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Facility for Oil Sector Transformation (FOSTER 2)

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Kenneth C. Ene

Kenneth C. Ene, Maja Jakobsen, Richard Williams, Simon Trace, Rich Williams, OPM Nigeria UK Department of International Development (DFID)

The Facility for Oil Sector Transformation (FOSTER 2) aims to achieve more effective use of Nigeria’s extractive industries to support national development. It is the successor programme to the Facility for Oil Sector Transparency and Reform (FOSTER I), which we delivered from 2011 to 2016.

We are working to identify additional extractive industries revenue and strengthen the management of the sectors, while also working to inform and engage local communities affected by the oil and gas sector in the country.

Challenges

Nigeria is potentially the largest oil producer in Africa. Its known reserves should last for at least another 40 years, but decades of corruption in Nigeria’s petroleum sector have created many challenges. Despite the rise in oil prices since May 2015, production has fallen short of the target of 2.2 million barrels a day (mbpd). This is critical as the government’s economic recovery plan assumes this will rise to 2.5 mbpd by 2020.

FOSTER works to address four types of deficits in the sector:

  • transparency deficits in the centralised, government-controlled oil and gas industry;
  • monitoring deficits owing to the lack of institutional checks and balances;
  • participation deficits arising from the weak relationship between state and civil society; and
  • information deficits as data on the sector are often unreliable, ambiguous, or contradictory.

Our approach

We continue to implement FOSTER, applying a politically-savvy approach to implementation reflecting the many challenges that decades of systemic and systematic corruption within Nigeria’s petroleum sector have created.

FOSTER is designed to be politically adaptive and operationally flexible, to enable swift, contingent responsiveness to demands from reform-minded partners, seizing opportunities which hold promise for the transformation of the oil and gas sector.

The programme’s theory of change continues to rely on key assumptions derived from on-going political economy analysis (PEA). The PEA identify issues where failures of governance are potentially amenable to reform and where there may be more winners than losers. Given our limited resources relative to the scale and depth of corruption and waste in Nigeria’s oil and gas sector, we are targeting our interventions depending on two key factors: the potency of the partnership with the reform agent; and the likely impact, both in terms of achieving our logframe and the possibility of generating wider impact in the sector and positive externalities beyond the lifespan of FOSTER.

Outcomes

FOSTER 2 has already contributed to a number of positive shifts in the oil and gas sector in Nigeria, including:

  • Supporting the government to establish and operate an inter-ministerial committee to improve co-ordination of development efforts in the Niger Delta and engage with local communities. This is aimed at promoting peace and stability in the region.
  • Support to both houses of parliament in developing the Petroleum Industry Governance Bill, aimed at sweeping improvements to sector oversight.
  • Stimulating debate in government on return on investment of different potential uses of Nigeria’s gas resources.

FOSTER’s overall success is measured by whether or not there are improvements in the scores against the 12 precepts for good governance and transparency in the oil and gas sector under the Nigeria Natural Resource Charter. A benchmarking survey carried out in 2017 showed a marked improvement on the previous ‘traffic light’ scores (2014). The 2017 scores showed 10 amber and two red lights as opposed to the three amber and nine red lights in 2014. Progress on four of the precepts was specifically linked to work carried out by FOSTER.