Regarding the International Finance Corporation's Proposed Niger Delta Credit Facility Project

 

May 29, 2001

Ms. Jan Piercy
U.S. Executive Director
World Bank Group
1818 H St. NW
Washington, DC  20433


Dear Ms. Piercy:

We are writing to express our serious concerns related to a proposed IFC investment, the Niger Delta Contractor Revolving Credit Facility, and to urge you to vote against this project.  This project involves IFC and the Shell Petroleum Development Company teaming up to provide credit to Nigerian contractors who are providing services to Shell.

Despite elections which brought General Olusegun Obasanjo to power, the Niger Delta  remains an extremely volatile region, in which human rights violations  continue to occur. Shell’s operations in the Niger Delta  have been the target of national and international human rights and environmental campaigns for almost a decade. Years of oil drilling by Shell have destroyed local livelihoods, polluted the environment created social unrest, and led to the militarization of the Delta region.  Shell’s culpability for this irreparable damage has poisoned relations between the local people and Shell. The Ogoni people have demanded that Shell address its legacy of failure, and Shell has not complied.  In 1995, under the brutal rule of Abacha, the Ogoni writer and environmental and human rights activist Ken Saro Wiwa and eight of his fellow Ogonis were hanged after false charges were filed against them by a kangaroo court.  Although Shell remained silent during his trial, President Bill Clinton urged that Saro Wiwa and the other Ogonis be freed. Unmoved, Abacha ensured they were hanged. This is one reason why Ogoniland remains closed to Shell to this day.

A report commissioned by Shell, and not made public, has found that its efforts in the past three years to promote development in Nigeria have failed.  (Economist, May 12, 2001)  According to a Human Rights Watch report from December 2000, “independent visitors to Ogoniland who have interviewed local people uniformly report their view that the majority of Ogonis oppose a return of Shell to the area.  Any activity that can be interpreted as indicating a desire of Shell to resume operations, even if not directly related to oil production, therefore has the potential to create significant tension with the community.”  In fact, in March and April 2000, controversy over various development projects led to violence in Ogoniland, resulting in the killing of several Ogoni civilians by paramilitary Mobile Police

Partnerships between IFC and Shell will only worsen these problems, and as IFC notes in the Project Summary (May 18, 2001), “IFC’s involvement in the Niger Delta region and the association with Shell could pose a reputational risk to IFC.”  By going forward with this project, IFC would be providing financing to support the very activities that have led to the volatile situation in the Niger Delta. 

The fact that this investment is being channeled through a Financial Intermediary (FI), rather than through direct IFC financing, only serves to make matters worse. The IFC's increasing use of FIs as a vehicle for private sector financing, and the resulting reduction in social and environmental oversight of FI subprojects, is worrying in and of itself. However, it is particularly problematic for projects that are both controversial and located in volatile situations. FI sub-projects are not as closely scrutinized by IFC social and environmental staff relative to IFC direct lending. Not only will the lower level of IFC oversight make it difficult to ensure compliance with IFC policies, but there is also some ambiguity as to whether or not IFC environmental guidelines are applied to Type 2 FI sub-projects. Furthermore, the already limited information disclosure requirements that applied to IFC direct lending do not apply to FI sub-projects. This lack of transparency is a major concern since it will reduce the ability of project affected peoples to understand and input into FI sub-projects.  We are deeply troubled by the IFC's intentions to extend this controversial financing through an FI.

Last year, over 200 groups from around the world called on the World Bank to stop financing oil, gas and mining projects because of the negative environmental and human rights impacts that these projects tend to have, as well as their failure to deliver benefits to marginalized communities.  It is precisely projects such as the Niger Delta Contractor Revolving Credit Facility that spark such outrage among civil society groups.

We have included for your review a letter from environmental and human rights groups from Nigeria, which outlines the problems associated with the project.  We share their concerns and urge you to take two steps: 1) ensure that this project is not streamlined by the board, and therefore approved without a vote; and 2) when it comes up for a vote, use your voice and vote to ensure that the World Bank Group will not support such projects.

We appreciate your attention to these concerns and look forward to your response. 

Sincerely,

Daphne Wysham, Institute for Policy Studies
Carol Welch, Friends of the Earth-US
Graham Saul, Bank Information Center

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