industrial revolution in the second half of the 1800s, even if the term CSR itself was not coined until many decades later. In the United Kingdom, as early as the nineteenth century, some enlightened entrepreneurs had already recognised how important it was to give their employees decent living conditions. So it was that low-cost housing was built close to some factories for workers, designed to create a truly autonomous community with its own services. The focus on employees was such that at the beginning of the 1900s some business owners even started to create pension funds for their workers. Such initiatives, taken for granted today, were considered revolutionary at the time.

This approach, in some ways the precursor to modern CSR, has made the UK one of the most advanced countries in terms of corporate responsibility. Various initiatives were born in the UK with the aim of disseminating and developing activities that connected business development with social and environmental issues. To name but a few examples:



Evolution of the Oil and Gas Legislation in Nigeria

As with many developing countries, the abundance of crude-oil deposits in Nigeria discovered in commercial quantities since 1956 has not translated into improved standard of living. As a result of the high level of inefficiency, corruption, abuse of natural monopoly powers, bureaucratic red-tapism and the existence of a distorting subsidy regime, the sector has progressed backwards against expectations. Oil-related pollution such as gas flaring, oil spillage and the discharge of effluents have also destroyed the environmental landscape of the Niger Delta where significant proportions of Nigeria’s oil resources are located. As a result of these problems, Nigeria has often been described as suffering from the theoretical concept of resource curse, also known as the Dutch Disease. Resource curse refers to the paradox that countries with an abundance of natural resources, specifically oil and gas, tend to have less economic growth and worse development outcomes than countries with fewer natural resources. This is most often due to government mismanagement of resources, weak, ineffectual, unstable or corrupt institutions. In countries suffering from resource curse, the overall impacts of natural resources might be more an economic curse than a blessing as indigenes and citizens have little or nothing to show for the abundance of oil wealth derived from their country. The Nigerian situation reeks of acute resource curse problems that could only be tackled by innovative and forward looking legal regimes.




This study examined Corporate Social Responsibility (CSR) practice and the Nigeria oil and gas sector. The situation in the Niger Delta Region of Nigeria indicates a variance between practice and implementation of the components of CSR, it is not only companies that have abandoned their responsibilities as governments too have failed in its responsibility to provide a legal framework within which companies can effectively meet their obligations or be made to do so. Efforts should be made on the part of the government to mainstream the provisions of the International Corporate Responsibility Instrument, i.e. the Organization for Economic Cooperation and Development (OECD), Guidelines for Multinational Enterprises; the United Nation (UN) Global Compact and the 1998 ILO Declaration on Fundamental Principles and Rights at Works into Nigerian laws.

In addition, the government should pass into law legislation that would promote the interest of the government in the region. Legislation that would make the companies to pay heavy penalties for identified damages to the eco-system. Such penalties should be paid to a Developmental Fund that would accrue to the region and not the Nigeria Government.

Given the irreparable damage done to the ecosystem of the host communities by the oil exploration activities, it is desirable that the host communities be better compensated. The present sharing formula of setting aside 13 per cent of the money realized from oil exploration for the host community is inequitable. It is therefore suggested that the United Nations pass a resolution on the appropriate sharing formula and the application therefore, so as to eliminate the waste associated with the fund. Furthermore, Nigeria should extend its membership of International Institutions recognized for CSR. Its membership should not be limited only to the World Business Council for Sustainable Development (WBCSD) but to the Organization for Economic Cooperation and Development (OECD), and the Dow Jones Sustainable Indexes (DJSGI). This would enable the government to address the distributional inequalities of environmental risks, especially in the natural resource sector of the economy.

Based on the evidences provided in this study, one can conclude that the oil transnational corporations in Nigeria, especially the oil majors of SPDC, Agip, and Mobil are living up to society’s expectation on corporate social responsibilities as they have continued to make remarkable contributions to the development of their host communities and regions even though they need to do more.


Findings from this study have clearly shown that well planned, executed and monitored Corporate Social Responsibility (CSR) programmes are indispensable tools for conflict management between oil producing companies and their host communities.

