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Host Community Development Funds In Nigeria – Establishment And Procedure – Finance and Banking – Nigeria – Mondaq News Alerts

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The Petroleum Industry Act 2021(the Act) introduces the Petroleum Host Community Development (PHCD) under Section 234 of the Act. The Host Community Development Trust was introduced by the Act to aid in the development of the economic and social infrastructure of communities in the petroleum-producing areas and this article aims to elaborate on the establishment and procedure for host community development fund.
The objectives of the Host Community under Section 234 of the Act are as follows;
The Nigerian Upstream Petroleum Regulatory Commission and the Nigerian Midstream and Downstream Petroleum Regulatory Authority are empowered under the Act to make regulations in respect to host communities on areas within their competence and jurisdiction. Such regulation includes a grievance mechanism to resolve disputes between settlers and host communities; the regulations shall include the ability to make the adjustments to reduce expenditures where the available funds for the administration are insufficient to fund the ongoing operations by doing the following:
The Act also provides for the incorporation of host communities development trusts under Section 235 of the Act as the settler is required to incorporate host communities development trust for the benefit of host communities which the settlor is responsible for. For the purpose of setting up the trust, the settler in consultation with the host communities shall appoint and authorise a Board of Trustees to be registered by the Corporate Affairs Commission as a corporate body under the Companies and Allied Matters Act.
Under Section 236 of the Act the Trust is required to be incorporated;
Failure of the holder of a license or lease to comply with its obligations as stated above may be grounds for the revocation of the applicable license or lease as provided under Section 238 of the Act.
Section 239 of the Act provides that the Constitution of the host community development trust shall allow the host communities development trust to manage and supervise the administration of the annual contribution of the settler as contemplated under the Act and any other sources of funding. The objectives of the Trust as provided under Section 239 (3) are to be specified in the Constitution and it shall include the following;
Under Section 244 of the Act, the Board of Trustees shall in each year allocate from host communities development trust fund a sum equivalent to;
The settler is required to provide to the Board of Trustees a matrix for the distribution of the trust fund to the host communities as provided under Section 245 of the Act. Fund Managers are also to be engaged to invest in the reserve fund as the fund accrues. The financial year of the host communities' development trust shall commence on the 1st of January and end on the 31st of December of each year or date set for the purpose by the Board of Trustees as provided under Section 253 of the Act.
As earlier stated, the Host Community Development Trust was introduced by the Act to aid in the development of the economic and social infrastructure of communities in petroleum-producing areas such as the Niger- Delta. The objectives of the trust include to finance and execute projects for the benefit and sustainable development of the host communities; undertake infrastructural development of the host communities within the scope of funds available to the Board of Trustees, amongst other purposes. Finally, it is important to state that by virtue of Section 256 of the Act, the funds of the host communities development trust created shall be exempted from taxation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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