US embassy cable - 03LAGOS713

UNCLAS SECTION 01 OF 03 LAGOS 000713 
 
SIPDIS 
 
 
E.O. 12958: N/A 
TAGS: ECON, EAID, EPET, EINV, EFIN, PGOV, NI 
SUBJECT: NIGERIA'S NIGER DELTA DEVELOPMENT COMMISSION: MIXED 
REVIEW 
 
 
1.  Summary:  The Niger Delta Development Corporation (NDDC) 
was established in 2001 to ensure sustainable development of 
Nigeria's troubled oil-producing region. Events of the last 
month in the Delta region suggest that the NDDC has failed 
to meet the test. Since 2001, the NDDC has received about 
$323 million for operations, yet the inhabitants of the 
region have perceived little change in living standards. 
NDDC officials believe the Corporation can improve their 
situation through coordination of activities of donor 
agencies in the area.  The NDDC has commissioned the design 
of an $8.5 million master plan for this purpose. However, 
development will only be sustainable to the extent that it 
supports an enabling environment for the oil and gas 
producers in the region.  The NDDC's propensity to implement 
projects raising its profile, the legacy it inherited of 
failed projects, its financial opaqueness, and the 
observations of skeptics suggest that the NDDC will have 
difficulty establishing itself as an effective institution 
of social stability and economic development. End Summary. 
 
 
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NDDC's Mandate 
-------------- 
 
 
2.  On February 18 NDDC Managing Director Godwin Omene 
briefed EconOff on the NDDC, the challenges it faces, and on 
a master plan in progress. NDDC's predecessor, the Oil 
Mineral Producing Areas Development Commission (OMPADEC), 
had been established in 1992 to administer three percent of 
Nigeria's total crude oil revenue for the benefit of the 
Niger Delta's population.  OMPADEC failed due to poor and 
irregular funding, instability of its board of directors, 
and lack of political will to complete projects, according 
to Omene. 
 
 
3.  The NDDC took up OMPADEC's discredited mandate on August 
21, 2001.  Its brief was broad, as the NDDC aims to 
formulate policies for the sustainable development of a 
region comprising Nigeria's nine oil-producing states: Abia, 
Rivers, Akwa Ibom, Imo, Delta, Bayelsa, Edo, Ondo, and Cross 
River.  This landmass covers 70,000 square kilometers and 
comprises seven forms of terrain (dry land, seasonal flooded 
land, swamps, shallow inland waters, near offshore land, and 
the deep offshore seabed). The region's bio-diversity is on 
par with that of Mississippi, and its population 
approximates 20 million. 
 
 
4. Although the Niger Delta accounts for about 90 percent of 
Nigeria's export earnings from oil production and 70 percent 
of the revenue accruing to the Federation Account, the per 
capita income of the Delta's inhabitants is below the 
national average of $280.  The Delta thus remains one of 
Nigeria's least developed regions.  The continued 
restiveness in the region is partly attributable to this 
fact. 
 
 
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NDDC Funding 
------------ 
 
 
5. Nigeria's constitution provides that at least 13 percent 
of the oil revenues of the Federation Account must be 
allocated to the oil producing states on the basis of a 
derivation principle.  With the concurrence of these states, 
the Federal Government theoretically allocates 15 percent of 
this funding to the NDDC.  Oil and gas producing companies 
in the Niger Delta contribute 3 percent of their annual 
operating budget to the Commission.  The Commission should 
arguably receive 50 percent of all monies due to member 
states from the Federal Government's Ecological Fund.  The 
NDDC is also entitled to any monies given to it in the form 
of loans or grants.  The NDDC may keep any proceeds from its 
other assets as well. 
 
 
6. Omene stated that in fact the NDDC receives only 10 
percent of its agreed allocation of the funds earmarked for 
the states from the Federation Account.  The oil companies 
pay their 3 percent contribution, minus monies earmarked for 
gas flaring expenditures.  While Omene commends the oil 
companies for their contribution, he is pushing for more 
funds. Omene said the NDDC would need three to four times 
the funds it receives annually to implement its planned 
projects. (The March 26 issue of Nigeria's "The Guardian" 
newspaper reported that NDDC has received about 42 billion 
naira ($323 million) for operations since 2001.) 
 
 
7.  As alluded to above, there is debate about which 
institution should receive Ecology Fund monies. The NDDC had 
thought that it was to receive 50 percent of the ecology 
funds, but Omene said the oil-producing states will get the 
funds directly.  He hopes that an amendment to the Act will 
change this since the NDDC wants to use these funds to drain 
plots, rehabilitate fish ponds and fresh water pools, 
restore coastal environs and lost villages, and recover 
spillage sites.  The environmental damage to be rectified, 
he said was, and continues to be, cased by flaring of 
natural gas in Nigeria, which at 50 percent of gas output is 
the highest worldwide. 
 
