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Cablegate: Nigeria's Niger Delta Development Commission: Mixed

This record is a partial extract of the original cable. The full text of the original cable is not available.

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.


--------------
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.


------------
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.


-----------
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.


------------
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.


------------
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.


-----------
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.


-------
Comment
-------


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

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