Based on the findings of this study the following recommendations are hereby made:

  1. Oil producing companies operating in Nigeria and other oil producing countries should be proactive in finding out the needs of the people and acting before situations degenerate to conflict.
  2. They should not just assume that because a community is peaceful that they should not be given attention. The outdated CSR model where a community is only attended to when conflicts arise should be discarded. There should be regular consultations and strategic planning to identify areas of needs of the communities for CSR to be effective as a conflict management strategy in the companies’ host communities. Oil producing companies operating in Delta State and other oil producing areas in the country should also stop patronizing few Chiefs and opinion Leaders. They should come out with CSR models that are all embracing after proper consultations with all strata of the communities where they operate. Such CSR models must have the confidence of the entire community and must be reviewed on a regular basis, either quarterly or annually. There should be adequate budgeting for such CSR projects identified and the amount to be spent must be specified and known to all stakeholders. There should be an agreement between the oil producing company and the community and the agreement must have a penalty clause, in case the oil company fails to perform.
  3. The oil producing companies should devise means like regular consultation and participation in community activities to ensure cordial relationship with their host communities. They should not use the divide and rule tactics where problems are deliberately created within the leadership of the community. Such divide and rule strategies do not last long and they cannot yield positive results for the oil companies. The oil companies that have MOUs or GMOUs with the communities should always endeavor to honour them. An organization that fails to honour such agreements cannot be said to be a good corporate citizen. Where there is a need for signing of agreements, there must be broad consultations to see that all parties are represented. If this is not done, factions may spring up and it will result to the company dealing with multiple groups, which can further lead to conflict.
  4. The companies should try as much as possible to avoid intimidating their host communities with the presence of heavy security personnel such as soldiers. It is more beneficial to build and sustain goodwill and long lasting relationship with the people than intimidating them and treating them as enemies. In situations where it is inevitable, invitation of military forces should not go beyond protecting the companies’ facilities and their staff where there are cases of security threats such as kidnapping and vandalisation of equipment. Where there is a good relationship between the oil companies and their host communities, local vigilante groups are enough to offer security services.
  5. The issue of unemployment should be seriously tackled. Finding from the study, Table 4.1, showed that 260 respondents, 76.9 percent were unemployed.
  6. Apart from employment of community members, skill acquisition centres should be established where members of the communities can be trained in different skills and they should be given some grants to establish themselves after graduation from such centres. The federal government should regulate the activities of the oil producing companies through policy formulation. They should compel them to meet their obligations to their host communities. The federal government on its part should intervene directly in the development of the areas. Unfortunately, the 13 percent derivation fund is not well utilized in some states. Those in public offices end up using the money to develop their own areas, even if they are not oil producing areas.
  7. Considering the fact that majority of the respondents and those interviewed in the three communities were not quite satisfied with the CSR strategies adopted by the oil companies, more concrete efforts should be made by the oil producing companies to improve on their CSR or if possible, change their strategies to more acceptable ones. As long as the communities are recipients of those CSR programmes, it would be unreasonable to ignore their feelings. There is also the need for the government to plan and carry out some enlightenment programmes for the communities so that they can improve their relationship with the oil companies operating in their areas. The fact that a community has oil does not mean that the oil companies must cater for all their needs. They should also realize that the resources of the oil companies are limited and that they are business ventures established to make profits for their investors.
  8. Oil producing companies should from time to time assess how the host communities where they operate perceive their CSR programmes in meeting with their needs. Research into this will enable them to appraise themselves and see whether they are doing well or not, and whether they are also accepted by the people or not. The oil producing companies should have developmental capital projects as their focus because these are more enduring. People can easily point out that these are what they have done for the host communities. Things that are not tangible, such as monetary incentives to community leaders, do not last long hence they should not be used in CSR programmes.

Contributions to Knowledge

The work has no doubt contributed substantially in expanding the frontiers of knowledge on the importance of public relations, especially in the areas of community relations and Corporate Social Responsibility (CSR) as conflict management strategies. The study extensively explored the concept of Corporate Social Responsibility (CSR) in the oil sector, which is the main stay of the Nigerian economy. The fact that the study used the mixed method research design, which combined qualitative and quantitative methods makes it unique. It got the views of members of the community through administered questionnaires and also conducted in-depth interviews with representatives of the communities and the oil companies. It afforded the researcher the opportunity to compare views from the various parties and arrive at conclusions.


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