This report outlines key actions that would contribute to making the oil spill compensation system in Nigeria fairer and more transparent for all.
It is based on analysis of the challenges with the compensation system identified in the SDN research report The Nigerian oil spill compensation system: obstacles and opportunities. This document summarises the challenges identified in that research, under a number of broad headings. It then suggests policy changes and stakeholder actions that could help improve the system.
There are many barriers to the effective operation of the compensation system; change will not happen overnight. Part of the reason for this is how informal many of the processes involved in oil spill evaluation are. Standardising procedures and making information on these more widely available in the public domain would make it harder to deviate from common practice.
There are also challenges linked to the artisanal oil industry, which involves the local refining of oil, siphoned from pipelines, into fuel for the black market. A large number of spills in the Niger Delta can be attributed to this activity, which is a major complication for the compensation system.
Although the technical and logistical changes we identify would be positive developments, to a large degree they depend upon the willingness of those in positions of political and other power to bring them about. Having an robust compensation system, adequately enforced, would be an incentive for companies to avoid spills. But the present system means it is relatively easy to avoid paying compensation at all—and that local stakeholders such as village chiefs are able to monopolise this when it is awarded. On the agenda for those seeking to bring about change in the compensation system must therefore be how to alter the incentives for present stakeholders such that they support change in the first place.