 
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Master Plan 
----------- 
 
 
8. Omene said the NDDC faces the challenge of designing a 
feasible yet visionary master plan. The act that established 
the NDDC calls for the corporation to implement policies 
that bear on health, education, employment, 
industrialization, agriculture and fisheries, housing and 
urban development, water supply and electric power, and 
transportation and telecommunications. The NDDC plans to 
implement its mandate through its 11 directorates. 
Collectively, they will try to coordinate the programs of 
all the international and domestic development agencies in 
the Niger Delta. Omene said NDDC consultants will encourage 
local community groups to express their needs, input that 
will become an integral component of the master plan. 
9. The NDDC has appointed two consulting firms to draft this 
plan.  German Technical Cooperation International Services, 
an arm of the German international aid agency, Gesellschaft 
fr Technische Zusammenarbeit or GTZ, is working with a 
Nigerian company, WILBAHI, on the project. The NDDC has set 
an October 2003 deadline for completing the design of the 
master plan at a cost of $8.5 million. 
 
 
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Achievements 
------------ 
 
 
10. Although the NDDC's consultants advised it to await 
completion of the master plan before implementing projects, 
the NDDC has initiated several to show that it is active. 
Omene said the NDDC has completed 211 projects including 
primary schools, river canals, rural electrification, and 
road construction since 2001. Another 700 projects are 
ongoing. The Niger Delta communities have high expectations 
of the NDDC, Omene said, since it has completed some of its 
predecessor's 1,506 abandoned projects. 
 
 
11. According to Omene, the NDDC has placed stringent 
requirements on its contractors, given its predecessor's 
history of waste and corruption. Those who change 
specifications or otherwise do not perform are discharged, 
not paid, or fined. Payments are made according to project 
completion stage. Large advances are not given: contractors 
receive 25 percent of the value of contracts at the 
commencement of projects. Banks must certify payments 
according to work completed.  The NDDC has 24 project 
monitors. Non-governmental organizations (NGOs), community 
groups, donors, state and local governments, and foreign 
governments also monitor what the NDDC does. 
 
 
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Mixed Review 
------------ 
 
 
12. The GON established the NDDC to bring peace and 
development to a troubled region. Is the NDDC living up to 
public expectations? The NDDC believes it is performing 
well, given the funds at its disposal. The oil producing 
states believe the NDDC should share more funding with them. 
NGOs tend to be critical.  We conclude that the NDDC has yet 
to meet this challenge. 
 
 
13. The Niger Delta region boasts numerous NGOs. The most 
notable is MOSOP (the Movement for the Survival of the OGONI 
People), a group that became prominent after the late 
General Abacha hanged Ken Saro Wiwa, MOSOP's Ogoni leader 
and eight other activists.  Other NGOs in the area include 
the Niger Delta Human and Environmental Rescue Organization 
(ND-Hero), Environmental Rights Action (ERA), and the Niger 
Delta Wetlands Center. 
 
 
14. Representatives of MOSOP and ND-HERO told EconOff they 
think the NDDC is not performing well. According to these 
contacts, the Presidency dispenses patronage through 
contracts awarded by the NDDC.  In one alleged instance, 
NDDC funds meant for a road in Rivers State were diverted to 
build a hotel in Port Harcourt. In another case, the wife of 
a state governor allegedly benefited from NDDC funds for pet 
projects. In yet another case, the Rivers State government 
claims a bypass allegedly built by the NDDC. A NGO contact 
revealed that this road existed before the NDDC was 
established; the NDDC simply reconditioned it. 
 
 
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Aid Request 
----------- 
 
 
15. Omene seized the opportunity of EconOff's visit to 
request USG assistance.  He said the NDDC wants to identify 
an NGO and funding to address the environmental problems 
resulting from oil and gas exploration and production. 
 
 
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Comment 
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16. The NDDC's task is enormous.  It must satisfy the needs 
of disparate local ethnic groups and communities, whose only 
bond is their increasing frustration over the lack of 
development and perceived inattention to their plight at all 
levels of government.  Their grievances include the 
marginalization of minority ethnic groups and distrust of 
the oil companies.  The NDDC must persuade these groups to 
cooperate and to create an enabling environment that can 
sustain development projects.  While it may not be evident 
to the region's inhabitants, development will be sustainable 
to the extent that it supports an enabling environment for 
the oil and gas producers in the region. 
 
 
17.  The NDDC's willingness to implement ad hoc projects, at 
times manipulated by politicians, lends credence to reports 
that the NDDC is not transparent and is incapable of 
managing itself, let alone the development of the Delta 
region. Given its predecessor's failures, the NDDC must 
prove itself to its Delta constituency. To succeed, the 
Corporation must engage local communities and ultimately use 
the funds entrusted to it to implement meaningful projects. 
If it does this, the NDDC will have taken steps toward 
promoting economic development and social stability in the 
Delta.  If it does not, the Niger Delta will continue to be 
an area of instability to the detriment of its inhabitants, 
the Nigerian government, and the oil and gas companies 
operating in its midst.  End comment. 
 
 
HINSON-JONES